PART 1. The following statements are either true or false. Indicate your answer on the answer sheet by circling for true or for false.
| T F | the unique test(s) for filing a joint return is/are: Legally married. | |
| T F |
2. John and Barbara Fix are married and have one child. They lived apart the entire year. They do not wish to file a joint return. John provided 100 percent of his child's support, and the child lived with him for the entire year. John paid all costs of keeping up the home. John may use the head of household filing status.
| T F | paid more than ½ of support
child lived with him last six months of year
No divorce decree, but lived apart the entire year |
|
| T F |
3. Bill Carter, a single taxpayer, age 45, provides all the support for his father, age 75, and his mother, age 73. Because he has dependents over age 65, Bill may claim the larger standard deduction for the elderly.
| T F | ||
| T F |
4. A couple is divorced. The divorced agreement does not state which parent may take the dependency exemption for the couple's child. The child lived with the custodial parent all year and received all his support from his parents. The custodial parent may claim the exemption for the child unless he or she signs a statement allowing the noncustodial parent to claim the exemption.
| T F | ||
| T F |
5. If a taxpayer is unable to obtain Form 2-2 from his employer, he cannot file his return until the form has been obtained from that employer.
| T F | There are three alternatives. | |
| T F |
6. Excess social security tax withheld due to the employer's error can be used on the tax return as a payment of tax.
| T F | True, see line of 1040, or line of 1040A | |
| T F |
7. All interest income is taxable on the federal return, regardless of its source.
| T F | U.S. Savings Bonds are possibly non-taxable. Series EE or HH. | |
| T F |
8. Sally Johnson, a degree candidate at City College, recieved a scolarship of $4,000 during 2000. She received and spent $3,000 on tuition and $1,000 for room and board. She has a $1,000 taxable income from her scholarship.
| T F | ||
| T F |
9. The child tax credit is availabe to taxpayers using the married filing separately status.
| T F | ||
| T F |
10. A taxpayer always must have a qualifying child in order to claim the earned income credit.
| T F | ||
| T F |
11. Edward and Martha Barry use the married filing separately status. Edward itemizes deduction. If Martha does not itemize, her standard deduction is $0.
| T F | ||
| T F |
12. Qualified student loan interest paid may be deducted even if the taxpayer does not itemize deductions.
| T F | ||
| T F |
13. Taxpayers with more than two qualifying children may qualify for the refundable additional child tax credit.
| T F | ||
| T F |
14. All taxpayers who receive Form 1099-G showing a state tax refund must include the refund in taxable income.
| T F | ||
| T F |
15. If an adoption of a U.S. citizen is not final, a taxpayer may claim an adoption credit on the tax return in the year the quaified expenses were paid.
| T F | |||
| T F |
16. The taxable portion of social security benefits varies from none to 80 percent, depending on the recipient's circumstances.
| T F | ||
| T F |
17. In all cases, if a couple is married and living together, both must hold jobs in order to claim the child care credit.
| T F | ||
| T F |
18. A taxpayer making a rollover from one IRA to another has 60 days to complete the transaction.
| T F | ||
| T F |
19. The lifetime learning credit, if it is available to a qualified student, is more beneficial to any give year than the Hope Credit.
20. Taxable alimony received is considered compensation for purposes of contributing to an IRA.
| T F | ||
| T F |
1. For 2000, what is the gross income filing requirement for a married couple, both age 43, using the married filing jointly status?
| must exceed the sum of the married standard deduction
plus the allowance for two deductions.
7350 + 5600 = 12,950 |
||
| A | $7,350 | |
| B | $10,150 | |
| C | $12,950 | |
D |
$13,800 | |
2. Which of the following items is not considered when determining the cost of maintenance of a home?
| A | Insurance on the home | |
| B | Utilities | |
| C | Food consumed in the home | |
| D | Mortgage principal payment | |
3. Which of the following dependent relatives does not have to live in the same household with the taxpayer to qualify the taxpayer for head of household status?
| A | Brother | |
| B | Aunt | |
| C | Mother | |
| D | Married child | |
4. Which of the following is not one of the five tests for dependency?
| A | Age | |
| B | Citizenship | |
| C | Gross Income | |
| D | Support | |
5. Which of the following items is not included when determining the total support of a dependent?
| A | Education | |
| B | Child care | |
| C | Life insurance premiums | |
| D | Recreation | |
6. Daniel and Pat House, a married coupe, were both 61 years old when Daniel died on January 1, 2000. Pat did not remarry. How many personal exemptions may Pat claim when filing her joint 2000 return?
| A | One | |
| B | Two | |
| C | Three | |
D |
Four | |
7. Jack and Moly Burk, both under age 65, file a joint return. They are entitled to claim their two children as dependents. Their adjusted gross income is $55,010 and their total itemized deductions are $8,800. Determine their tax.
| A | $4,151 | |
| B | $4,337 | |
| C | $5,254 | |
| D | $5,471 | |
8. A single taxpayer paid the following taxes in 2000:
State withholding from wages $1,220
City withholding from wages 515
Real estate taxes on home 780
Sales tax on new car 900
He also received a $105 state tax refund from his 1999 return. What figure will appear on line 9 of his schedule A?
| A | $2,000 | |
| B | $2,410 | |
| C | $2,515 | |
| D | $3,415 | |
9. A taxpayer received the following income:
Interest credited to savings account $620
Interest on certificate of deposit 125
Interest on Series HH Savings Bonds 130
Interest on municipal bond 340
What is the total taxable amount of interst income to be reported on Schedule B, form 1040?
| A | $620 | |
| B | $745 | |
| C | $875 | |
| D | $1,215 | |
10. Which of the following income items is not subject to income tax on the federal return?
| A | Income from an illegal activity | |
| B | Tips under $20 per month | |
| C | Fees received for jury duty | |
| D | Inherited car | |
11. A taxpayer's divorce decree requires him to pay $400 per month alimony and $200 per month child support. In 2000, he made 10 payments totaling $6,000. How much may he deduct as alimony on his return?
| A | $3,600 | |
| B | $4,000 | |
| C | $4,800 | |
|
D |
$6,000 | |
12. Which of the following expenses is not a qualified expense for purposes of the adoption credit?
| A | Legal fees | |
| B | Travel expenses | |
| C | Court costs | |
|
D |
Surrogate parent's medical expenses | |
13. Which of the following expenses is not a qualified expense for purposes of the adoption credit?
| A | Fee paid to Christian Science practitioner | |
| B | Premiums on a policy to cover loss of earnings if hospitalized | |
| C | Maintenance costs of a guide dog for the blind | |
|
D |
Cost of hearing aid batteries | |
14. Betty Sexton (26) and her 5-yer-old daughter shared a home all year with Betty's mother, Lilly (49). Betty's earned income and modified AGI were both $12,889. Lilly's earned income was $15,345. What is the amount of Betty's earned income credit?
| A | $0 | |
| B | $1,932 | |
| C | $1,980 | |
|
D |
$2,323 | |
15. Which of the following items cannot be deducted as a charitable contribution?
| A | Cash donation to church | |
| B | Cost of volunteer scout master uniform | |
| C | Cost of raffle tickets purchased from a church | |
|
D |
FMV of property donated to Red Cross. | |
16. Which of the following is not an allowable casualty or theft loss?
| A | Theft of registered dog | |
| B | Accidental misplacement of diamond ring | |
| C | Vandalism damage to personal residence | |
|
D |
Roof damage from windstorm | |
17. Which of the following cannot be claimed as a deduction of Schedule A?
| A | Preparation of a Will | |
| B | Tax preparation fee | |
| C | Nurse's uniforms and shoes | |
|
D |
$500 for lottery tickets (won $650) | |
18. Sam and Mary Fern a filing a joint return and have two dependent children, ages three and four. Sam's wages are $24,800; Mary's are $20,600. Their AGI is $46,260. They paid total child care expenses of $5,200 to Childlove Nursey to care for both children while they worked. What is the amount of their child care credit.
| A | $480 | |
| B | $960 | |
| C | $1,040 | |
|
D |
$1,152 | |
19. Fonda McGregor is an unmarried head of household with the following income for the year:
Wages $23,000
Bank interest 300
Municipal bond interest 85
Lottery prize 200
Gift from her father 3,000
Fonda contributed $1,250 to her traditional IRA, which she will deduct. Computer her AGI.
|
taxed Wages taxed Bank Interest Municipal bond interest taxed Lottery prize Gift from her father |
taxed
$23,000 300 200 $23,500 -1,250 $22,250 |
non-taxed
$85 3,000 $3,085 | |
| A | $22,250 | ||
| B | $22,335 | ||
| C | $24,950 | ||
|
D |
$25,250 | ||
20. A single taxpayer, age 63, contributed $10,400 in after-tax money to the cost of his pension. On March 1, 2000, he began receiving payments of $400 per month from the plan. How much of his pension income is taxable for 2000? Use the simplified method in your calculations.
| A | $3,567 | |
| B | $3,600 | |
| C | $4,320 | |
|
D |
$4,800 | |
21. Which of the following payments qualifies for 10-year averaging?
| A | Receipt of entire balance from a qualified plan within one year because of an employee's retirement. The employee was born in 1834. | |
| B | Total distribution of all funds from a traditional IRA. | |
| C | A loan from a qualified retirement plan | |
|
D |
Total distribution of all funds upon termination of a qualified plan; the employee was born in 1939 and continues to work for the same employer. | |
22. Philip Sinclair has been paying back a student loan since 1993, when he was first required to make interest payments. In 2000, he paid $1,690 in interest on the loan. How much may he deduct on line 24, Form 1040?
| A | $0 | |
| B | $1,500 | |
| C | $1,690 | |
|
D |
$2,000 | |
23. Which of the following does not constitute compensation for purposes of making an IRA contribution?
| A | Tips | |
| B | Commissions | |
| C | Bonuses | |
|
D |
Unemployment compensation | |
24. A single taxpayer, age 30, would like to make the maximum contribution to his Roth IRA. His 2000 tax rerturn shows the following:
Wages $25,000
Traditional IRA contrib. 1,200
Alimony paid 600
| A | $0 | |
| B | $600 | |
| C | $800 | |
|
D |
$2,000 | |
25. Which of the following is not a prohibited transaction for an IRA?
| A | Borrowing money from the IRA | |
| B | Selling property to an IRA | |
| C | Using IRA funds as loan collateral | |
|
D |
Rolling over funds from one IRA to another within 60 days | |
26. Laura Hickman files as head of household. She has three dependent children, ages 18, 16, 13. Her 2000 modified AGI is $31,394, and her tax liability before credits is $2,059. How much is her child tax credit? She is claiming no other credits.
| A | $0 | |
| B | $500 | |
| C | $1,000 | |
|
D |
$1,500 | |
27. Which of the following does not constitute nontaxable earned income (NEI) for purposes of the earned income credit?
| A | Temporary Assistance for Needy Families (Welfare benefits) | |
| B | Voluntary salary reductions paid into a cafeteria plan | |
| C | Clergy housing allowance | |
|
D |
Before-tax contributions to a section 401(k) plan | |
28. Zoe Williams (18) is a dependent of her parents. She earned $1,475 wages from babysitting and $180 interest from her savings account. How much may she contribute to a traditional or Roth IRA for 2000?
| A | $700 | |
| B | $1,475 | |
| C | $1,655 | |
|
D |
$2,000 | |
29. In 2000, Dexter Johnson started attending college on a full-time basis as a freshman. He paid $2,700 tutition and qualified expenses. He took out a $2,000 loan from a bank to help him pay the tuition. How much is his Hope credit for 2000?
| A | $0 | |
| B | $700 | |
| C | $1,500 | |
|
D |
$2,000 | |
30. A single taxpayer received the following income during the year:
Wages $ 7,000
Tax-exempt interest 20,000
Social Security benefits 6,000
What portion of his social security benefits should be included on line 20b, Form 1040?
| A | $0 | |
| B | $2,500 | |
| C | $3,000 | |
|
D |
$5,100 | |