Question.188 - 1 - Which of the following taxpayers must use the tax rate schedule to calculate their tax liability? Select an answer: A. A taxpayer with an AGI of $135,000 and itemized deductions of $12,500 B. A taxpayer with an AGI of $50,000 and claiming the standard deduction C. A taxpayer with an AGI of $110,000 and itemized deductions of $21,000 D. A taxpayer with an AGI of $900 of unearned income Ans.1 - D 2. - Which of the following capital expenditures can qualify as a deductible medical expense to accommodate a disabled taxpayer in their home? Select an answer: A. Construction cost for erecting a ramp to one’s home B. Moving or modifying electrical outlets and fixtures to accommodate the taxpayer C. Lowering or modifying kitchen cabinets and equipment for easy access by the taxpayer D. All of the listed expenses would qualify. Ans.2 – D 3. - Which of the following items is included in a taxpayer’s gross income on their current year’s tax return? Select an answer: A. Alimony benefits received and winter fuel subsidy B. Unemployment benefits and alimony benefits received C. Unemployment benefits and winter fuel subsidy D. Unemployment benefits, alimony benefits received, and winter fuel subsidy Ans.3 - B 4. - Which of the following statements is correct with respect to property received as a gift that has a basis greater than its fair market value? Select an answer: A. If it is sold for less than the fair market value, the adjusted basis becomes the basis for computing the loss. B. If it is sold for less than the adjusted basis but more than the fair market value, the adjusted basis becomes the basis for computing the loss. C. If it is sold for more than the fair market value but less than the adjusted basis, the taxpayer has no gain or loss. D. If it is sold for more than the adjusted basis, the fair market value becomes the basis for computing the gain. Ans.4 - C5. - Which of the following statements is correct with respect to filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return? Select an answer: A. The taxpayer does not need to pay the balance of any estimated taxes for 6 months when they file their tax return. B. The taxpayer has a 6-month extension to file their tax return but must pay the balance of any estimated taxes at the time of filing for the extension. C. An automatic 2-month extension can be obtained for individuals living outside the United States. D. A penalty for late payment is not charged if an extension is granted. Ans.5 - C6. - Which of the following categories does not satisfy the relationship test for the earned income tax credit (EITC)? Select an answer: A. Son or daughter B. Foster child C. Adopted child D. All of the children statuses listed satisfy the relationship test. Ans.6 - D 7. - Which of the following educational assistance items that a person receives while attending a qualified university is included in their gross income in the year that the funds are received? Select an answer: A. Scholarship amount for books and supplies B. Scholarship amount for equipment required to enroll in course C. Fellowship amount for room and board D. None of the amounts listed are included in gross income. Ans.7 - C 8. - Which of the following rules is correct concerning the deductibility of interest expense as investment income? Select an answer: A. Investment interest expense is limited to the amount of interest, dividends, and investment income. B. Investment interest expense is limited to the amount of interest and investment income. C. Investment interest expense is limited to the amount of investment income. D. Investment interest expense is limited to the amount of investment income less investment expenses (excluding investment interest). Ans.8 - D9. – Which of the following items is included in a taxpayer’s gross income? Select an answer: A. Municipal fund dividends B. Mutual bond interest C. Both the municipal bond interest and mutual fund dividends are included. D. Both the municipal bond interest and mutual fund dividends are excluded. Ans.9 - D10. - Which of the following statements is correct concerning the filing of an amended tax return? Select an answer: A. Form 1040X is used to file an amended tax return. B. An amended return can be filed within 3 years after the date of filing the original return. C. If the last day for filing falls on a weekend, the return can be filed on the next business day. D. All of the statements are correct. Ans.10 - D11. - Where are mortgage interest and points that are paid at the time of settlement on the taxpayer’s primary residential residence reported? Select an answer: A. Both the mortgage interest and the points are reported on Form 1040. B. The mortgage interest and the points are reported on Schedule A. C. The mortgage interest is reported on Schedule A and the points are not reported. D. The mortgage interest is reported on Form 1040 and the points are reported on Schedule A. Ans.11 - D12. - A taxpayer participates in their company’s qualified retirement plan. In addition, the taxpayer files as single and has a modified adjusted gross income for the year of $300,000. If the taxpayer elects to make a contribution to their Roth IRA, which of the following options is available to the taxpayer? Select an answer: A. The contribution can be treated as a deductible contribution. B. The contribution will be treated as an excess contribution. C. The contribution will be treated as a nondeductible contribution. D. The taxpayer is not eligible to make a contribution to their Roth IRA. Ans.12 - D 13. - Which of the following statements is correct concerning the foreign earned income exclusion? Select an answer: A. A taxpayer can take a credit (but not a deduction) for foreign income taxes paid on income that the taxpayer excludes from U.S. tax. B. A taxpayer can take a deduction (but not a credit) for foreign income taxes paid on income that the taxpayer excludes from U.S. tax. C. A taxpayer cannot take a credit (or a deduction) for foreign income taxes paid on income that the taxpayer excludes from U.S. tax. D. A taxpayer can take a credit (or a deduction) for foreign income taxes paid on income that the taxpayer excludes from U.S. tax. Ans.13 - C14. - When is the owner of a Roth IRA required to begin receiving distributions from the Roth IRA? Select an answer: A. By April 1 of the year following the year in which the owner reaches age 70-1/2 B. By April 1 of the year in which the owner reaches age 70-1/2 C. By January 1 of the year in which the owner reaches age 70-1/2 D. The owner is not required to take distributions from a Roth IRA. Ans.14 - A 15. -If a surviving spouse is the only beneficiary of a deceased spouse’s IRA, they may treat the inherited IRA as their own IRA: Select an answer: A. by designating themselves as the account owner on the inherited IRA. B. by rolling over the inherited IRA into an existing IRA of their own. C. by making a contribution to the inherited IRA. D. All of the responses are correct. Ans.15 - A16. - Which of the following statements is correct for purposes of figuring and reporting self-employment tax? Select an answer: A. If a taxpayer has net earnings of $600 or more as a self-employed person, then the taxpayer must pay self-employment tax. B. If a taxpayer receives guaranteed payments from a partnership, the taxpayer is required to pay self-employment taxes on those payments. C. If a taxpayer and taxpayer’s spouse have separate businesses, the couple treats the businesses as a single business for self-employment tax purposes. D. If a taxpayer has more two or more business, the taxpayer must treat each business independently. Ans.16 - A 17. - Which of the following compensations received by a taxpayer is considered as income when figuring a taxpayer's maximum IRA contribution amount? Select an answer: A. Alimony payments received B. Interest income C. Pension income D. None of the items listed are considered income when figuring this amount. Ans.17 - A 18. - Which of the following is a requirement that must be satisfied for a taxpayer to claim an educational deduction on Schedule A? Select an answer: A. The taxpayer must keep their present salary, status, or job. B. The education serves a bona fide business purpose of the taxpayer’s employer. C. The education is not part of a program that will qualify the taxpayer for a new trade or business. D.

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