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CHAPTER 7 TB

50. Which of the following is not a taxpayer filing stats for prposes of !eter"ining theappropriate tax ratesche!le#

A. Hea! of Hosehol!B. $alifying Wi!ow or Wi!ower C. %arrie! &iling 'eparately(. 'ingleE. All of these are taxpayer filing statuses

5). The taxa*le inco"e le+els in the "arrie! filing ,ointly tax rate sche!le are -------those in the "arrie!filing separately sche!le.A. the sa"e asB. double

C. half the a"ont of (. none of these

5. /in!a is a alifying wi!ow in 0). 1n 0)2 she reporte! 3752000 of taxa*le inco"e4all or!inary.What is her gross tax lia*ility sing the tax rate sche!les#A. $10,810

B. 3)6280C. 3)6270(. 3)925)

•

4752000 : 702700 ; .5 < 8795 = )02)0

59. %iley2 a single taxpayer2 plans on reporting 3>2950 of taxa*le inco"e this year 4allof her inco"e isfro" a part?ti"e ,o*. 'he is consi!ering applying for a secon! part?ti"e ,o* that wol!gi+e her ana!!itional 3)02000 of taxa*le inco"e. By how "ch will the inco"e fro" the secon! ,o*increase her taxlia*ility 4se the tax rate sche!les#A. 3)2000B. 3)2500

C. $1,600(. 32500

56. Ta"ra an! @aco* are "arrie! an! they file a ,oint tax retrn. Ta"ra recei+e! nearlythree ti"es the salarythat @aco* recei+e!. Which of the following state"ents is tre#A. Ta"ra an! @aco* liely pay no tax "arriage penalty nor recei+e a tax "arriage *enefit.

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B. Ta"ra an! @aco* liely pay a tax "arriage penalty.C. Tara and !a"ob li#ely re"eie a tax arriage benefit.(. Ta"ra an! @aco* liely will pay a tax "arriage penalty an! recei+e a tax "arriage *enefit.

55. 'tephanie an! %itch are "arrie! an! they file a ,oint tax retrn. %itch recei+e! aslightly higher salarythan 'tephanie !i! !ring the year. Which of the following state"ents is tre#A. 'tephanie an! %itch liely pay no tax "arriage penalty nor recei+e a tax "arriage *enefit.B. %tephanie and &it"h li#ely pay a tax arriage penalty.

C. 'tephanie an! %itch liely recei+e a tax "arriage *enefit.(. 'tephanie an! %itch liely will pay a tax "arriage penalty an! recei+e a tax "arriage *enefit.

5>. Harrison recei+e! a alifie! !i+i!en!. Withot nowing any a!!itional facts2 which

of the followingstate"ents is tre regar!ing the rate at which the !i+i!en! will *e taxe! to Harrison#A. The !i+i!en! will *e taxe! at a )5 tax rate.B. The !i+i!en! will *e taxe! at a 0 tax rate.C. The entire !i+i!en! will *e taxe! at either 0 or the entire !i+i!en! will *e taxe! at)5 !epen!ing onHarrisons "arginal or!inary inco"e tax rate.'. (one of these.

57. @a"ie is single. 1n 0)2 she reporte! 3)002000 of taxa*le inco"e2 incl!ing a long?ter" capital gainof 352000. What is her gross tax lia*ility2 ron!e! to the nearest whole !ollar a"ont 4sethe tax ratesche!les#A. 32>)B. 3)26>)C. $)0,811

(. 3)52000

5. Angelena files as a hea! of hosehol!. 1n 0)2 she reporte! 3502000 of taxa*leinco"e2 incl!ing a3)02000 alifie! !i+i!en!. What is her gross tax lia*ility2 ron!e! to the nearest whole!ollar a"ont4se the tax rate sche!les#A. 35290B. $*,++8

C. 372500(. 372)65

58. Which of the following is not a *arrier to inco"e shifting a"ong fa"ily "e"*ers#

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A. The assign"ent of inco"e !octrineB. Det nearne! inco"e for chil!ren ) an! yonger taxe! at parents "arginal tax ratesC. Eliination of preferential tax rates on diidends and long-ter "apital gains

for dependents

(. Two of these

>0. The ly"pians ha+e three chil!ren. The i!!ie tax applies to nearne! inco"erecei+e! *y which of thefollowing chil!ren#A. /oseidon is a )0-year-old full-tie student ho does not support hiself.

B. (e"eter2 a 9?year?ol! fll?ti"e st!ent who spports herself with a ,o* at a grocerystore.C. Fes is 0 years ol! an! not a st!ent.(. Two of these.E. Done of these.

>). Ass"ing the i!!ie tax applies2 what a"ont of a chil!s inco"e is s*,ect to thei!!ie tax#A. All of itB. All of the nearne! inco"eC. The net unearned in"oe

(. Taxa*le inco"e less the stan!ar! !e!ction

>. (ring 0)2 %ontoya 4age )5 recei+e! 3200 fro" a corporate *on!. He alsorecei+e! 3>00 fro"a sa+ings accont esta*lishe! for hi" *y his parents. %ontoya li+es with his parents an!he is their !epen!ent. What is %ontoyas taxa*le inco"e#A. 30B. 3200C. 3200'. $1,8*0

>9. (ring 0)2 @as"ine 4age ) recei+e! 32600 fro" a corporate *on!. 'he alsorecei+e! 3>00 fro"a sa+ings accont esta*lishe! for her *y her parents. @as"ine li+es with her parents an!she is their !epen!ent. Ass"ing her parents "arginal tax rate is 2 what is @as"ines gross taxlia*ility#A. 30B. 385C. 390'. $02

>6. Hestia 4age )7 is clai"e! as a !epen!ent *y her parents2 Rhea an! Chrons. 1n 0)2Hestia recei+e!

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3)2000 of interest inco"e fro" a *on! that she owns. 1n a!!ition2 she has earne! inco"eof 300. What isher taxa*le inco"e for 0)#

A. 30

B. $)*0C. 3700(. 3)200

>5. %ontage 4age )5 is clai"e! as a !epen!ent *y his parents %att an! %ary. 1n 0)2%ontage recei+e!352000 of alifie! !i+i!en!s an! he recei+e! 300 fro" a part ti"e ,o*. What is histaxa*le inco"e for 0)#A. 3)00B. 392800

C. $,+00(. 36250

>>. Hester 4age )7 is clai"e! as a !epen!ent *y his parents2 Charlton an! A*igail. 1n0)2 Hester recei+e!3)02000 of alifie! !i+i!en!s an! he recei+e! 3>2000 fro" a part ti"e ,o*. What is histaxa*le inco"efor 0)#A. 3)>2000B. 3)52050C. $10,0*0

(. 382700

>7. The alternati+e "ini"" tax *ase is typically ------ the reglar inco"e tax *ase.A. s"aller thanB. a*ot the sa"e asC. larger than

(. exactly the sa"e as

>. The co"ptation of the alternati+e "ini"" tax *ase *egins with reglar taxa*leinco"e. Which of thefollowing is not part of the for"la for co"pting the alternati+e "ini"" tax *ase#A. %ubtra"t personal exeptions.

B. A!! the stan!ar! !e!ction a"ont if se! for reglar tax.C. '*tract the A%T exe"ption a"ont 4if any.(. A!! *ac tax exe"pt interest fro" a pri+ate acti+ity *on! not isse! in 008 or 0)0.

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>8. 1n 0)2 %aia 4who files as a hea! of hosehol! reporte! reglar taxa*le inco"e of3))52000. 'heite"iGe! her !e!ctions2 !e!cting 32000 in charita*le contri*tions an! 392000 in stateinco"e taxes.'he clai"e! exe"ptions for herself an! her son2 Her"es2 439200 each. What is %aias

alternati+e"ini"" taxa*le inco"e#A. 3))2000B. 3))52000C. 3))200'. $1)*,600

 

11*000 3 2000 3 2800 3 2800

70. Which of the following ite"s is not a!!e! *ac to reglar taxa*le inco"e in

co"pting alternati+e"ini"" taxa*le inco"e#A. 4oe ortgage interest expense.

B. Real property taxes.C. Tax exe"pt interest fro" a pri+ate acti+ity *on! isse! in 007.(. %iscellaneos ite"iGe! !e!ctions in excess of the floor.

• Ho"e eity interest is a!!e! *ac if procee!s fro" the loan are not se! to

acire or s*stantially i"pro+e the ho"e.

7). Which of the following state"ents regar!ing the A%T exe"ption a"onts is nottre#A. The a"ont of the exe"ption !epen!s on the taxpayers filing stats.B. The exe"ption a"ont is co"pletely phase!?ot for high inco"e taxpayers.C. Taxpayers ust "hoose hether they ill "lai the exeption or itei5e

dedu"tions.

(. Done of these state"ents is false 4all of these state"ents are tre.

7. Persephone has a reglar tax lia*ility of 3)2675 an! a tentati+e "ini"" tax of3))2500. i+en ,st this infor"ation2 what is her alternati+e "ini"" tax lia*ility for the

year#A. $0B. 3))2500C. 3875(. 3)2675

• Becase Persephones reglar tax lia*ility excee!s the tentati+e "ini"" tax2 she

!oes not owe any alternati+e "ini"" tax.

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79. Har"ony reports a reglar tax lia*ility of 3)52000 an! tentati+e "ini"" tax of3)72000. i+en ,st thisinfor"ation2 what is her alternati+e "ini"" tax lia*ility for the year#A. 30

B. $),000C. 3)52000(. 3)72000

76. Which of the following state"ents accrately !escri*es the alternati+e "ini"" taxrate4s#A. The top A%T "arginal rate is higher than the top reglar tax "arginal tax rate.B. The A&T rates represent a progressie tax rate stru"ture.

C. The A%T rate is the sa"e rate for all taxpayers.(. Done of these.

75. Which of the following is not typical of taxpayers who are "ost liely affecte! *y theA%T#A. Ha+e "any !epen!entsB. Pay high state inco"e taxC. Pay high property taxes'. 4ae relatiely lo "apital gains

7>. Which of the following col! explain why an increasing n"*er of taxpayers ares*,ect to 4or col!*eco"e s*,ect to A%T#A. 'e"reasing regular tax rates

B. The A%T exe"ption a"ont is in!exe! to increase with inflationC. Property +ales are !ecreasing(.The personal an! !epen!ency exe"ption a"onts are not increasing as fast as theA%T exe"ption is !ecreasing

77. Asteria earne! a 352500 salary as an e"ployee in 0). How "ch shol! here"ployer ha+e withhel!fro" her paychec for &1CA taxes 4ron!e! to the nearest whole !ollar a"ont#A. 3970B. 3)207)C. $1,1

(. 39298

7. Baer earne! 3))92900 of salary as an e"ployee in 0). How "ch shol! hise"ployer ha+e withhel!fro" his paychec for &1CA taxes 4ron!e! to the nearest whole !ollar a"ont#A. 3)2>69B. 32>>7C. $6,)6+

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(. 3>260)

78. Hera ha! &1CA taxes withhel! on the 3))2000 salary she recei+e! as an e"ployee in0). Her hs*an!2Fes2 "a!e 3702000 as an e"ployee at a ree gyro stan!. How "ch "st Fes ha+e

withhel! for &1CAtaxes for 0)2 ass"ing he files a ,oint retrn with Hera#A. 30B. 3)20)5C. 352955'. $2,**

0. Which of the following state"ents regar!ing &1CA taxes is tre#A. /ow inco"e e"ployees are not reire! to pay &1CA taxes.B.

An eployee ho has to different eployers during the year ay be entitled to a

tax "redit foro+erpai! &1CA taxes.C.The "axi"" a"ont of %e!icare taxes an e"ployee is reire! to pay is cappe! eachyear *t the"axi"" a"ont of 'ocial 'ecrity taxes is not.(. The wage *ase li"it for &1CA taxes !epen!s on the taxpayers filing stats.

). Which of the following sggests that a woring taxpayer is an in!epen!ent contractorrather than ane"ployee#A. Wors for "ore than one fir"B. %ay realiGe a loss fro" *siness acti+itiesC. 'ets own woring hors(. Wors so"ewhere other than on e"ployer pre"isesE. All of these suggest independent "ontra"tor status

. Which of the following state"ents *est !escri*es the !e!ctions in!epen!entcontractors "ay clai" for +ali! *siness expenses#A. for A7 dedu"tions

B. fro" A1 !e!ctions not s*,ect to the two percent of A1 floor C. fro" A1 !e!ctions s*,ect to a two percent of A1 floor (. for A1 !e!ctions li"ite! to inco"e fro" the *siness acti+ities

9. The wage *ase for which of the following taxes is cappe!#A. &e!eral inco"eB. %o"ial %e"urity

C. %e!icare(. Alternati+e "ini""

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6. Which of the following state"ents regar!ing the self?e"ploy"ent tax is "ostaccrate#A.The self?e"ploy"ent tax *ase is generally the taxpayers net inco"e fro" self?

e"ploy"ent 4sallynet inco"e fro" 'che!le C.B.Taxpayers who report less than 3>00 of net inco"e fro" self?e"ploy"ent 4sally netinco"e fro"'che!le C are not reire! to pay self e"ploy"ent taxes.C.

The self-eployent tax base is net earnings fro self eployent hi"h is less

than net in"oe fro

self-eployent.

(. The 'ocial 'ecrity tax li"it !oes not apply to self?e"ploy"ent taxes.

5. Which of the following *est !escri*es the "anner in which self?e"ploye! taxpayers"ay !e!ct selfe"ploy"enttaxes#A. (e!ct e"ployer portion fro" A1.B. (e!ct entire a"ont fro" A1.C. 'edu"t eployer portion for A7.

(. (e!ct entire a"ont for A1.E. Do !e!ction

>. &or taxpayers who recei+e *oth salary as an e"ployee an! self?e"ploy"ent inco"eas an in!epen!entcontractor in the sa"e year2 which of the following state"ents regar!ing &1CA an! self?e"ploy"enttaxes is "ost accrate#A. The 'ocial 'ecrity li"it applies to the salary *t not to the self?e"ploy"ent inco"e.B. The 'ocial 'ecrity li"it applies to the self?e"ploy"ent inco"e *t not to the salary.C.

%alary is first applied against the %o"ial %e"urity liit and then self-eployent

in"oe is applied

against the %o"ial %e"urity liit.

(.'elf?e"ploy"ent inco"e is first applie! against the 'ocial 'ecrity li"it an! then salaryis applie!against the 'ocial 'ecrity li"it.

7. Which of the following state"ents concerning !ifferences *etween e"ployees an!in!epen!entcontractors is "ost accrate#

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A. E"ployees an! in!epen!ent contractors !e!ct *siness expenses as "iscellaneosite"iGe!!e!ctions.B.9hile eployees are typi"ally eligible for nontaxable fringe benefits fro

eployers, independent"ontra"tors are not.

C.E"ployers are reire! to withhol! either &1CA or self e"ploy"ent taxes fro"co"pensation pai! toe"ployees an! co"pensation pai! to in!epen!ent contractors.(.E"ployers typically withhol! fe!eral inco"e taxes fro" co"pensation pai! toe"ployees an! toin!epen!ent contractors.

. Which of the following state"ents concerning tax cre!its is tre#A. The tax *enefit a taxpayer recei+es fro" a cre!it !epen!s on the taxpayers "arginaltax rate.B. Refn!a*le tax cre!its are li"ite! to a taxpayers gross tax lia*ility.

C. Tax cre!its are generally "ore *eneficial than tax !e!ctions.(. Done of these is a tre state"ent.

8. Which of the following is not one of the general tax cre!it categories#A. Donrefn!a*le personalB. Refn!a*le personalC. Bsiness(. Refn!a*le *siness

80. Which of the following state"ents regar!ing the chil! tax cre!it is false#A. The chil! for who" the cre!it is clai"e! "st *e n!er the age of )5 at the en! of theyear.B. The cre!it is s*,ect to phase?ot *ase! on the taxpayers A1.C. The fll cre!it for a chil! who alifies is 3)2000.(. The chil! for who" the cre!it is clai"e! "st "eet the !efinition of a alifyingchil!.

8). $antitati+ely2 what is the relationship *etween the A1 phase?ot threshol!s for thechil! tax cre!it#A. Hea! of hosehol!I'ingle = %arrie! &iling 'eparately = %arrie! &iling @ointlyB. Hea! of hosehol!I'ingle J %arrie! &iling 'eparately J %arrie! &iling @ointlyC. Hea! of hosehol!I'ingle = %arrie! &iling 'eparately K %arrie! &iling @ointly(. Hea! of hosehol!I'ingle K %arrie! &iling 'eparately J %arrie! &iling @ointly

8. Rhianna an! @ay are "arrie! filing ,ointly in 0). They ha+e six chil!ren for who"they "ay clai" thechil! tax cre!it. Their A1 was 3)92660. What a"ont of chil! tax cre!it "ay theyclai" on their 0)tax retrn#A. 352900

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B. 3>2000C. 3)2000(. 362000

89. The a"ont of expen!itres eligi*le for the chil! an! !epen!ent care cre!it is the

least of three a"onts.Which of the following is not one of those a"onts#A. The total a"ont of chil! an! !epen!ent care expen!itres for the year B. 392000 for one alifying person or 3>2000 for two or "ore alifying personsC. The !epen!ents earne! inco"e for the year (. The taxpayers earne! inco"e for the year 

86. Which of the following state"ents regar!ing the chil! an! !epen!ent care cre!it isfalse#A. Taxpayers "ay clai" a cre!it for only a portion of alifying !epen!ent careexpen!itres.

B. 1f a taxpayers inco"e is too high2 she will *e ineligi*le to clai" any chil! an!!epen!ent care cre!it.C. A single taxpayer "st ha+e earne! inco"e to clai" any chil! an! !epen!ent carecre!it.(.A taxpayer is not eligi*le to clai" the !epen!ent care cre!it if any !epen!ent relati+e pro+i!es thecare.

85. Tr!y is @ocelyns frien!. Tr!y loos after @ocelyns for?year?ol! son !ring the !ayso @ocelyn can goto wor. (ring the year2 @ocelyn pai! Tr!y 362000 to care for her son. What is thea"ont of @ocelynschil! an! !epen!ent care cre!it if her A1 for the year was 3902000#A. 30B. 3)0C. 3)200(. 392000

8>. Laelyns "other2 @!y2 loos after Laelyns for?year?ol! twins so Laelyn can go towor 4she !rops off an! pics p the twins fro" @!ys ho"e e+ery!ay. 'ince @!y is a relati+e2 Laelyn"a!e sre2 for tax prposes2 to pay her "other the going rate for chil! care 43>2900 for the year. What isthe a"ont of Laelyns chil! an! !epen!ent care cre!it if her A1 for the year was 39>2000#A. 3)2660B. 32)00C. 3>2000(. 30

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87. Which of the following state"ents regar!ing the chil! an! !epen!ent care cre!it istre#A. A "arrie! cople "st file ,ointly to clai" the cre!it.B.A taxpayer "ay clai" a cre!it for !epen!ent care expenses for a !epen!ent who is )6

years ol! or ol!er  *t only if the !epen!ent li+es in the taxpayers ho"e for the entire year.C.All else eal2 a taxpayer "aing alifying expen!itres for three chil!ren "ay clai""ore !epen!entcare cre!it than a taxpayer "aing 4the sa"e a"ont of alifying expen!itres for twochil!ren.(. Done of these state"ents is tre.

8. Which of the following is not tre of the A"erican opportnity cre!it#A. A taxpayer with "ltiple eligi*le !epen!ents can clai" a cre!it for each !epen!entsalifying

expensesB. The cre!it is a+aila*le for st!ents !ring their first for years of postsecon!arye!cation onlyC. 1t is phase! ot *ase! on the taxpayers A1(. A taxpayer "ay not clai" a cre!it nless the taxpayer pays a !epen!ents alifyinge!cationalexpenses

88. Which of the following is not tre of the lifeti"e learning cre!it#A. 1t is a nonrefn!a*le cre!it.B.The cre!it can *e clai"e! *y taxpayers who ha+e gra!ate! fro" college an! are taing professionaltraining corses to i"pro+e their ,o* sills.C. A taxpayer with "ltiple !epen!ents can clai" a cre!it for each !epen!ents alifyingexpenses.(. The cre!it is s*,ect to phase ot *ase! on the taxpayers A1.

)00.Which of the following is not a tre state"ent a*ot the A"erican opportnity cre!it4AC an! lifeti"elearning cre!its#A. A taxpayer "ay not report *oth an AC an! a lifeti"e learning cre!it on the sa"e taxretrn.B. Certain e!cational expenses alify for *oth cre!its *t taxpayers "st clai" onecre!it or the other for the expen!itres 4the taxpayer can not clai" *oth cre!its for the sa"e expen!itres.C.Taxpayers "ay choose to either 4) !e!ct alifying e!cation expenses of anin!i+i!al as for A1!e!ctions or clai" e!cational cre!its for the in!i+i!als expenses 4*t not *oth.(.

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The A1 phase?ot threshol! for phasing ot the AC is higher than the A1 phase?otthreshol! for the lifeti"e learning cre!it.

)0).Which of the following state"ents regar!ing the earne! inco"e cre!it is tre#

A. 1t is a nonrefn!a*le cre!itB. A taxpayer with "ore earne! inco"e "ay recei+e "ore cre!it than a taxpayer with lessearne! inco"eC. A 70?year?ol! taxpayer with no !epen!ents can alify for the cre!it in certaincirc"stances(. A taxpayer whose only sorce of inco"e is interest fro" corporate *on!s is eligi*lefor the cre!it

)0.Which of the following !oes not affect the a"ont of the earne! inco"e cre!it#A. &iling statsB. A"ont of cre!it taen in pre+ios years

C. D"*er of alifying chil!ren(. Taxpayers A1)09.Carolyn has an A1 of 392000 4all fro" earne! inco"e2 two alifying chil!ren2an! is filing as a hea!of hosehol!. What a"ont of earne! inco"e cre!it is she entitle! to#A. 30B. 39C. 392>0(. 362606E. 3529>

)06.Which of the following state"ents regar!ing cre!its is correct#A. Bsiness expenses are generally refn!a*le cre!itsB. Bsiness cre!its that are generate! in one year *t are not tiliGe! in that year expireC.Bsiness cre!its that are generate! in one year *t are not tiliGe! in that year "ay *ecarrie! forwar!to ftre years *t not *ac to a prior year (.Bsiness cre!its that are generate! in one year *t are not tiliGe! in that year "ay *ecarrie! *ac tothe pre+ios year an! then forwar! to ftre years

)05.1f there is not enogh gross tax lia*ility to se the foreign tax cre!it2 ---------.A. it expires nse!B. it is carrie! *ac years or forwar! 0 yearsC. it is carrie! *ac 9 years or forwar! 5 years(. it is carrie! *ac ) year or forwar! )0 years

)0>.Which of the following tax cre!its is flly refn!a*le#

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A. A"erican opportnity cre!itB. (epen!ent care cre!itC. Earne! inco"e cre!it(. Done of these

)07.How col! an in!i+i!al o*tain a *siness tax cre!it#A. Throgh self?e"ploy"ent acti+itiesB. Throgh flow?throgh fro" a partnership or ' corporationC. By woring o+erseas an! o*taining a foreign tax cre!it(. All of these

)0.Which of the following represents the correct or!er in which cre!its are applie! togross tax lia*ility4fro" first to last#A. Donrefn!a*le personal2 *siness2 refn!a*leB. Bsiness2 nonrefn!a*le personal2 refn!a*le

C. Refn!a*le2 nonrefn!a*le personal2 *siness(. Refn!a*le2 *siness2 nonrefn!a*le personal

)08.Cassy reports a gross tax lia*ility of 3)2000. 'he also clai"s 3600 of nonrefn!a*le personal cre!its23700 of refn!a*le personal cre!its2 an! 300 of *siness cre!its. What is Cassys taxrefn! or taxlia*ility !e after applying the cre!its#A. 3)2000 taxes paya*leB. 30 refn! or taxes paya*leC. 3700 refn!(. 3900 refn!

))0.'heryls A1 is 3002000. Her crrent tax lia*ility is 3520>. /ast year2 her taxlia*ility was 3627.'he will not owe n!erpay"ent penalties if her total esti"ate! tax pay"ents are at leastwhich of thefollowing 4ron!e! a"onts 4ass"e she "aes the reire! pay"ents each arter#A. 36>2>)B. 3627C. 35)2567(. 3592586

))).1f an e"ployer withhol!s taxes fro" an e"ployee2 in general2 when are these taxestreate! as pai! to the1R'#A. As withhel!B. As the e"ployee reests on hisIher W ? 6 for"C. E+enly throghot the year (. n April )5

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)).Which of the following state"ents a*ot esti"ate! tax pay"ents an! n!erpay"ent penalties is tre for in!i+i!al taxpayers#A.Taxpayers who ha+e pai! their fll tax lia*ility *y the original tax retrn !e !ate are

 protecte! fro"n!erpay"ent penalties.B.Taxpayers who ha+e pai! their fll tax lia*ility *y the exten!e! tax retrn !e !ate are protecte! fro"n!erpay"ent penalties.C.Taxpayers who ha+e ne+en inco"e strea"s can pay esti"ate! tax arterly in ne+ena"onts an!not *e sscepti*le to n!erpay"ent penalties.(.Taxpayers who ha+e pai! their reire! a"ont of esti"ate! tax2 e+en thogh not onti"e2 are protecte! fro" n!erpay"ent penalties.

))9.Which of the following state"ent4s concerning esti"ate! tax pay"ents an!n!erpay"ent penalties for in!i+i!als is 4are tre#A. Whether taxpayers are s*,ect to n!erpay"ent penalties is !eter"ine! on a arterly *asis.B.(e !ates for esti"ate! tax pay"ents for a gi+en year are April )52 @ne )52 'epte"*er)5 of that year an! @anary )5 of the next year nless these !ates fall on a weeen! or a holi!ay.C. The a"ont of penalty !epen!s on the a"ont of the n!erpay"ent a"ong otherfactors.(. All of these state"ents are tre.

))6.What happens if the taxpayer owes an n!erpay"ent penalty2 *t !oes not co"pte iton &or" )0#A. Dothing2 nless the taxpayer is a!ite!B. The taxpayer is i""e!iately sent to the Tax CortC. The 1R' will co"pte an! assess the penalty(. The penalty is increase! *y fi+e percentage points

))5.Happy2 'leepy2 r"py2 an! (oc all !i! not "ae a!eate esti"ate! pay"ents.Which of the" will notowe n!erpay"ent penalties for 0) gi+en the following infor"ation#A. HappyB. 'leepyC. r"py(. (ocE. Two of these&. Done of these

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))>.Taxpayers are not reire! to file a tax retrn nless their gross inco"e passes acertain threshol!. Thisthreshol! is generally the -------.A. applica*le stan!ar! !e!ction a"ont

B. personal exe"ption a"ontC. twice the applica*le stan!ar! !e!ction a"ont(. applica*le stan!ar! !e!ction a"ont pls the personal exe"ption a"ont

))7.Why wol! a taxpayer file a tax retrn if not reire! to !o so#A. to re"ain in fa+or with the 1R'B. to clai" a refn! of taxes pai!C. all taxpayers are reire! to file retrns(. in or!er to clai" the stan!ar! !e!ction

))./ooing at the following partial calen!ar for April2 when will in!i+i!al tax retrns

 *e !e#A. &ri!ay2 April )6B. 'atr!ay2 April )5C. 'n!ay2 April )>(. %on!ay2 April )7E. Tes!ay2 April )

))8.Which of the following is not tre of the extension to file an in!i+i!al tax retrn#A. 1t is grante! ato"atically *y the 1R' if reeste!B. 1t "st *e reeste! *y the original !e !ate of the retrnC.1t exten!s the !e !ate for the retrn an! associate! tax pay"ents *eyon! the original !e!ate of thetax retrn(. The extension is for six "onths *eyon! the original !e !ate)0.Which of the following taxpayers 4all age 60 are reire! to file a retrn#A. @enny an! @i"B. AllenC. Ti""y(. Done of these

)).What is the n!erpay"ent penalty rate that taxpayers pay when they n!erpay theiresti"ate! taxes#A. &e!eral short?ter" interest rate.B. &e!eral short?ter" interest rate pls three percentage points.C. &e!eral long?ter" interest rate.(. Fero. The go+ern"ent !oes not pay interest on o+erpay"ents.

).Which of the following state"ents regar!ing late filing penalties is tre#A. 1f a taxpayer fails to file a tax retrn2 the late filing penalty will contine to grow ntil

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the taxpayer files the tax retrn.B.The a"ont of the late filing penalty is the sa"e for *oth fra!lent failre to file an!non fra!lentfailre to file.

C.Taxpayers who owe no tax as of the !e !ate of their tax retrns are not s*,ect to latefiling penaltiese+en if they file late.(. Done of these.

)9.Which of the following state"ents regar!ing late filing penalties an!Ior late pay"ent penalties is tre#A.An extension of ti"e to file the tax retrn protects a taxpayer fro" late pay"ent penaltiesas long as thetax is pai! *y the exten!e! !e !ate of the retrn.

B. The penalty rate for late filing penalties is less than the penalty rate for late pay"ent penalties.C.1f a taxpayer has not pai! the fll tax lia*ility *y the original !e !ate of the retrn an!the taxpayer hasnot file! a tax retrn *y the !e !ate of the retrn2 the "axi"" late filing an! late pay"ent penalty will *e no greater than the late filing penalty *y itself.(. Done of these.

CHAPTER 9

9>. Tax cost reco+ery "etho!s !o not incl!eMA. A"ortiGationB. CapitaliGationC. (epletion(. (epreciationE. All of these are tax cost reco+ery "etho!s

97. Which of the following is not !epreciate!#

A. Ato"o*ileB. Bil!ingC. Patent(. %achineryE. All of these are !epreciate!

9. Which of the following is not sally incl!e! in an assets tax *asis#A. Prchase price

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B. 'ales taxC. 'hipping(. 1nstallation costsE. All of these are incl!e! in an assets tax *asis

98. Which of the following wol! *e consi!ere! an i"pro+e"ent rather than a rotine"aintenance#A. il changeB. Engine o+erhalC. Wiper *la!e replace"ent(. Air filter change

60. Tax !epreciation is crrently n!er what syste"#A. '" of the years !igitsB. Accelerate! cost reco+ery syste"C. %o!ifie! accelerate! cost reco+ery syste"

(. 'traight line syste"E. Done of these

6). Which is not an allowa*le "etho! n!er %ACR'#A. )50 percent !eclining *alanceB. 00 percent !eclining *alanceC. 'traight line(. '" of the years !igitsE. All of these are allowa*le "etho!s n!er %ACR'

6. Which of the allowa*le "etho!s allows the "ost accelerate! !epreciation#A. )50 percent !eclining *alanceB. 00 percent !eclining *alanceC. 'traight line(. '" of the years !igitsE. Done of these allow accelerate! !epreciation

69. How is the reco+ery perio! of an asset !eter"ine!#A. Esti"ate! sefl lifeB. Treasry reglationC. Re+ene Proce!re 7 ? 5>(. Re+ene Rling 7 ? 5>E. Done of these

66. Which of the following !epreciation con+entions are not se! n!er %ACR'#A. &ll?"onthB. Half?year C. %i!?"onth(. %i!?arter E. All of these are se! n!er %ACR'

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65. Which !epreciation con+ention is the general rle for tangi*le personal property#A. &ll?"onthB. Half?year C. %i!?"onth

(. %i!?arter E. Done of these are con+entions for tangi*le personal property

6>. The %ACR' reco+ery perio! for ato"o*iles an! co"pters isMA. 9 yearsB. 5 yearsC. 7 years(. )0 yearsE. Done of these

67. /ax2 //C prchase! only one asset !ring the crrent year. 1t place! in ser+ice

co"pter eip"ent 45? year property on Agst > with a *asis of 302000. Calclatethe "axi"" !epreciation expense for the crrent year 4ignoring N)78 an! *ons!epreciationMA. 32000B. 325C. 392000(. 362000E. Done of these

6. 'airra2 //C prchase! only one asset !ring the crrent year. 1t place! in ser+icefrnitre 47?year  property on April )> with a *asis of 352000. Calclate the "axi"" !epreciationexpense for the crrent year2 ron!ing to a whole n"*er 4ignoring N)78 an! *ons!epreciationMA. 3)27>B. 392579C. 3626>9(. 352000E. Done of these

68. Beths *siness prchase! only one asset !ring the crrent year. 1t place! in ser+ice"achinery 47?year property on (ece"*er ) with a *asis of 3502000. Calclate the"axi"" !epreciation expense 4ignoring N)78 an! *ons !epreciationMA. 3)275B. 32500C. 372)65(. 3)02000E. Done of these

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50. (eir!res *siness prchase! two assets !ring the crrent year. 1t place! in ser+iceco"pter eip"ent 45?year property on @anary 0 with a *asis of 3)52000 an!"achinery 47?year property on cto*er ) with a *asis of 3)52000. Calclate the"axi"" !epreciation expense2 ron!e! to a whole n"*er 4ignoring N)78 an! *ons!epreciationMA. 3)2>B. 352)66C. 3527>(. 3>2000E. Done of these

5). '+i2 1nc. prchase! two assets !ring the crrent year. 1t place! in ser+ice co"ptereip"ent 45?year property on Agst )0 with a *asis of 302000 an! "achinery 47?year  property on Do+e"*er ) with a *asis of 3)02000. Calclate the "axi"" !epreciationexpense2 ron!e! to a whole n"*er 4ignoringN)78 an! *ons !epreciationMA. 357B. 392957C. 35268(. 3>2000E. Done of these

5. Wheeler //C prchase! two assets !ring the crrent year. 1t place! in ser+iceco"pter eip"ent 45?year property on Do+e"*er )> with a *asis of 3)52000 an!frnitre 47?year property on April 0 with a *asis of 3))2000. Calclate the "axi""!epreciation expense2 ron!ing to a whole n"*er 4ignoringN)78 an! *ons !epreciationMA. 3)25B. 327)6C. 36257(. 35200E. Done of these

59. Tasha //C prchase! frnitre 47?year property on April 0 with a *asis of 302000an! se! the "i!arter con+ention. (ring the crrent year2 which is the forth year Tasha //C owne! the property2 the property was !ispose! of on (ece"*er )5. Calclate the "axi""!epreciation expense2 ron!ing to a whole n"*erMA. 38B. 32085

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C. 326>)(. 32986E. Done of these

56. Anne //C prchase! co"pter eip"ent 45?year property on Agst 8 with a

 *asis of 3902000 an!se! the half?year con+ention. (ring the crrent year2 which is the forth year Anne//C owne! the property2 the property was !ispose! of on @anary )5. Calclate the "axi""!epreciation expenseMA. 369B. 3)27C. 3)276(. 39265>E. Done of these

55. Poploc //C prchase! a warehose an! lan! !ring the crrent year for 39502000.The prchase price was allocate! as followsM 3752000 to the *il!ing an! 3752000 to thelan!. The property was place! in ser+ice on Agst ). Calclate Poplocs "axi""!epreciation for this first year2 ron!e! to the nearest whole n"*erMA. 32>6B. 39297)C. 39275)(. 362776E. Done of these

5>. To" To" //C prchase! a rental hose an! lan! !ring the crrent year for3)502000. The prchase price was allocate! as followsM 3)002000 to the *il!ing an!3502000 to the lan!. The property was place! in ser+ice on %ay . Calclate To" To"s"axi"" !epreciation for this first yearMA. 3)2>05B. 3279C. 3260(. 3926)0E. Done of these

57. 'i""ons //C prchase! an office *il!ing an! lan! se+eral years ago for 3502000.The prchase price was allocate! as followsM 3002000 to the *il!ing an! 3502000 to thelan!. The property was place! in ser+ice on cto*er . 1f the property is !ispose! of on&e*rary 7 !ring the )0 th year2 calclate 'i""ons "axi"" !epreciation in the )0 thyearMA. 3>6)B. 3808C. 352)(. 37296>E. Done of these

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5. /enter //C place! in ser+ice on April 82 0) "achinery an! eip"ent 47?year property with a *asisof 35002000. Ass"e that /enter has sfficient inco"e to a+oi! anyli"itations. Calclate the "axi""!epreciation expense incl!ing N)78 expensing 4*tignoring *ons !epreciationMA. 37)2650.B. 3)982000.C. 3)80257.(. 3)02650.E. Done of these.

58. /itt"an //C place! in ser+ice on @ly 82 0) "achinery an! eip"ent 47?year property with a *asis of 35002000. /itt"ans inco"e for the crrent year *eforeexpensing was 3)002000. Calclate the "axi"" !epreciation expense incl!ing N)78expensing 4*t ignoring *ons !epreciationMA. 37)2650.B. 3)80257.C. 3)572)>0.(. 3)02650E. Done of these.

>0. Croch //C place! in ser+ice on %ay )82 0) "achinery an! eip"ent 47?year property with a *asis of 3>502000. Ass"e that Croch has sfficient inco"e to a+oi!any li"itations. Calclate the "axi"" !epreciation expense incl!ing N)78 expensing4*t ignoring *ons !epreciationMA. 3825.B. 3)9629.C. 3)20.(. 39)25.E. Done of these.

>). Clay //C place! in ser+ice "achinery an! eip"ent 47?year property with a *asisof 3>002000 on @ne >2 0). Ass"e that Clay has sfficient inco"e to a+oi! anyli"itations. Calclate the "axi"" !epreciation expense incl!ing N)78 expensing4ignoring any possi*le *ons !epreciation2 ron!e! to awhole n"*erMA. 3)702589B. 306277C. 362760(. 352860

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E. Done of these

>. Bonnie @o prchase! a se! co"pter 45?year property for se in her sole proprietorship. The *asis of the co"pter was 32600. Bonnie @o se! the co"pter in her  *siness >0 percent of the ti"e an! se! itfor personal prposes the rest of the ti"e!ring the first year. Calclate Bonnie @os !epreciation expense!ring the first yearass"ing the sole proprietorship ha! a loss !ring the year 4Bonnie !i! not place the property in ser+ice in the last arterMA. 360B. 3C. 360

(. 32600E. Done of these

>9. Billie Bo* prchase! a se! co"pter 45?year property for se in his sole proprietorship in the prior year. The *asis of the co"pter was 32600. Billie Bo* se!the co"pter in his *siness >0 percent of the ti"e !ring the first year. (ring thesecon! year2 Billie Bo* se! the co"pter 60 percent for *siness se. Calclate BillieBo*s !epreciation expense !ring the secon! year ass"ing the sole proprietorship ha! aloss !ring the year 4Billie Bo* !i! not place the asset in ser+ice in the last arterMA. 30B. 36C. 3)8(. 399>E. Done of these

>6. Poto"ac //C prchase! an ato"o*ile for 3902000 on Agst 5  th of 0). What isPoto"acs !epreciation expense for 0) 4ignore any possi*le *ons !epreciation#A. 3920>0B. 3627C. 3>2000(. 3902000E. Done of these

>5. Arlington //C prchase! an ato"o*ile for 3602000 on @ly 5 th of 0). What isArlingtons !epreciation expense for 0) if its *siness se percentage is 75 percent4ignore any possi*le *ons !epreciation#A. 3285B. 3920>0C. 3>2000(. 32000

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E. Done of these

>>. Ass"e that Bethany acires a co"petitors assets on %arch 9) st. The prchase price was 3)502000. f that a"ont2 3)52000 is allocate! to tangi*le assets an! 352000is allocate! to goo!will 4a N)87 intangi*le asset. What is Bethanys a"ortiGation expense

for the crrent year2 ron!e! to the nearest whole n"*er#A. 30B. 3)250C. 3)29)8(. 3)298E. Done of these

>7. Ass"e that Brittany acires a co"petitors assets on 'epte"*er 90 th of the prioryear. The prchase price was 39502000. f that a"ont2 39002000 is allocate! to tangi*leassets an! 3502000 is allocate!eally to two N)87 intangi*le assets 4goo!will an! a )?year non?co"pete agree"ent.

i+en2 that the non?co"pete agree"ent expires on 'epte"*er 90 th of year 2 what isBrittanys a"ortiGation expense for the secon! year2 ron!e! to the nearest wholen"*er#A. 30B. 3)2>>7C. 328)7(. 392999E. Done of these

>. @as"ine starte! a new *siness in the crrent year. 'he incrre! 3)02000 of start?pcosts. How "ch of the start?p costs can *e i""e!iately expense! for the year#A. 30B. 32500C. 352000(. 3)02000E. Done of these

>8. Racine starte! a new *siness in the crrent year. 'he incrre! 352000 of start?pcosts. 1f her *siness starte! on Do+e"*er 9 r! of the crrent year2 what is the totalexpense she "ay !e!ct with respect to the start?p costs for her initial year2 ron!e! tothe nearest whole n"*er#A. 32555.B. 392566.C. 3525.(. 352000.E. Done of these.

70. (aschle //C co"plete! so"e research an! !e+elop"ent !ring @ne of the crrentyear. The relate!costs were 3>02000. 1f (aschle wants to capitaliGe an! a"ortiGe the costs as icly as

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 possi*le2 what isthe total a"ortiGation expense (aschle "ay !e!ct !ring the crrent year#A. 30B. 3>2500C. 372000

(. 3)2000E. Done of these7). @orge prchase! a copyright for se in his *siness in the crrent year. The prchaseoccrre! on @ly)5 th an! the prchase price was 3752000. 1f the patent has a re"aining life of 75 "onths2what is the totala"ortiGation expense @orge "ay !e!ct !ring the crrent year#A. 30B. 352500C. 3>2000(. 3)2000

E. Done of these

7. eithner //C patente! a process it !e+elope! in the crrent year. The patent isexpecte! to create *enefits for eithner o+er a )0 year perio!. The patent was isse! on April )5 th an! thelegal costsassociate! with the patent were 3692000. 1n a!!ition2 eithner ha! na"ortiGe! researchexpen!itres of 3)52000 relate! to the process. What is the total a"ortiGation expense eithner "ay!e!ct !ring thecrrent year#A. 326)7B. 32558C. 362)0(. 362950E. Done of these

79. 'anta &e prchase! the rights to extract troise on a tract of lan! o+er a fi+e?year perio!. 'anta &e pai! 39002000 for extraction rights. A geologist esti"ates that 'anta &e will reco+er 52000 pon!s of troise. (ring the crrent year2 'anta &e extracte! )2500 pon!s of troise2 which itsol! for 3002000. What is 'anta &es cost !epletion expense for the crrent year#A. 3>02000B. 3802000C. 3))02000(. 39002000E. Done of these

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