CHAPTER 3–TAX FORMULA AND TAX

| February 14, 2018

59.
In terms of the tax formula applicable to
individual taxpayers, which, if any, of the following statements is correct?

A. The formula does not apply
if a taxpayer elects to claim the standard deduction.
B.
In arriving at AGI, personal and dependency
exemptions must be subtracted from gross income.
C.
In arriving at taxable income, a taxpayer must
choose between the standard deduction and claiming personal and dependency
exemptions.

D. In
arriving at taxable income, a taxpayer must choose between the standard
deduction and deductions forAGI.

E.
None of the above.

60.
Regarding the tax formula and its relationship to
Form 1040, which, if any, of the following statements is correct?

A. Most exclusions from gross
income are reported on page 2 of Form 1040.
B.
An “above the line deduction” refers to a
deduction for AGI.
C.
A “page 1 deduction” refers to a deduction from
AGI.
D.
The taxable income (TI) amount appears both at the
bottom of page 1 and at the top of page 2 of Form 1040.

E.
None of the above.

61.
Which
of the following items, if any, is deductible?

A. Parking expenses incurred
in connection with jury duty—taxpayer is a dentist.
B.
Contributions to mayor’s reelection campaign.
C.
Substantiated gambling losses (not in excess of
gambling winnings) incurred on a vacation to Reno.
D. Speeding
ticket incurred while on business.
E.
Premiums paid on personal life insurance policy.

62.
Which,
if any, of the following is a deduction from AGI?

A. Alimony payments.
B.
Child support payments.
C.
Funeral expenses.
D. Loss on
the sale of a personal residence.
E.
Interest on home mortgage.

6

67.
Which,
if any, of the following is a deduction for AGI?

A. Alimony payments.
B.
Interest on home mortgage.
C.
Unreimbursed employee expenses.
D. Charitable
contributions.
E.
None of the above.

68.
Which,
if any, of the statements regarding the standard deduction is correct?

A. The basic standard
deduction is indexed for inflation but the additional standard deduction is
not.
B.
Not available to taxpayers who choose to deduct
their personal and dependency exemptions.
C.
Not available to taxpayers who choose to claim
their deduction for AGI.
D. Some
taxpayers may qualify for two additional standard deductions.
E.
None of the above.

69.
Which,
if any, of the following statements relating to the standard deduction is correct?

A. If a taxpayer dies during
the year, his (or her) standard deduction must be prorated.
B.
If spouses file separate returns, both spouses
must claim the standard deduction (rather than itemize their deductions from
AGI).

C.
If a taxpayer is claimed as a dependent of
another, his (or her) additional standard deduction is allowed in full (i.e.,
no adjustment is necessary).

D. If a
taxpayer is claimed as a dependent of another, no basic standard deduction is
allowed.
E.
None of the above.

70.
During
2010, Marvin had the following transactions:

Salary

$50,000

Bank loan (proceeds used
to buy personal auto)

10,000

Alimony paid

6,000

Child support paid

12,000

Gift from aunt

20,000

Marvin’s AGI is:

A. $32,000.

B. $38,000.

C. $44,000.

D. $56,000.

E. $64,000.

71. During 2010, Anna had the following
transactions:

Salary

$70,000

Interest income on City
of Denver bonds

2,000

Inheritance from uncle

40,000

Contribution to
traditional IRA

5,000

Lottery losses

3,000

Anna’s AGI is:

A. $62,000.
B. $65,000.
C. $67,000.
D. $102,000.
E. $104,000.

7

72. During 2010, Justin had the following
transactions:

Salary

$ 80,000

Interest income on IBM
bonds

2,000

Damages for personal
injury (car accident)

200,000

Punitive damages (same
car accident)

100,000

Cash dividends from
Chevron Corporation stock

5,000

Justin’s AGI is:

A. $185,000.

B. $187,000.

C. $285,000.

D. $287,000.

E. $385,000.

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