South-Western Federal Taxation
Comprehensive, Chapter 3 UPDATED
ACTUAL Exam Questions and CORRECT
Answers
Abandoned spouse - CORRECT ANSWER - The abandoned spouse provision enables a
married taxpayer with a dependent child whose spouse did not live in the taxpayer's home during
the last six months of the tax year to file as a head of household rather than as married filing
separately.
Child tax credit - CORRECT ANSWER - A tax credit based solely on the number of
qualifying children under age 17. The maximum credit available is $1,000 per child through
2017. A qualifying child must be claimed as a dependent on a parent's tax return to qualify for
the credit. Taxpayers who qualify for the child tax credit may also qualify for a supplemental
credit. The supplemental credit is treated as a component of the earned income credit and is
therefore refundable. The credit is phased out for higher-income taxpayers. § 24.
Collectibles - CORRECT ANSWER - A special type of capital asset, the gain from which is
taxed at a maximum rate of 28 percent if the holding period is more than one year. Examples
include art, rugs, antiques, gems, metals, stamps, some coins and bullion, and alcoholic
beverages held for investment.
Dependency exemption - CORRECT ANSWER - The tax law provides an exemption for each
individual taxpayer and an additional exemption for the taxpayer's spouse if a joint return is
filed. An individual may also claim a dependency exemption for each dependent, provided
certain tests are met. The amount of the personal and dependency exemptions is $3,900 in 2013
($3,800 in 2012). The exemption is subject to phaseout once adjusted gross income exceeds
certain statutory threshold amounts. This phaseout provision is subject to partial phaseout
beginning in 2006. Beginning in 2010, the phaseout provision no longer applies. Under the
sunset provision, the phaseout of personal and dependency exemptions was scheduled to be
reinstated in 2011. The Tax Relief Act (TRA) of 2010 put off the reinstatement for two years
(i.e., 2011 and 2012). For 2013, the American Taxpayer Relief Act of 2012 restored the phaseout
of personal and dependency exemptions.
Comprehensive, Chapter 3 UPDATED
ACTUAL Exam Questions and CORRECT
Answers
Abandoned spouse - CORRECT ANSWER - The abandoned spouse provision enables a
married taxpayer with a dependent child whose spouse did not live in the taxpayer's home during
the last six months of the tax year to file as a head of household rather than as married filing
separately.
Child tax credit - CORRECT ANSWER - A tax credit based solely on the number of
qualifying children under age 17. The maximum credit available is $1,000 per child through
2017. A qualifying child must be claimed as a dependent on a parent's tax return to qualify for
the credit. Taxpayers who qualify for the child tax credit may also qualify for a supplemental
credit. The supplemental credit is treated as a component of the earned income credit and is
therefore refundable. The credit is phased out for higher-income taxpayers. § 24.
Collectibles - CORRECT ANSWER - A special type of capital asset, the gain from which is
taxed at a maximum rate of 28 percent if the holding period is more than one year. Examples
include art, rugs, antiques, gems, metals, stamps, some coins and bullion, and alcoholic
beverages held for investment.
Dependency exemption - CORRECT ANSWER - The tax law provides an exemption for each
individual taxpayer and an additional exemption for the taxpayer's spouse if a joint return is
filed. An individual may also claim a dependency exemption for each dependent, provided
certain tests are met. The amount of the personal and dependency exemptions is $3,900 in 2013
($3,800 in 2012). The exemption is subject to phaseout once adjusted gross income exceeds
certain statutory threshold amounts. This phaseout provision is subject to partial phaseout
beginning in 2006. Beginning in 2010, the phaseout provision no longer applies. Under the
sunset provision, the phaseout of personal and dependency exemptions was scheduled to be
reinstated in 2011. The Tax Relief Act (TRA) of 2010 put off the reinstatement for two years
(i.e., 2011 and 2012). For 2013, the American Taxpayer Relief Act of 2012 restored the phaseout
of personal and dependency exemptions.
