TAX4001 2024/2025 Exam Questions
with 100% Correct Answers | Latest
Update
Identify and define the two Tax Credit classifications - 🧠ANSWER ✔✔1)
Refundable Tax credits - are allowed to reduce a taxpayers tax liability to
ZERO and, if some credit remains, are refundable (paid) by the
government to taxpayers.
2) Nonrefundable tax credits - are allowances that have been created by
congress for social, economic, and political reasons such as child and
dependent care credits.
Assume the same facts as in Example I:2-3 except that Joan is not a
homeowner. Thus, she has no property taxes or mortgage interest but does
pay rent of $800 per month for an apartment. Her taxable income is
computed as follows: - 🧠ANSWER ✔✔Joan would use the standard
deduction of $5,700 because it is greater than her itemized deductions of
$500. Rent paid for a personal apartment is not deductible.
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PRIVACY STATEMENT. ALL RIGHTS RESERVED
, A special rule applies to any individual for whom the dependency
exemption is allowable to another taxpayer. - 🧠ANSWER ✔✔The standard
deduction of the dependent is limited to the greater of
(1) the dependent's earned income plus $300 or
(2) $950 (in 2010 and 2011).
The purpose of this limitation is to prevent parents from shifting unearned
income, such as interest and dividends, to their children and avoid paying
tax on such income.
Without this rule, children could use the standard deduction to offset
interest and dividends.
Webb and Beth are married, in the 35% marginal tax rate bracket, and
have one son, Vincent, age 15. Vincent has no income and is claimed as a
dependent by his parents. Webb and Beth transfer stocks and bonds that
earn $3,000 in dividends and interest to Vincent. Their goal is to shift the
$3,000 of income to Vincent to utilize his standard deduction. However,
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
2
PRIVACY STATEMENT. ALL RIGHTS RESERVED
with 100% Correct Answers | Latest
Update
Identify and define the two Tax Credit classifications - 🧠ANSWER ✔✔1)
Refundable Tax credits - are allowed to reduce a taxpayers tax liability to
ZERO and, if some credit remains, are refundable (paid) by the
government to taxpayers.
2) Nonrefundable tax credits - are allowances that have been created by
congress for social, economic, and political reasons such as child and
dependent care credits.
Assume the same facts as in Example I:2-3 except that Joan is not a
homeowner. Thus, she has no property taxes or mortgage interest but does
pay rent of $800 per month for an apartment. Her taxable income is
computed as follows: - 🧠ANSWER ✔✔Joan would use the standard
deduction of $5,700 because it is greater than her itemized deductions of
$500. Rent paid for a personal apartment is not deductible.
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
1
PRIVACY STATEMENT. ALL RIGHTS RESERVED
, A special rule applies to any individual for whom the dependency
exemption is allowable to another taxpayer. - 🧠ANSWER ✔✔The standard
deduction of the dependent is limited to the greater of
(1) the dependent's earned income plus $300 or
(2) $950 (in 2010 and 2011).
The purpose of this limitation is to prevent parents from shifting unearned
income, such as interest and dividends, to their children and avoid paying
tax on such income.
Without this rule, children could use the standard deduction to offset
interest and dividends.
Webb and Beth are married, in the 35% marginal tax rate bracket, and
have one son, Vincent, age 15. Vincent has no income and is claimed as a
dependent by his parents. Webb and Beth transfer stocks and bonds that
earn $3,000 in dividends and interest to Vincent. Their goal is to shift the
$3,000 of income to Vincent to utilize his standard deduction. However,
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
2
PRIVACY STATEMENT. ALL RIGHTS RESERVED
