EXAM 1 MD STATE TAX PREP GOLDEN STATE UPDATED
ACTUAL QUESTIONS AND CORRECT ANSWERS
Question:
1. Danielle and her 3-year-old daughter Kyra lived with her mother all year. Danielle is 25 years old,
unmarried, and her adjusted gross income (AGI) is $18,000. Danielle's mother's AGI is $15,000. Kyra's
father did not live with Danielle or her daughter. Also, Danielle has not signed Form 8332 (or a similar
statement) to release claiming the child as a dependent to the noncustodial parent. Because Danielle's
mother's AGI is not higher than hers she cannot claim Kyra as a qualifying child on her income tax return.
Only Danielle can claim Kyra as a qualifying child and is entitled, if additional eligibility requirements are
met, to which of the following tax benefit?
A. The Child Tax Credit
B. The Credit for Child and Dependent Care Expenses
C. Head of household filing status
D. All of the above
Answer:
D. All of the above
Question:
2. Mike is unmarried. His dependent daughter, Sara, lived with him all year. Property taxes of $1,000 and
mortgage interest of $4,000 on the home where he and Sara live are divided equally with his ex-wife. Mike
paid the utilities of $100 per month. What portion of the yearly household expenses allows him to qualify
for head of household filing status? A. $2,500 B. $3,700 C. $5,600 D. $6,200
Answer:
B. $3,700
Question:
3. Which of the following is a requirement that must be met in determining whether a taxpayer is eligible
for head of household filing status purposes? A. An individual's spouse must not have lived in their home
for the entire tax year B. The individual must be divorced or legally separated for over one year C. An
individual must pay less than one-half the cost of keeping up a home for the tax year D. An individual's
home must be, for at least 6 months, the main home of his or her child, stepchild, or adopted child whom
he or she can properly claim as a dependent
Answer:
D. An individual's home must be, for at least 6 months, the main home of his child, stepchild, or adopted
child whom he or she can properly claim as a dependent.
Question:
4. Which dependent relative does not have to live in the same household as the taxpayer claiming head of
household filing status? A. Uncle B. Sister or brother C. Mother D. Daughter
Answer:
C. Mother
, Question:
5. In meeting the gross income test for claiming his father as a dependent, James must consider the income
received by his father. This income included gross rents of $3,000 (expenses were $2,000), municipal bond
interest of $1,000, dividends of $1,500, and Social Security of $4,000. What is James' father's gross
income for dependency test purposes? A. $3,000 B. $4,500 C. $5,500 D. $9,600
Answer:
B. $4,500
Question:
6. Generally, qualified dividends are taxed at what tax rate? A. Individual tax rate B. Long-term capital
gains tax rates C. Corporate tax rates D. None of the above
Answer:
B. Long-term capital gains tax rates
Question:
7. If a taxpayer receives noncash gifts or services for making deposits or for opening an account in a
savings institution, for deposits of less than $5,000, gifts or services valued at more than what amount must
be reported as interest? A. $10 B. $20 C. $30 D. $40
Answer:
A. $10
Question:
8. Qualified dividends are eligible to be taxed at a lower tax rate than other ordinary income. For 2024, this
means that qualified dividends are taxed at a maximum rate of what percentage? A. 7.5% B. 10% C. 15%
D. 20%
Answer:
D. 20%
Question:
9. A taxpayer goes to a casino and wins $10,000. The casino withholds $500 for federal income taxes.
What is the proper tax treatment by the taxpayer? A. The taxpayer must report the winnings and can claim
the amount of federal income tax withheld on Form 1040
B. The taxpayer does not have to report the winnings because the taxpayer did not receive a Form 1099-G
from the casino C. The taxpayer is not required to report the winnings on the taxpayer's Form 1040 unless
the taxpayer wants to claim the withholding on the Form 1040 D. The taxpayer must report the winnings
on the taxpayer's Form 1040, but the taxpayer may not claim the amount of federal income tax withheld
unless the taxpayer itemizes deductions
Answer:
A. The taxpayer must report the winnings and can claim the amount of federal income tax withheld on
Form 1040
ACTUAL QUESTIONS AND CORRECT ANSWERS
Question:
1. Danielle and her 3-year-old daughter Kyra lived with her mother all year. Danielle is 25 years old,
unmarried, and her adjusted gross income (AGI) is $18,000. Danielle's mother's AGI is $15,000. Kyra's
father did not live with Danielle or her daughter. Also, Danielle has not signed Form 8332 (or a similar
statement) to release claiming the child as a dependent to the noncustodial parent. Because Danielle's
mother's AGI is not higher than hers she cannot claim Kyra as a qualifying child on her income tax return.
Only Danielle can claim Kyra as a qualifying child and is entitled, if additional eligibility requirements are
met, to which of the following tax benefit?
A. The Child Tax Credit
B. The Credit for Child and Dependent Care Expenses
C. Head of household filing status
D. All of the above
Answer:
D. All of the above
Question:
2. Mike is unmarried. His dependent daughter, Sara, lived with him all year. Property taxes of $1,000 and
mortgage interest of $4,000 on the home where he and Sara live are divided equally with his ex-wife. Mike
paid the utilities of $100 per month. What portion of the yearly household expenses allows him to qualify
for head of household filing status? A. $2,500 B. $3,700 C. $5,600 D. $6,200
Answer:
B. $3,700
Question:
3. Which of the following is a requirement that must be met in determining whether a taxpayer is eligible
for head of household filing status purposes? A. An individual's spouse must not have lived in their home
for the entire tax year B. The individual must be divorced or legally separated for over one year C. An
individual must pay less than one-half the cost of keeping up a home for the tax year D. An individual's
home must be, for at least 6 months, the main home of his or her child, stepchild, or adopted child whom
he or she can properly claim as a dependent
Answer:
D. An individual's home must be, for at least 6 months, the main home of his child, stepchild, or adopted
child whom he or she can properly claim as a dependent.
Question:
4. Which dependent relative does not have to live in the same household as the taxpayer claiming head of
household filing status? A. Uncle B. Sister or brother C. Mother D. Daughter
Answer:
C. Mother
, Question:
5. In meeting the gross income test for claiming his father as a dependent, James must consider the income
received by his father. This income included gross rents of $3,000 (expenses were $2,000), municipal bond
interest of $1,000, dividends of $1,500, and Social Security of $4,000. What is James' father's gross
income for dependency test purposes? A. $3,000 B. $4,500 C. $5,500 D. $9,600
Answer:
B. $4,500
Question:
6. Generally, qualified dividends are taxed at what tax rate? A. Individual tax rate B. Long-term capital
gains tax rates C. Corporate tax rates D. None of the above
Answer:
B. Long-term capital gains tax rates
Question:
7. If a taxpayer receives noncash gifts or services for making deposits or for opening an account in a
savings institution, for deposits of less than $5,000, gifts or services valued at more than what amount must
be reported as interest? A. $10 B. $20 C. $30 D. $40
Answer:
A. $10
Question:
8. Qualified dividends are eligible to be taxed at a lower tax rate than other ordinary income. For 2024, this
means that qualified dividends are taxed at a maximum rate of what percentage? A. 7.5% B. 10% C. 15%
D. 20%
Answer:
D. 20%
Question:
9. A taxpayer goes to a casino and wins $10,000. The casino withholds $500 for federal income taxes.
What is the proper tax treatment by the taxpayer? A. The taxpayer must report the winnings and can claim
the amount of federal income tax withheld on Form 1040
B. The taxpayer does not have to report the winnings because the taxpayer did not receive a Form 1099-G
from the casino C. The taxpayer is not required to report the winnings on the taxpayer's Form 1040 unless
the taxpayer wants to claim the withholding on the Form 1040 D. The taxpayer must report the winnings
on the taxpayer's Form 1040, but the taxpayer may not claim the amount of federal income tax withheld
unless the taxpayer itemizes deductions
Answer:
A. The taxpayer must report the winnings and can claim the amount of federal income tax withheld on
Form 1040
