Gleim Final Exam with Complete Solutions
Chris, age 5, has $3,600 of interest income and no earned income in 2020. Assuming the
current applicable standard deduction is $1,100, how much of Chris's income will be subject
to the Kiddie Tax? Correct Ans-1400, net unearned income of a child is taxed to the parent
at a higher marginal rate (3600-1100+1100)=1400
An employee who has had Social Security tax withheld in an amount greater than the
maximum for a particular year may claim Correct Ans-the excess as a credit against income
tax if that excess resulted from correct withholding by 2 or more employers
Books of account or records sufficient to establish the amount of gross income, deductions,
credit, or other matters required to be shown in any tax or information return Correct Ans-
Must be maintained as long as the contents may be material in administration of any internal
revenue law.
Which of the statements describes estimated taxes? Correct Ans-Withholding taxes for the
self-employed and for nonwage or salary income.
Which of the following is not treated as prepayment of tax? Correct Ans-Penalty for prior
year underpayment of tax.
, Gleim Final Exam with Complete Solutions
An individual taxpayer's tax return included the following:
Regular tax before tax credits
$5,000
Current-year estimated tax payments
6,000
Amount paid with current-year extension
1,000
Federal income tax withheld
1,000
What amount, if any, is the taxpayer's overpayment? Correct Ans-3000,
(6000+1000+1000)-(5000)=3000
A 22-year-old full-time student earned $11,000 in salary and received $9,000 in interest from
corporate bonds. The bonds were a gift from the student's grandparents. The student's
parents pay more than half of the student's support, including $25,000 in tuition. Which of
the following statements is correct regarding the student's current-year income tax?
, Gleim Final Exam with Complete Solutions
Correct Ans-A portion of the student's interest income and no other income will be subject
to the "kiddie tax."
Company A, a U.S. company, deducted costs from research and development of a product in
the U.S., then licensed rights to the product to a foreign subsidiary in a lower tax jurisdiction.
The subsidiary then manufactured the product and sold each unit back to Company A (the
parent company). This is an example of which tax planning technique? Correct Ans-shifting
of income
Utilizing MACRS depreciation (accelerating the depreciation deduction) instead of electing
straight-line depreciation is an example of which tax planning technique? Correct Ans-
timing
Which of the following falls under the tax planning strategy of income shifting? Correct
Ans-Hiring a family member in order to increase business expenses and increase family global
net income.
Which of the following is an evasion of tax? Correct Ans-A parent reporting his or her own
taxable income on a child's tax return.
, Gleim Final Exam with Complete Solutions
Which of the following allows a taxpayer to legally avoid paying income tax? Correct Ans-
Treating a portion of compensation as a tax-free fringe benefit.
When should a noncorporate taxpayer elect to forgo Sec. 179 or elect out of bonus
depreciation deductions in the current year? Correct Ans-When the taxpayer has low
marginal tax rates in the current year and expects to be in higher marginal rates in the future.
A husband and wife can file a joint return even if Correct Ans-The spouses have different
accounting methods.
Which of the following, if any, are among the requirements to enable a taxpayer to be
classified as a "qualifying widow(er)"?
A dependent has lived with the taxpayer for 6 months.
The taxpayer has maintained the cost of the principal residence for 6 months. Correct Ans-
neither
Chris, age 5, has $3,600 of interest income and no earned income in 2020. Assuming the
current applicable standard deduction is $1,100, how much of Chris's income will be subject
to the Kiddie Tax? Correct Ans-1400, net unearned income of a child is taxed to the parent
at a higher marginal rate (3600-1100+1100)=1400
An employee who has had Social Security tax withheld in an amount greater than the
maximum for a particular year may claim Correct Ans-the excess as a credit against income
tax if that excess resulted from correct withholding by 2 or more employers
Books of account or records sufficient to establish the amount of gross income, deductions,
credit, or other matters required to be shown in any tax or information return Correct Ans-
Must be maintained as long as the contents may be material in administration of any internal
revenue law.
Which of the statements describes estimated taxes? Correct Ans-Withholding taxes for the
self-employed and for nonwage or salary income.
Which of the following is not treated as prepayment of tax? Correct Ans-Penalty for prior
year underpayment of tax.
, Gleim Final Exam with Complete Solutions
An individual taxpayer's tax return included the following:
Regular tax before tax credits
$5,000
Current-year estimated tax payments
6,000
Amount paid with current-year extension
1,000
Federal income tax withheld
1,000
What amount, if any, is the taxpayer's overpayment? Correct Ans-3000,
(6000+1000+1000)-(5000)=3000
A 22-year-old full-time student earned $11,000 in salary and received $9,000 in interest from
corporate bonds. The bonds were a gift from the student's grandparents. The student's
parents pay more than half of the student's support, including $25,000 in tuition. Which of
the following statements is correct regarding the student's current-year income tax?
, Gleim Final Exam with Complete Solutions
Correct Ans-A portion of the student's interest income and no other income will be subject
to the "kiddie tax."
Company A, a U.S. company, deducted costs from research and development of a product in
the U.S., then licensed rights to the product to a foreign subsidiary in a lower tax jurisdiction.
The subsidiary then manufactured the product and sold each unit back to Company A (the
parent company). This is an example of which tax planning technique? Correct Ans-shifting
of income
Utilizing MACRS depreciation (accelerating the depreciation deduction) instead of electing
straight-line depreciation is an example of which tax planning technique? Correct Ans-
timing
Which of the following falls under the tax planning strategy of income shifting? Correct
Ans-Hiring a family member in order to increase business expenses and increase family global
net income.
Which of the following is an evasion of tax? Correct Ans-A parent reporting his or her own
taxable income on a child's tax return.
, Gleim Final Exam with Complete Solutions
Which of the following allows a taxpayer to legally avoid paying income tax? Correct Ans-
Treating a portion of compensation as a tax-free fringe benefit.
When should a noncorporate taxpayer elect to forgo Sec. 179 or elect out of bonus
depreciation deductions in the current year? Correct Ans-When the taxpayer has low
marginal tax rates in the current year and expects to be in higher marginal rates in the future.
A husband and wife can file a joint return even if Correct Ans-The spouses have different
accounting methods.
Which of the following, if any, are among the requirements to enable a taxpayer to be
classified as a "qualifying widow(er)"?
A dependent has lived with the taxpayer for 6 months.
The taxpayer has maintained the cost of the principal residence for 6 months. Correct Ans-
neither
