TAX 4001 Exam with 100% Correct Answers
The amount of the standard deduction varies are what three items? - ANSWER 1) Filing Status
2) Age
3) Vision
At what age does the elderly taxpayer received an increase in standard deductions and when is
this individual considered to reach this age for tax purposes? - ANSWER The increase in the
standard deduction for elderly taxpayers is available if the taxpayer turns 65 during the tax
year. For purposes of this requirement, a taxpayer is considered to be age 65 on the day before
his or her sixty-fifth birthday. Thus, a taxpayer who reaches age 65 on January 1 of a year is
deemed to have reached age 65 on December 31 of the preceding year. The adjustment is
allowed on the final return of a deceased taxpayer only if he or she reached age 65 before
death.
Define: Income for tax purposes - ANSWER 1) Income from any source, even if it's illegal.
Taxable and Nontaxable.
2) Closer to Revenue, but it does not include a "return on capital". Only gains from a sale
or Gross Profit is viewed as income.
, The standard deduction is unavailable to what three categories of taxpayers? - ANSWER 1) An
individual filing a return for a period less than twelve months because of a change in
accounting period.
2) A married taxpayer filing a separate return in instances where the other spouse itemizes.
3) Nonresident aliens.
To illustrate why Congress does not permit certain taxpayers to claim the standard deduction,
consider what could happen if a married couple files separate returns but only one spouse
itemizes. On a separate return in 2011 when the standard deduction is $5,800, one spouse
could claim all itemized deductions while the other uses the standard deduction.
Clay and Joy, a married couple, have incomes of $35,000 and $34,000, respectively. Their itemized
deductions total $9,000. They would claim a $11,600 standard deduction on a joint return. If Clay
filed a separate return and claimed all of the deductions, his itemized deductions of $9,000 would
be greater than the $5,800 standard deduction. If Joy could claim the standard deduction on her
return, their total deductions would equal $14,800 ($9,000 + $5,800). The law, however, requires
that either they both itemize or they both use the standard deduction.
In 2011, Joan is single and a homeowner who incurs property taxes on her home of $2,000,
makes charitable contributions of $500, and pays mortgage interest of $6,000. Joan's
adjusted gross income is $32,000. Her taxable income is computed as follows: - ANSWER Joan
would itemize her deductions because they ($8,500) are greater than her standard deduction
($5,800).
Define Gross Income - ANSWER Income reduced by exclusions; derived from any source. This is
the amount your are initially taxed on before deductions and credits.
Define: Exclusion - ANSWER Income that tax law says is not taxable; income that is
omitted from the tax base.
The amount of the standard deduction varies are what three items? - ANSWER 1) Filing Status
2) Age
3) Vision
At what age does the elderly taxpayer received an increase in standard deductions and when is
this individual considered to reach this age for tax purposes? - ANSWER The increase in the
standard deduction for elderly taxpayers is available if the taxpayer turns 65 during the tax
year. For purposes of this requirement, a taxpayer is considered to be age 65 on the day before
his or her sixty-fifth birthday. Thus, a taxpayer who reaches age 65 on January 1 of a year is
deemed to have reached age 65 on December 31 of the preceding year. The adjustment is
allowed on the final return of a deceased taxpayer only if he or she reached age 65 before
death.
Define: Income for tax purposes - ANSWER 1) Income from any source, even if it's illegal.
Taxable and Nontaxable.
2) Closer to Revenue, but it does not include a "return on capital". Only gains from a sale
or Gross Profit is viewed as income.
, The standard deduction is unavailable to what three categories of taxpayers? - ANSWER 1) An
individual filing a return for a period less than twelve months because of a change in
accounting period.
2) A married taxpayer filing a separate return in instances where the other spouse itemizes.
3) Nonresident aliens.
To illustrate why Congress does not permit certain taxpayers to claim the standard deduction,
consider what could happen if a married couple files separate returns but only one spouse
itemizes. On a separate return in 2011 when the standard deduction is $5,800, one spouse
could claim all itemized deductions while the other uses the standard deduction.
Clay and Joy, a married couple, have incomes of $35,000 and $34,000, respectively. Their itemized
deductions total $9,000. They would claim a $11,600 standard deduction on a joint return. If Clay
filed a separate return and claimed all of the deductions, his itemized deductions of $9,000 would
be greater than the $5,800 standard deduction. If Joy could claim the standard deduction on her
return, their total deductions would equal $14,800 ($9,000 + $5,800). The law, however, requires
that either they both itemize or they both use the standard deduction.
In 2011, Joan is single and a homeowner who incurs property taxes on her home of $2,000,
makes charitable contributions of $500, and pays mortgage interest of $6,000. Joan's
adjusted gross income is $32,000. Her taxable income is computed as follows: - ANSWER Joan
would itemize her deductions because they ($8,500) are greater than her standard deduction
($5,800).
Define Gross Income - ANSWER Income reduced by exclusions; derived from any source. This is
the amount your are initially taxed on before deductions and credits.
Define: Exclusion - ANSWER Income that tax law says is not taxable; income that is
omitted from the tax base.
