HR BLOCK VOCAB CH 1-6
QUESTIONS WITH ACCURATE
ANSWERS
Acquisition Debt correct answer Debt incurred to acquire, construct, or improve
the taxpayer's principal or secondary residence.
Adjusted Gross Income (AGI) correct answer Adjusted gross income equals gross
income less reductions that are allowable, regardless of whether personal
deductions are itemized.
Basis correct answer The amount assigned to an asset from which gain or loss is
determined for income tax purposes. For assets acquired by purchase, basis is
cost. Special rules govern the basis of property received by virtue of another's
death or by gift; the basis of stock received on a transfer of property to a
controlled corporation; the basis of the property transferred to the corporation;
and the basis of property received upon the liquidation of a corporation.
Capital Gain Distributions correct answer Amounts paid by mutual funds,
regulated investment companies, and real estate investment trusts. These
amounts represent the shareholder's portion of gain from the sale of capital
assets owned by these investment companies. Capital gain distributions are taxed
in the year constructively received and are always considered to be held long-
term.
Charitable Contributions correct answer Money or property donated to a
qualified charitable organization. Such donations are deductible on Schedule A as
an itemized deduction.
, Community Income correct answer Income of a married couple, living in a
community property state, that is considered to belong equally to each spouse,
regardless of which spouse receives the income.
Community Property correct answer Property considered to belong in equal
shares to a husband and wife. This concept of ownership for property acquired
after marriage is followed in Arizona, California, Idaho, Louisiana, New Mexico,
Nevada, Texas, Washington, and Wisconsin.
Contribution correct answer (1) Gift to a qualified charitable organization,
generally deductible on Schedule A. (2) Money placed in a retirement fund, such
as an individual retirement arrangement or an employer-maintained retirement
plan.
Credits correct answer A direct reduction of tax liability allowed for various
purposes to taxpayers who meet the qualifications. Some credits are refundable;
that is, the IRS will send the taxpayer a refund for any amount in excess of the tax
liability. Some credits are nonrefundable; that is, they can only reduce tax liability
to zero. Some credits may be carried to other tax years.
Custodial Parent correct answer The parent with whom a child lived for the
greater number of nights during the year.
Custodial Parent correct answer The parent with whom a child lived for the
greater number of nights during the year.
Deductions correct answer Amounts that may be subtracted from income that is
otherwise taxable.
QUESTIONS WITH ACCURATE
ANSWERS
Acquisition Debt correct answer Debt incurred to acquire, construct, or improve
the taxpayer's principal or secondary residence.
Adjusted Gross Income (AGI) correct answer Adjusted gross income equals gross
income less reductions that are allowable, regardless of whether personal
deductions are itemized.
Basis correct answer The amount assigned to an asset from which gain or loss is
determined for income tax purposes. For assets acquired by purchase, basis is
cost. Special rules govern the basis of property received by virtue of another's
death or by gift; the basis of stock received on a transfer of property to a
controlled corporation; the basis of the property transferred to the corporation;
and the basis of property received upon the liquidation of a corporation.
Capital Gain Distributions correct answer Amounts paid by mutual funds,
regulated investment companies, and real estate investment trusts. These
amounts represent the shareholder's portion of gain from the sale of capital
assets owned by these investment companies. Capital gain distributions are taxed
in the year constructively received and are always considered to be held long-
term.
Charitable Contributions correct answer Money or property donated to a
qualified charitable organization. Such donations are deductible on Schedule A as
an itemized deduction.
, Community Income correct answer Income of a married couple, living in a
community property state, that is considered to belong equally to each spouse,
regardless of which spouse receives the income.
Community Property correct answer Property considered to belong in equal
shares to a husband and wife. This concept of ownership for property acquired
after marriage is followed in Arizona, California, Idaho, Louisiana, New Mexico,
Nevada, Texas, Washington, and Wisconsin.
Contribution correct answer (1) Gift to a qualified charitable organization,
generally deductible on Schedule A. (2) Money placed in a retirement fund, such
as an individual retirement arrangement or an employer-maintained retirement
plan.
Credits correct answer A direct reduction of tax liability allowed for various
purposes to taxpayers who meet the qualifications. Some credits are refundable;
that is, the IRS will send the taxpayer a refund for any amount in excess of the tax
liability. Some credits are nonrefundable; that is, they can only reduce tax liability
to zero. Some credits may be carried to other tax years.
Custodial Parent correct answer The parent with whom a child lived for the
greater number of nights during the year.
Custodial Parent correct answer The parent with whom a child lived for the
greater number of nights during the year.
Deductions correct answer Amounts that may be subtracted from income that is
otherwise taxable.
