CANADIAN TAX PRINCIPLES CHAPTER 4 EXAM
PREP COMPLETE QUESTIONS AND VERIFIED
ANSWERS GRADED A+
◉The U.S. tax laws are based on the all-inclusive concept where gross
income includes all realized income from whatever source derived.
Answer: True
◉Which one of the following choices is the definition of realized
income? Answer: Income from a transaction with a second party where
there is a measurable change in property rights between parties
◉Income that is taxed in the current year according to the tax rate
schedule is referred to as ______ income. Answer: ordinary
◉Depreciable assets used in a trade or business are classified as capital
assets. Answer: False
◉Which of the following statements is TRUE regarding the individual
income tax formula? Answer: A taxpayer may deduct the greater of his
standard deduction or his itemized deductions from AGI to arrive at
taxable income.
,◉The U.S. tax laws are based on the all-inclusive concept where gross
income includes all realized income from "whatever_______ ________
." Answer: source derived
◉Which of the following choices describe tax deductions? (Choose all
that apply.) Answer: - Tax deductions are a matter of legislative grace.
- Taxpayers are NOT allowed to deduct anything unless a specific tax
provision allows them to do so.
◉Which of the following statements is correct? Answer: Stock which
has appreciated in value must be sold before it is considered part of
gross income.
◉Deductions ______ (for/from) AGI cause a reduction in AGI, which
increases the deductibility of _________ (for/from) AGI deductions
subject to AGI limitations. Answer: for , from
◉Yolanda is your client. With her current level of taxable income, she is
paying tax at a 24% marginal rate. She received $2,000 in qualified
dividends this year. What rate of tax do you expect that Yolanda will pay
on her dividends? Answer: The qualified dividends are taxed at a
favorable rate. Since Yolanda is in the 24% bracket, the dividends will
be taxed at 15%.
◉Which of the following assets are classified as capital assets? (Check
all that apply.) Answer: - A house owned and used by a taxpayer
, - Stock held for investment
◉Zack is single and has collected the following information for
preparing his 2019 taxes: Gross income $74,000, tax credits $2,500,
itemized deductions $9,000, deductions for AGI $5,000, tax
prepayments $8,400. Based on this information, Zack's "adjusted gross
income" equals $_______ , and his "taxable income" equals $_________
Answer: - 69000
- 56800
◉Which of the following items are deductions FOR adjusted gross
income? (Check all that apply.) Answer: - Capital losses
- Contributions to (non Roth) qualified retirement accounts
- Health insurance for self-employed persons
- Alimony paid for divorces finalized before 1/1/2019
◉All sources of income are taxable unless specifically excluded through
a tax provision. However,________ are NOT permitted unless a specific
tax provision allows them. Answer: deductions
◉For tax years beginning in 2018, a taxpayer's from AGI deductions
include the greater of the standard deduction or the taxpayer's
_________ deductions and 20% of the taxpayer's qualified ___________
income. Answer: itemized , business
PREP COMPLETE QUESTIONS AND VERIFIED
ANSWERS GRADED A+
◉The U.S. tax laws are based on the all-inclusive concept where gross
income includes all realized income from whatever source derived.
Answer: True
◉Which one of the following choices is the definition of realized
income? Answer: Income from a transaction with a second party where
there is a measurable change in property rights between parties
◉Income that is taxed in the current year according to the tax rate
schedule is referred to as ______ income. Answer: ordinary
◉Depreciable assets used in a trade or business are classified as capital
assets. Answer: False
◉Which of the following statements is TRUE regarding the individual
income tax formula? Answer: A taxpayer may deduct the greater of his
standard deduction or his itemized deductions from AGI to arrive at
taxable income.
,◉The U.S. tax laws are based on the all-inclusive concept where gross
income includes all realized income from "whatever_______ ________
." Answer: source derived
◉Which of the following choices describe tax deductions? (Choose all
that apply.) Answer: - Tax deductions are a matter of legislative grace.
- Taxpayers are NOT allowed to deduct anything unless a specific tax
provision allows them to do so.
◉Which of the following statements is correct? Answer: Stock which
has appreciated in value must be sold before it is considered part of
gross income.
◉Deductions ______ (for/from) AGI cause a reduction in AGI, which
increases the deductibility of _________ (for/from) AGI deductions
subject to AGI limitations. Answer: for , from
◉Yolanda is your client. With her current level of taxable income, she is
paying tax at a 24% marginal rate. She received $2,000 in qualified
dividends this year. What rate of tax do you expect that Yolanda will pay
on her dividends? Answer: The qualified dividends are taxed at a
favorable rate. Since Yolanda is in the 24% bracket, the dividends will
be taxed at 15%.
◉Which of the following assets are classified as capital assets? (Check
all that apply.) Answer: - A house owned and used by a taxpayer
, - Stock held for investment
◉Zack is single and has collected the following information for
preparing his 2019 taxes: Gross income $74,000, tax credits $2,500,
itemized deductions $9,000, deductions for AGI $5,000, tax
prepayments $8,400. Based on this information, Zack's "adjusted gross
income" equals $_______ , and his "taxable income" equals $_________
Answer: - 69000
- 56800
◉Which of the following items are deductions FOR adjusted gross
income? (Check all that apply.) Answer: - Capital losses
- Contributions to (non Roth) qualified retirement accounts
- Health insurance for self-employed persons
- Alimony paid for divorces finalized before 1/1/2019
◉All sources of income are taxable unless specifically excluded through
a tax provision. However,________ are NOT permitted unless a specific
tax provision allows them. Answer: deductions
◉For tax years beginning in 2018, a taxpayer's from AGI deductions
include the greater of the standard deduction or the taxpayer's
_________ deductions and 20% of the taxpayer's qualified ___________
income. Answer: itemized , business
