HS 321 - Exam 2 Exam Questions With
Correct Answers
Don and Betty are married, use the MFJ tax status, and never itemize
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their deductions. They have a gross income of $250,000 and deductions
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for adjusted gross income (AGI) in the amount of $12,000. Don and
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Betty are both over the age of 65, and neither is blind. What is Don and
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Betty's taxable income in the current year? Assume a standard
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deduction of $25,900 and additional standard deduction of $1,400.
| | | | | | | |
a. $212,900
|
b. $224,900
|
c. $209,300
|
d. $211,550 - CORRECT ANSWER✔✔-c. $209,300
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Explanation: Don and Betty's taxable income = gross income − | | | | | | | | | |
deductions for adjusted gross income − the greater of the standard
| | | | | | | | | | |
deduction or itemized deductions + additional deductions for being over
| | | | | | | | |
the age of 65.
| | | |
Therefore, their taxable income can be calculated as follows:
| | | | | | | |
For the Tax Year 2021:
| | | |
,- Gross Income = $250,000
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- Less: Deductions for AGI = (-$12,000)
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- Adjusted Gross Income = $238,000
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- Less: Standard Deduction = (-$25,900)
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- Less: Additional Standard Deduction = (-$2,800)
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- Taxable Income = $209,300
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Riley, aged 16 and a qualifying dependent of her parents, has $12,650 of
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|earned income from a newspaper route and $1,500 of unearned
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income. How much is taxable to Riley at her own tax rate?
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a. $500 |
b. $1,450
|
c. $1,150
|
d. $1,200 - CORRECT ANSWER✔✔-d. $1,200
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Explanation: Since Riley's unearned income is below $2,200, all of her
| | | | | | | | | | |
earned AND unearned income in excess of the standard deduction is
| | | | | | | | | | |
taxed at her rate. Her standard deduction is limited to $12,950 (the
| | | | | | | | | | | |
standard deduction for a single person) since her earned income of
| | | | | | | | | | |
$12,650 + $400 exceeds the standard deduction amount. Her total
| | | | | | | | | |
income is $14,150 − $12,950 standard deduction = $1,200.
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,Jason, aged 15 and a qualifying dependent of his parents, has $3,500 in
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interest and dividends and $12,000 in earned income from a part-time
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job. What is Jason's standard deduction this year?
| | | | | | |
a. $15,500
|
b. $12,400
|
c. $12,550
|
d. $12,000 - CORRECT ANSWER✔✔-b. $12,400
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Explanation: The standard deduction for a qualifying dependent is the
| | | | | | | | | |
lesser of earned income plus $400 or the standard deduction of $12,950
| | | | | | | | | | |
|in 2022. |
Nadia is a single taxpayer who had the following items of income and
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expense for the current tax year:
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- Wages: $85,000
| |
- U.S. savings bond interest: $5,000
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- Ordinary dividends: $3,000
| | |
- Municipal bond interest: $2,500
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- Receipt of gift from brother: $75,000
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- Federal taxes paid: $9,000
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, - Real estate taxes paid: $7,000
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- Mortgage interest paid: $8,000
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What is Nadia's adjusted gross income (AGI) for the current year?
| | | | | | | | | |
a. $95,500 |
b. $93,000 |
c. $146,500 |
d. $84,000 - CORRECT ANSWER✔✔-b. $93,000
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Explanation: Nadia's income includes the wages, U.S. savings bond
| | | | | | | | |
interest, and ordinary dividends. Therefore, her AGI is $93,000. $85,000
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+ $5,000 + $3,000 = $93,000
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Helen invested $30,000 in an annuity contract many years ago. This
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year, Helen annuitized the contract. The insurance company agreed to
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pay Helen $222.22 per month for 15 years. If Helen receives five
| | | | | | | | | | | |
payments this year, how much must she include in her gross income this
| | | | | | | | | | | |
year?
|
a. $0 |
b. $833.33 |
c. $277.77 |
Correct Answers
Don and Betty are married, use the MFJ tax status, and never itemize
| | | | | | | | | | | | |
their deductions. They have a gross income of $250,000 and deductions
| | | | | | | | | | |
for adjusted gross income (AGI) in the amount of $12,000. Don and
| | | | | | | | | | | |
Betty are both over the age of 65, and neither is blind. What is Don and
| | | | | | | | | | | | | | | |
Betty's taxable income in the current year? Assume a standard
| | | | | | | | | |
deduction of $25,900 and additional standard deduction of $1,400.
| | | | | | | |
a. $212,900
|
b. $224,900
|
c. $209,300
|
d. $211,550 - CORRECT ANSWER✔✔-c. $209,300
| | | | |
Explanation: Don and Betty's taxable income = gross income − | | | | | | | | | |
deductions for adjusted gross income − the greater of the standard
| | | | | | | | | | |
deduction or itemized deductions + additional deductions for being over
| | | | | | | | |
the age of 65.
| | | |
Therefore, their taxable income can be calculated as follows:
| | | | | | | |
For the Tax Year 2021:
| | | |
,- Gross Income = $250,000
| | | |
- Less: Deductions for AGI = (-$12,000)
| | | | | |
- Adjusted Gross Income = $238,000
| | | | |
- Less: Standard Deduction = (-$25,900)
| | | | |
- Less: Additional Standard Deduction = (-$2,800)
| | | | | |
- Taxable Income = $209,300
| | | |
Riley, aged 16 and a qualifying dependent of her parents, has $12,650 of
| | | | | | | | | | | |
|earned income from a newspaper route and $1,500 of unearned
| | | | | | | | | |
income. How much is taxable to Riley at her own tax rate?
| | | | | | | | | | |
a. $500 |
b. $1,450
|
c. $1,150
|
d. $1,200 - CORRECT ANSWER✔✔-d. $1,200
| | | | |
Explanation: Since Riley's unearned income is below $2,200, all of her
| | | | | | | | | | |
earned AND unearned income in excess of the standard deduction is
| | | | | | | | | | |
taxed at her rate. Her standard deduction is limited to $12,950 (the
| | | | | | | | | | | |
standard deduction for a single person) since her earned income of
| | | | | | | | | | |
$12,650 + $400 exceeds the standard deduction amount. Her total
| | | | | | | | | |
income is $14,150 − $12,950 standard deduction = $1,200.
| | | | | | | |
,Jason, aged 15 and a qualifying dependent of his parents, has $3,500 in
| | | | | | | | | | | | |
interest and dividends and $12,000 in earned income from a part-time
| | | | | | | | | | |
job. What is Jason's standard deduction this year?
| | | | | | |
a. $15,500
|
b. $12,400
|
c. $12,550
|
d. $12,000 - CORRECT ANSWER✔✔-b. $12,400
| | | | |
Explanation: The standard deduction for a qualifying dependent is the
| | | | | | | | | |
lesser of earned income plus $400 or the standard deduction of $12,950
| | | | | | | | | | |
|in 2022. |
Nadia is a single taxpayer who had the following items of income and
| | | | | | | | | | | | |
expense for the current tax year:
| | | | |
- Wages: $85,000
| |
- U.S. savings bond interest: $5,000
| | | | |
- Ordinary dividends: $3,000
| | |
- Municipal bond interest: $2,500
| | | |
- Receipt of gift from brother: $75,000
| | | | | |
- Federal taxes paid: $9,000
| | | |
, - Real estate taxes paid: $7,000
| | | | |
- Mortgage interest paid: $8,000
| | | |
What is Nadia's adjusted gross income (AGI) for the current year?
| | | | | | | | | |
a. $95,500 |
b. $93,000 |
c. $146,500 |
d. $84,000 - CORRECT ANSWER✔✔-b. $93,000
| | | | |
Explanation: Nadia's income includes the wages, U.S. savings bond
| | | | | | | | |
interest, and ordinary dividends. Therefore, her AGI is $93,000. $85,000
| | | | | | | | | |
+ $5,000 + $3,000 = $93,000
| | | | |
Helen invested $30,000 in an annuity contract many years ago. This
| | | | | | | | | | |
year, Helen annuitized the contract. The insurance company agreed to
| | | | | | | | | |
pay Helen $222.22 per month for 15 years. If Helen receives five
| | | | | | | | | | | |
payments this year, how much must she include in her gross income this
| | | | | | | | | | | |
year?
|
a. $0 |
b. $833.33 |
c. $277.77 |
