Federal Taxation - Exam 2 (ALL) UPDATED
ACTUAL Exam Questions and CORRECT
Answers
Which taxpayers have limits on their/receive no standard deduction? - CORRECT ANSWER -
married taxpayers filing separate where the other spouse itemizes, non-resident aliens, and
taxpayers with filing periods less than 12 months
limit on standard deduction for dependents - CORRECT ANSWER - the greater of $1050 OR
earned income + $350 (note: cannot exceed personal exemption amount of $6300)
multiple support agreement - CORRECT ANSWER - if a group of people provide over 1/2
the support of a dependent but no one member provides over 1/2 the support alone, then eligible
members of the group may designate one member to claim the exemption
alimony - CORRECT ANSWER - deductible by the payer and taxable to the recipient; must
be made in cash, terminate at death of payee, not be designated as other than alimony (i.e child
support), be made between people living in separate households
who generally claims the dependency exemption for the child of divorced parents? - CORRECT
ANSWER - the custodial parent
surviving spouse - CORRECT ANSWER - can file a joint return 2 years after their spouse's
death IF the taxpayer does not remarry, is a US citizen or resident, would have qualified to file a
joint return in the year of death, and has at least one dependent child living at home during the
entire year with the taxpayer paying over 1/2 the expenses of the home
head of household - CORRECT ANSWER - must be unmarried as of the last day of the tax
year, not be a surviving spouse, a US citizen or resident, pay over half the costs of maintaining
their house in which a dependent lives for more than half of the tax year
, abandoned spouse - CORRECT ANSWER - may file as head of household if the taxpayer
lived apart from their spouse for the last six months of the year, is a US citizen or resident, and
pays over 1/2 the cost of maintaining a household in which the taxpayer and a dependent son or
daughter live for over 1/2 the year
tax concept of income - CORRECT ANSWER - there must be: 1. an economic benefit 2.
realized income (wherewithal-to-pay, cash-basis) 3. recognized income
tax on qualified dividends - CORRECT ANSWER - 10% or 15% tax bracket = NO tax
25% - 35% tax bracket = 15% tax rate
39.6% tax bracket = 20% tax rate
health insurance (fringe benefit) - CORRECT ANSWER - whatever is paid by the employer is
not taxable to the employee (ex. if the premium is $300 and they pay 80%, the $240 paid by
them is not taxable to the employee)
child support - CORRECT ANSWER - neither taxable nor deductible
property settlement - CORRECT ANSWER - neither taxable nor deductible
expected return (annuity) - CORRECT ANSWER - expected return multiple (given) * annual
payment
exclusion ratio (annuity) - CORRECT ANSWER - cost (investment in the contract) / expected
return
current year exclusion (annuity) - CORRECT ANSWER - exclusion ratio * amount received
during the year
provisional income - CORRECT ANSWER - AGI + tax-exempt interest + excluded foreign
income + 50% of Social Security benefits
ACTUAL Exam Questions and CORRECT
Answers
Which taxpayers have limits on their/receive no standard deduction? - CORRECT ANSWER -
married taxpayers filing separate where the other spouse itemizes, non-resident aliens, and
taxpayers with filing periods less than 12 months
limit on standard deduction for dependents - CORRECT ANSWER - the greater of $1050 OR
earned income + $350 (note: cannot exceed personal exemption amount of $6300)
multiple support agreement - CORRECT ANSWER - if a group of people provide over 1/2
the support of a dependent but no one member provides over 1/2 the support alone, then eligible
members of the group may designate one member to claim the exemption
alimony - CORRECT ANSWER - deductible by the payer and taxable to the recipient; must
be made in cash, terminate at death of payee, not be designated as other than alimony (i.e child
support), be made between people living in separate households
who generally claims the dependency exemption for the child of divorced parents? - CORRECT
ANSWER - the custodial parent
surviving spouse - CORRECT ANSWER - can file a joint return 2 years after their spouse's
death IF the taxpayer does not remarry, is a US citizen or resident, would have qualified to file a
joint return in the year of death, and has at least one dependent child living at home during the
entire year with the taxpayer paying over 1/2 the expenses of the home
head of household - CORRECT ANSWER - must be unmarried as of the last day of the tax
year, not be a surviving spouse, a US citizen or resident, pay over half the costs of maintaining
their house in which a dependent lives for more than half of the tax year
, abandoned spouse - CORRECT ANSWER - may file as head of household if the taxpayer
lived apart from their spouse for the last six months of the year, is a US citizen or resident, and
pays over 1/2 the cost of maintaining a household in which the taxpayer and a dependent son or
daughter live for over 1/2 the year
tax concept of income - CORRECT ANSWER - there must be: 1. an economic benefit 2.
realized income (wherewithal-to-pay, cash-basis) 3. recognized income
tax on qualified dividends - CORRECT ANSWER - 10% or 15% tax bracket = NO tax
25% - 35% tax bracket = 15% tax rate
39.6% tax bracket = 20% tax rate
health insurance (fringe benefit) - CORRECT ANSWER - whatever is paid by the employer is
not taxable to the employee (ex. if the premium is $300 and they pay 80%, the $240 paid by
them is not taxable to the employee)
child support - CORRECT ANSWER - neither taxable nor deductible
property settlement - CORRECT ANSWER - neither taxable nor deductible
expected return (annuity) - CORRECT ANSWER - expected return multiple (given) * annual
payment
exclusion ratio (annuity) - CORRECT ANSWER - cost (investment in the contract) / expected
return
current year exclusion (annuity) - CORRECT ANSWER - exclusion ratio * amount received
during the year
provisional income - CORRECT ANSWER - AGI + tax-exempt interest + excluded foreign
income + 50% of Social Security benefits
