Question 1

Which one of the following items is a set amount of income on which no taxes are paid?

Accepted Answer

A)  itemized deductions
B)  standard deduction
C)  earned tax credit
D)  withholding
E)  capital gainsF) B) and E)
G) None of the above

Question 2

A tax on the value of automobiles,boats,or furniture is referred to as a personal property tax.

Accepted Answer

A) True 
 B)False

Question 3

A $2,000 deposit to a tax-deferred retirement account for a person in a 25 percent tax bracket would result in a reduced tax bill of:

Accepted Answer

A)  $2,000
B)  $1,500
C)  $1,200
D)  $500
E)  $300F) All of the above
G) A) and D)

Question 4

The interest paid on which type of loan is not tax deductible?

Accepted Answer

A)  home equity loan used to purchase an automobile
B)  credit card
C)  mortgage for a primary residence
D)  mortgage for a second home
E)  second mortgage for a primary residenceF) A) and B)
G) A) and E)

Question 5

Alex Bates goes on Jeopardy and earns $875,000 in winnings.What type of income is this?

Accepted Answer

A)  earned Income
B)  investment Income
C)  passive Income
D)  other Income
E)  deferred IncomeF) B) and C)
G) A) and B)

Question 6

Money received by an individual for personal effort is classified as ______________ income.

Accepted Answer

A)  passive
B)  earned
C)  portfolio
D)  excluded
E)  capital gainsF) B) and C)
G) A) and D)

Question 7

Randal Ice has adjusted gross income of $32,000.He has medical expenses for the year of $6000.How much of these expenses can he deduct from adjusted gross income?

Accepted Answer

A)  $0
B)  $2,400
C)  $3,600
D)  $4,500
E)  $6,000F) All of the above
G) C) and E)

Question 8

For a dependent to qualify as an exemption,he or she must:

Accepted Answer

A)  be married.
B)  be under age 16.
C)  be registered in school.
D)  receive more than one half of his or her support from the taxpayer.
E)  be a relativE.F) All of the above
G) D) and E)

Question 9

An exclusion is earnings not included in taxable income.

Accepted Answer

A) True 
 B)False

Question 10

_____________ are expenses that a taxpayer is allowed to deduct from adjusted gross income.

Accepted Answer

A)  Exemptions
B)  Exclusions
C)  Itemized deductions
D)  Tax credits
E)  Passive incomeF) B) and D)
G) C) and D)

Question 11

Which form would an individual use who has less than $100,000 in taxable income from wages,salaries,tips,unemployment compensation,interest,or dividends,and who is married and does not itemize deductions?

Accepted Answer

A)  Form 1040X
B)  Form 1040EZ
C)  Form 1040A
D)  Schedule A
E)  Schedule EF) C) and D)
G) B) and C)

Question 12

Michael closed on his new home December 31,2009 instead of January 1,2010.As a result,Michael

Accepted Answer

A)  accelerated tax deductions in 2009.
B)  accelerated tax deductions in 2010.
C)  increased his adjusted gross income in 2009.
D)  decreased his adjusted gross income in 2010.
E)  decreased tax exemptions in 2009.F) C) and E)
G) A) and C)

Question 13

Why would tax-exempt income provide greater short-term financial benefits than tax-deferred income?

Accepted Answer

The answer of Why would tax-exempt income provide greater short-term...

Question 14

Many taxpayers with high incomes and high amounts of deductions must pay an additional tax referred to as the ________________ tax.

Accepted Answer

A)  deferred
B)  bonus
C)  excess
D)  capital gains
E)  alternative minimumF) A) and B)
G) B) and D)

Question 15

Interest earnings of $1,600 from a taxable investment for a person in a 28 percent tax bracket would result in after-tax earnings of:

Accepted Answer

A)  $1,600
B)  $1,152
C)  $1,100
D)  $448
E)  $152F) C) and D)
G) D) and E)

Question 16

Which type of tax is imposed on specific goods and services at the time of purchase?

Accepted Answer

A)  estate
B)  inheritance
C)  excise
D)  general sales
E)  value-addedF) A) and C)
G) A) and B)

Question 17

Which one of the following is a retirement plan that allows a $5,000 annual contribution with tax-free earnings after five years?

Accepted Answer

A)  Roth IRA
B)  Education IRA
C)  Keogh Account
D)  401(k) Plan
E)  SEPF) B) and E)
G) B) and C)

Question 18

Tax avoidance refers to illegal actions to reduce one's taxes.

Accepted Answer

A) True 
 B)False

Question 19

Which one of these investments produces tax-exempt income?

Accepted Answer

A)  U.S.savings bonds
B)  corporate stock
C)  stock mutual fund
D)  municipal bond
E)  corporate bondF) All of the above
G) B) and E)

Question 20

Which one of the following is not included in gross income?

Accepted Answer

A)  Tax credit.
B)  Exemption.
C)  Exclusion.
D)  Earned income.
E)  Portfolio incomE.F) A) and B)
G) D) and E)

Exam 4: Planning Your Tax Strategy

Tax avoidance refers to illegal actions to reduce one's taxes.

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Why would tax-exempt income provide greater short-term financial benefits than tax-deferred income?

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Which one of the following is not included in gross income?

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Randal Ice has adjusted gross income of $32,000.He has medical expenses for the year of $6000.How much of these expenses can he deduct from adjusted gross income?

Correct AnswerverifiedShow Answer

Interest earnings of $1,600 from a taxable investment for a person in a 28 percent tax bracket would result in after-tax earnings of:

Correct AnswerverifiedShow Answer

Money received by an individual for personal effort is classified as ______________ income.

Correct AnswerverifiedShow Answer

An exclusion is earnings not included in taxable income.

Correct AnswerverifiedShow Answer

Which type of tax is imposed on specific goods and services at the time of purchase?

Correct AnswerverifiedShow Answer

For a dependent to qualify as an exemption,he or she must:

Correct AnswerverifiedShow Answer

The interest paid on which type of loan is not tax deductible?

Correct AnswerverifiedShow Answer

Which one of the following items is a set amount of income on which no taxes are paid?

Correct AnswerverifiedShow Answer

Which form would an individual use who has less than $100,000 in taxable income from wages,salaries,tips,unemployment compensation,interest,or dividends,and who is married and does not itemize deductions?

Correct AnswerverifiedShow Answer

Alex Bates goes on Jeopardy and earns $875,000 in winnings.What type of income is this?

Correct AnswerverifiedShow Answer

_____________ are expenses that a taxpayer is allowed to deduct from adjusted gross income.

Correct AnswerverifiedShow Answer

A tax on the value of automobiles,boats,or furniture is referred to as a personal property tax.

Correct AnswerverifiedShow Answer

Many taxpayers with high incomes and high amounts of deductions must pay an additional tax referred to as the ________________ tax.

Correct AnswerverifiedShow Answer

Which one of these investments produces tax-exempt income?

Correct AnswerverifiedShow Answer

A $2,000 deposit to a tax-deferred retirement account for a person in a 25 percent tax bracket would result in a reduced tax bill of:

Correct AnswerverifiedShow Answer

Which one of the following is a retirement plan that allows a $5,000 annual contribution with tax-free earnings after five years?

Correct AnswerverifiedShow Answer

Michael closed on his new home December 31,2009 instead of January 1,2010.As a result,Michael

Correct AnswerverifiedShow Answer

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