Card 0 of 120
West is single, has no dependents, and does not itemize. West provides the following information regarding his current-year’s return:
What is the amount of West’s AMT tax preference items?
Among the options provided, only the percentage depletion in excess of a property’s adjusted basis is included as an AMT tax preference item.
Compare your answer with the correct one above
The credit for prior year AMT liability may be carried:
Like capital losses for individuals, AMT credits may be carried forward indefinitely for individual taxpayers.
Compare your answer with the correct one above
Which of the following is not an adjustment or preference to arrive at alternative minimum taxable income?
Adjustments and preferences to arrive at AMTI include many items, such as passive activity losses, accelerated depreciation, net operating loss of an individual taxpayer, state and local taxes, the standard deduction, and private activity bond interest income. Deductible contributions to IRAs are treated the same under AMTI as for taxable income.
Compare your answer with the correct one above
The credit for prior year AMT liability may be carried:
AMT paid can be claimed as a credit against other years if the tax was paid on items that increased AMT that year but will reverse in later years. The credit is carried forward indefinitely.
Compare your answer with the correct one above
Of the following is not an adjustment or preference to arrive at AMTI?
Deductible contributions to individual retirement accounts are not an adjustment or preference in calculation a taxpayer’s AMTI. They are an adjustment in calculating adjusted gross income for regular tax purposes.
Compare your answer with the correct one above
Of the following, which are allowable itemized deductions for computing AMT income?
Both of these options are normal itemized deductions (Sch A) however not all itemized deductions are included in AMTI.
Compare your answer with the correct one above
A 22-year-old full-time student earned $11,000 in salary and received $9,000 in interest from corporate bonds. The bonds were a gift from the student's grandparents. The student's parents pay more than half of the student's support, including $25,000 in tuition. Which of the following statements is correct regarding the student's current-year income tax?
As a full-time student with more than $2,200 in unearned income (interest income), and who does not earn more than half their own support is subject to the kiddie tax. This tax applies only to unearned income, not earned, meaning the salary is subject only to regular income taxes.
Compare your answer with the correct one above
June earned $400,000 in his business during the current year, and her husband Steve received investment income of $20,000. June provides more than half of the support for her 50-year-old widowed brother, who lives with June and earned $44,000 in salary. June also provides full support for her children, an 18-year-old daughter and a 20-year-old son, who is a full-time college student. The family employs a live-in housekeeper and a live-in butler to assist them with their residence. Both the housekeeper and butler provided all of their own support. How many people qualify as either a qualifying child or qualifying relative for June?
Only the children meet the qualifications of dependents (each as a qualifying child). Since the children receive full support from their parents and are either a) under 19 or b) under 24 and full-time college students, they meet the basic criteria as qualifying children. The widowed brother does not qualify because his gross income exceeds $4,300.
Compare your answer with the correct one above
Jake and Andrea contribute to more than half of the support of their three children, Kenny, Bryan, and Jennifer. Kenny, age 20, worked full time at the local bakery and earned $20,000. Bryan, 18, is a part-time college student who earned $6,000 working as a resident assistant in the student dormitory where he lived half the year. Jennifer, age 25, is an aspiring actress who lives at home with Jake and Andrea. Jennifer earned $2,500 for three commercials she starred in. Who qualifies as a dependent for Jake and Andrea under either the rules of qualifying child or qualifying relative?
Only Bryan and Jennifer qualify. Bryan is considered a qualifying child since he is under age 19, lives with his parents half the year, and receives more than half his support from his parents. Jennifer is considered a qualifying relative since she is a child of the parents, receives more than half her support from them, and makes less than $4,300 in gross income. Kenny is over 19, not a college student, and makes over $4,300 in gross income, which disqualifies him as a dependent.
Compare your answer with the correct one above
The Kent family has a 21 year old son Andrew, who is a full-time student at a university. Andrew received $10,000 in scholarships this year for academic achievement. He also works part time at the bookstore and earned $5,400 this year. The Kents paid $7,000 to support Andrew this year. Andrew was home for two months in the summer and at school for the rest of the year. Andrew used the scholarship, the wages from his part time job, and the money from his parents as his only source of support this year. Which of the following status’ does Andrew meet?
Andrew meets the definition of qualifying child for the Kent family. He meets the close relative test because he is their son. He is under the age of 24 and is a full-time student so he meets the age limit. He meets the residency requirements because his principal place of residence is his parents home since he is only away as a student. He also does not provide more than half of his own support.
Compare your answer with the correct one above
Of the following, which is or are among the requirements to enable taxpayers to be classified as a “qualifying widower”? A) The dependent has lived with the taxpayer for six months B) The taxpayer has maintained the cost of the principal residence for six months
These requirements do not enable a taxpayer to be classified as a qualifying widower.
Compare your answer with the correct one above
Jared has two children, an 18-year-old son and a 20-year-old daughter who is a full-time student. Both children have not made more than $1,000 each from their part-time jobs. Which of the following children would qualify as a qualifying relative or child?
Both of these children qualify as qualifying children. They are close relatives, they are within the age limit, receive their support from their father, and do not make enough income themselves.
Compare your answer with the correct one above
Which of the following is (are) among the requirements to enable a taxpayer to be classified as a “qualifying widow(er)”?
I. A dependent has lived with the taxpayer for six months.
II. The taxpayer has maintained the cost of the principal residence for six months.
Requirements to file as a qualifying widow(er) are that the suriving spouse must pay over half the cost of maintaining a household where a dependent child lives for the whole taxable year.
Compare your answer with the correct one above
Under a divorce settlement, Joan transferred her 50% ownership of their personal residence to Jim. The joint basis of the residence was $200,000. At the time of the transfer, the property’s fair market value was $300,000. What was Joan’s recognized gain and Jim’s basis for the residence?
In this instance, there is no gain recognized because no consideration changed hands. Additionally, since Jim was an original owner of the home, upon the settlement Joan’s 50% share transfers to him, but the basis does not change.
Compare your answer with the correct one above
Decker, a 62-year-old single individual, sold his principal residence for the net amount of $500,000 after all selling expenses. Decker bought the house 15 years ago and occupied it until it was sold. On the date of sale, the house had a cost basis of $200,000. Within six months, Decker purchased a new house for $600,000. What amount of gain should Decker recognize from the sale of the residence?
For individuals, the maximum exclusion of gain for individuals on the sale of their home is $250,000; the amount goes up to $500,000 for married couples who file jointly. Since Decker, a single taxpayer, sold the house at a gain of $300,000 ($500,000 less the original cost of $200,000), he may take the $250,000 exclusion and the remainder, $50,000, is a taxable gain. The cost of the new house does not affect the amount of exclusion or recognized gain.
Compare your answer with the correct one above
In December, Year 11, Douglas, a single taxpayer, purchased a new residence for $200,000. Douglas lived in the residence continuously from Year 11 until selling the residence in July, Year 18, for $455,000. What amount of gain is recognized from the sale of the residence on Douglas’ Year 18 tax return?
For individuals, the maximum exclusion of gain for individuals on the sale of their home is $250,000; the amount goes up to $500,000 for married couples who file jointly. Since Douglas, a single taxpayer, sold the house at a gain of $255,000 ($455,000 less the original cost of $200,000), he may take the $250,000 exclusion and the remainder, $5,000, is a taxable gain.
Compare your answer with the correct one above
A owns a second residence that is used for both personal and rental purposes. During the current year, A used the second residence for 50 days and rented the residence for 200 days. Which of the following is correct?
As the second property was personally used for more than 14 days, any net loss from the rental of the property will be disallowed
Compare your answer with the correct one above
Andrew and Brittany are married. They have resided full time in their principal residence for the last 20 years. They have decided to sell their home. Once the transaction was finalized, they were presented with the final amounts. Sale price = $750,000 Cost basis = $100,000. How much of a gain must the two recognize from the sale on their joint tax return?
Each spouse would be able to claim their $250,000 deduction against the gain of sale of a principal residence. Together, this deduction would total $500,000. $750,000-$100,000-$500,000=$150,000
Compare your answer with the correct one above
For a move of principal residence within the United States due to a change in job, which expenses can be deducted as moving expenses?
Only moving expenses for military orders are deductible now under current tax legislation.
Compare your answer with the correct one above
In which of the following scenarios would the head of household filing status be available to the taxpayer?
Head of household is available to unmarried or legally separated taxpayers who maintain the principle residence of a qualifying dependent for at least half the year. The taxpayer’s parent does not have to live with the taxpayer, but the taxpayer must maintain the home of the parent. Individuals who do not qualify as children are subject to a gross income limitation of $4,300 to be considered a dependent.
Compare your answer with the correct one above