1. A tax rate that increases as the tax base increases is an example of what kind of tax rate structure? a. Progressive b. Proportional c. Regressive d. Recessive 2. Determine the marginal tax rate for a single taxpayer with taxable income of $39,510. _________________ 3. Determine the marginal tax rate for a single taxpayer with taxable income of $39,510. _________________ 4. Employers report wage income to employees on a a. Form W-2 b. Form W-3 c. Form 1099-E d. Form 1099-G 5. Interest payors (banks, savings and loans, insurance companies, etc.) report interest earnings to taxpayers on a a. Form W-2 b. Form 1099-INT c. Bank Statement d. Form 1040 Determine the amount of the standard deduction for each of the following taxpayers for tax year 2010: 6. Peter and Elizabeth, who are married and file separate tax returns. Elizabeth will itemize her deductions. _________ 7. Patricia, who earned $1,100 working a part-time job. She can be claimed as a dependent by her parents. _________ 8. Rodolfo, who is over 65 and is single. _________ 9. Bernard, who is a nonresident alien with U.S. income. _________ 10. Herman, who is 76 and a qualifying widower with a dependent child. _________ 11. Alex is single and had W-2 income of $32,996 and interest income of $211. What is his taxable income? $23,857 ________ 12.. A taxpayer is married with a qualifying child (dependent), but she has been living apart from her spouse for five months of the year. She paid for more than half of the cost of keeping up the household. Her spouse does not want to file jointly. What filing status must she use when filing her tax return if she wants to obtain the maximum legal benefit? a. Single b. Head of Household c. Qualifying Widow(er) d. Married Filing Separately 13. The taxpayers spouse died at the beginning of 2010. He has no qualifying child. Which filing status should the taxpayer select for his tax return for 2010? a. Married Filing Jointly b. Married Filing Separately c. Single d. Qualifying Widow(er) 14. A legally divorced taxpayer maintains a household for himself and maintains a separate household that is the principal place of abode of his dependent widowed mother. What filing status should he use when filing his tax return? a. Head of Household b. Single c. Qualifying widow(er) d. Married Filing Separately 15. Tina is age 21 and a full-time student living with her parents. She had wages of $550 ($60 of income tax withholding) for 2010. Can Tina claim an exemption for herself on her tax return even though her parents will claim her as a dependent on their tax return? a. No, Tina cannot claim the exemption b. Tina and her parents can both claim the exemption c. No one can claim the exemption for Tina d. Yes, Tina can claim the exemption 16. Failure to make required estimated payments will subject the taxpayer to a potential underpayment penalty plus interest. However, if the difference between the tax shown on the return and the amount of tax withheld for wages is less than _______, the taxpayer will not be assessed a penalty. a. $ 500 b. $ 850 c. $ 1,000 d. $ 1,250 17. Can a taxpayer avoid the failure to pay on time penalty by filing an automatic extension of time to file his or her tax return? __________________________ 18. If an attorney performs some estate tax work for a client and the client agrees to pay $1,000 to him and $2,000 to a local financial institution for a debt the attorney owes, the attorney has income of: a. $1,000 b. $2,000 c. $3,000 d. None of the above 19. Income may be realized in the form of: a. Property b. Cash c. Services d. All of the above 20. Determine the amount of taxable income that should be reported by a cash-basis taxpayer in 2010 in the following case: A taxpayer completes $500 of accounting services in December 2010 for a client who pays for the accounting work in January 2011. 2010 Income _______ 2011 Income _______ 21. Lei, who files as head of household, received $9,000 of social security benefits. Her AGI before the social security benefits was $27,000. She also received $200 of tax exempt interest. What amount of social security benefits is taxable to Lei? a. $ 3,250 b. $ 4,500 c. $ 7,650 d. $ 9,000 22. Which of the following should not be included in income? a. Unemployment compensation payments b. Jury duty pay c. Prizes and awards d. Workers compensation payments 23. Payments under written dependent care assistance plans are tax free, except that the exclusion for a single person cannot exceed his or her earned income and cannot exceed a. $ 2,500 b. $ 5,000 c. $ 5,150 d. $ 5,250 24. Monique is a graduate student at a state university. In 2010, she received a $9,000 scholarship ($6,000 for tuition and fees and $3,000 for campus housing) and a graduate assistantship that pays $4,000. What amount of the amount she received from school is taxable? a. $ 4,000 b. $ 7,000 c. $ 9,000 d. $13,000 25. Employers can reimburse employees for up to $_________________ per year of educational assistance, whether or not job related. a. $ 5,000 b. $ 5,150 c. $ 5,250 d. $ 5,520 26. Paola is a freshman in the UC-Davis degree program in veterinary medicine. In 2010, Paola paid $3,000 in tuition, $500 for books, and $250 for supplies for class. Paola also paid room and board of $3,500. What is the total qualifying educational expense for educational loan interest for Paola in 2010? a. $7,250 b. $3,750 c. $3,500 d. $3,000 27. Henry graduated from the University of Maryland in 2010. In 2010, to take advantage of lower interest rates, he refinanced his qualified educational loans with another loan. He is not a dependent on another persons tax return. What is the maximum deduction available to him for the $3,200 he paid for educational loan interest in 2010? a. $0 b. $3,200 c. $2,500 d. $3,000 28. Rena had the following moving expenses during 2010: Cost of packing and transporting her household goods $1,500 Lodging for travel between the old home and new home $600 Meals incurred during the trip $175 Rena moved to start a new job and met all the required tests for moving expense deductibility. What is the total amount of moving expenses that can be deducted on her 2010 return? a. $2, 275 b. $2,100 c. $1,675 d. $600 29. The determination for the deduction of the self-employment tax is based upon a. the net earnings of the business b. the gross earnings of the business c. a total of 7.65% of FICA taxes d. the total of itemized deductions 30. Maria is granted a divorce. Beginning in January 2010, by court ordered decree, she paid her husband $600 per month for alimony and $300 per month for child support. For 2010, how much will she be able to deduct as alimony? a. $7,200 b. $3,600 c. $600 d. $0 31. Which of the following may not be deducted as medical expenses? a. $3,000 to a family physician for medical care. b. $1,000 long-term care insurance. c. $600 for eyeglasses. d. $300 for maternity clothes. 32. Mrs. Gonzales must use a wheelchair. Upon advice from her physician, she installed an elevator and widened the front entrance of her house in 2010, incurring $15,000 and $4,000 in costs, respectively. Mrs. Gonzales originally purchased her house for $152,000. An appraisal showed the fair market value of Mrs. Gonzaless house immediately after these modifications at $162,000. Compute her currently deductible medical expense. a. $19,000 b. $15,000 c. $9,000 d. $4,000 33. Maria is single and age 32. In 2010, she had AGI of $35,000. During the year she incurred and paid the following medical costs: Doctor and Dentist fess $1,950 Prescription medicines 275 Medical care insurance premiums 340 Health Club Fee 600 Crutches for a sprained ankle 50 What is Marias medical expense deduction (before application of the adjusted gross income limitation) for her 2010 tax return? a. $3,215 b. $3,165 c. $2,940 d. $2,615 34. During 2010, Sam paid the following taxes related to his home: Property taxes on residence (paid from escrow account) $1,550 Property tax portion of car registration (based on value) 400 Property taxes on land held for long-term appreciation 350 What amount can Sam deduct as property taxes in calculating his itemized deductions for 2010? a. $350 b. $750 c. $1,950 d. $2,300 35. Which of the following miscellaneous deductions are subject to the 2% of adjusted gross income limitation? a. Unreimbursed employee business expenses b. Investment counsel and advisory fees c. Safe deposit box fees d. All of above 36. Which of the following expenses are deductible, but subject to the 2% limitation on Form 1040, Schedule A, Job Expenses and Most Other Miscellaneous Itemized Deductions? a. A blue suit for an accountant. b. Appraisal fees on the sale of a personal residence. c. Uniforms for a UPS delivery person. d. The cost of hauling tools to work in a car. 37. Which of the following are miscellaneous itemized deductions not subject to the 2% adjusted gross income limitation? a. Unreimbursed employee business expenses b. Gambling losses up to the amount of gambling winnings c. Union or professional dues and subscriptions d. Tax return preparation fees 38. Which of the following expenses are not deductible as medical expenses? A. Insulin used for diabetes B. Wig, purchased upon the advice of a physician for the mental health of a patient who has lost all of his/her hair from disease C. Swimming lessons, recommended by a doctor for improvement of general health D. Acupuncture used to treat migraines 39. Cynthia lives in California, a state that imposes a tax on income. The following information relates to Cynthia's state income taxes for 2010. State taxes withheld from Cynthias paychecks in 2010 $3,000 Refund received in 2010 from 2008 tax $300 State taxes paid in 2010 from 2008 tax $800 Assuming she elects to deduct state and local income taxes, what amount should Cynthia use as an itemized deduction for state and local income taxes for her 2010 federal income tax return? A. $1,100 B. $2,700 C. $3,800 D. $4,100 Each of the following taxpayers received a state income tax refund in 2010. In all cases, the taxpayer has a filing status of married filing jointly. What amount of the refund is properly included in 2010 income? 40. Refund of $729; taxpayer did not itemize deductions in 2009. _________ 41. Refund of $591; taxpayer had $13,220 of itemized deductions in 2009. _________ 42. Refund of $927; taxpayer had itemized deductions of $11,600 in 2009. _________ 43. In May 2010, Maria graduated from the University of San Diego with a degree in accounting and moved to Denver to look for work. Shortly after arriving in Denver, she obtained work as a staff accountant in a local CPA firm. In her move to Denver, Maria incurred the following costs: $450 in gasoline. $250 for renting a truck from UPAYME rentals. $100 for a tow trailer for her car. $85 in food. $35 in double lattes from Starbucks. $300 for motel lodging on the way to Denver. $350 for a previous plane trip to Denver to look for an apartment. $175 in temporary storage costs for her collection of antique bassoons. How much, if any, may Maria take as a moving expense deduction on her 2010 tax return? Is that deduction subject to any conditions that could change its deductibility in the future? ___________ 44. Juan, who is single, is a self-employed carpenter and is also an employee of Frame It, Inc. His self-employment net income is $35,000, and he received a W-2 from Frame It for wages of $25,000. He is covered by his employers pension plan, but his employer does not offer a health plan in which he could participate. Up to how much of his self-employed health insurance premiums could he deduct for this year, if any? _________________ 45. Under the terms of a divorce decree executed May 1, 2010, Rob transferred a house worth $650,000 to his ex-wife, Linda, and was to make alimony payments of $3,000 per month. The property has a tax basis to Rob of $300,000. How much of this must be reported on Lindas tax return? _________________ 46. Which of the following organizations qualifies for deductible charitable contributions? a. A nonprofit educational institution. b. The Salvation Army. c. Churches. d. All of the above. 47. In 2010, the Bells vacation cottage was severely damaged by an earthquake in an area not declared a federal disaster area. They had AGI of $110,000 in 2010. Following is information related to the cottage: Cost basis $95,000 FMV before casualty 135,000 FMV after casualty 25,000 The Bells had insurance and received an $80,000 insurance settlement. What is the amount of allowable casualty loss deduction for the Bells in 2010 before the AGI and event limitations? a. $13,500. b. $14,900 c. $15,000 d. $40,000 48. Which expense, incurred and paid in 2010, can be claimed as an itemized deduction subject to the 2% of AGI floor? a. Self-employed health insurance. b. Unreimbursed moving expenses. c. Employees unreimbursed business car expense. d. Self-employment taxes. 49. Raquel, who works in medical sales, drives her own vehicle to various locations for client sales meetings. Her employer reimburses her $400 each month for various business expenses and does not expect Raquel to provide proof of her expenses. Her employer included this $4,800 reimbursement in Raquels 2010 W-2 as part of her wages. In 2010, Raquel incurred $3,000 in transportation expense, $1,000 in parking and tolls expense, $1,800 in car repair expense, and $600 for expenses while attending a professional association convention. Assume that Raquel uses the vehicle for business purposes only and that she maintains adequate documentation to support all of these expenditures. What amount is Raquel entitled to deduct on her Schedule A for miscellaneous itemized deductions? a. $6,400 b. $4,800. c. $1,600. d. $0 50. Louis is employed as an accountant for a large firm in San Diego. During 2010, he paid the following miscellaneous expenses: Unreimbursed employee business expenses $520 Union dues 400 Tax return preparation fee 175 Job hunting expenses within the same profession 200 Louis plans to itemize his deductions in 2010; what amount could he claim as miscellaneous itemized deductions? ________________