26 Jim purchased one share of X42 Utility Company stock for $100 He received a dividend of $5 It was reported to him on Form 1099 DIV, included in Box 3 Nondividend distributions Which of the following statements is CORRECT A The dividend is not taxable as dividend income, and the basis of his stock is not $105 B The dividend is not taxable as dividend income however, it is reported as capital gain C The dividend is not taxable as dividend income, and the basis of his stock is now $95 27 Which of the following statements is CORRECT in regard to parents of a qualifying child, where the childs only income is $5,000 in unearned interest and dividends A The parents are not able to claim a Child Credit for their child B The parents may claim up to a $500 Other dependent credit for this child C The parents may claim up to a $2,000 Child credit for this child 28 Which one of the following statements describes credits A Credits generally have the same tax effect as deductions B Most credits are nonrefundable C Credits are equally applicable to the regular and alternative minimum tax regimes 29 Which one of the following statements describes the child care and dependent care credit A The expenses must be made in order for the taxpayer to look for work B The expenses with respect to child care or dependent care that qualify for the credit are limited C The expenses must be made on behalf of more than one child or dependent 30 Which one of the following statements describes the child tax credit A The amount of the tax credit is $500 per child B The amount of the tax credit is phased out at certain levels of adjusted gross income C The credit is not refundable 31 The Lifetime Learning credit may be taken for the following expenses A Tuition, fees, books, and living expenses B Tuition, all fees, and books C Tuition and most fees 32 Which one of the following statements concerning estimated federal income tax is CORRECT A Estimated payments may be taken as itemized deductions on Schedule A B Estimated taxes paid during the current year are taken as a credit against the taxpayers tax liability C Estimated payments are reported on Form W 2 33 To use the Tax Rate Schedules, the taxpayer generally must meet which one of the following criteria A Have taxable income in excess of $100,000 B Have adjusted gross income in excess of $125,000 C Not be covered with at least a minimal essential coverage health insurance plan 34 Which one of the following describes income that might NOT be determined by use of the Tax Rate Tables or Tax Schedules A Capital gains B Investment income C The taxable portion of Social Security income 35 For assets sold in 2018, the minimum holding period for determining long term capital gains and losses is one day more than A 99 days B Three months and 15 days C 12 months 36 In 2018, Ruth sold a painting for $25,000 that she had bought for her personal use in 1979 at a cost of $10,000 On her 2018 return, Ruth should treat the sale of the painting as a transaction resulting in A Ordinary income B Long term capital gain C No income as this is the sale of a personal asset 37 In 2018, Rex sold an auto for $10,000 that he had bought for his personal use in 2009 at a cost of $25,000 On his 2018 return, Rex should treat the sale of this personal asset as a transaction resulting in A Ordinary income B Long term capital gain C No gain or loss, as the auto was a personal use asset 38 Which of the following items must Forms 1099 B include A Cost basis information for all sales transactions B Cost basis information for all covered security sales transactions C Cost basis information for all capital gain or loss sales transactions 39 A taxpayer received a Form 1099 B reporting proceeds and basis for a 2018 sale of stock Which of the following statements is NOT CORRECT regarding the proper reporting of 1099 B information in 2018 A Transactions reported on Form 1099 B for which basis was reported to the IRS and for which the taxpayer has no adjustments must be reported on Form 8949 B Taxpayers may simply separate all Form 1099 B amounts into a short and long term summary, and report directly on revised Schedule D, Lines 1a (short term) and 8a (long term) C Transactions reported on Form 1099 B for which basis was reported to the IRS and for which the taxpayer has no adjustments may be excluded from reporting on Form 8949 40 The lowest tax rate with respect to capital gains is afforded to which one of the following A Sale of collectibles B Sales subject to unrecaptured 1250 rules C Gains from the sale of publicly traded stock 41 Excluding additional taxes on Net Investment Income, capital gains from the sale of stock held for six years on March 1, 2018, by a taxpayer in the highest individual tax bracket are taxed at a maximum capital gains tax rate of A 15 percent B 37 percent C 20 percent 42 Capital gains from the sale of stock held for six years on July 1, 2018, by a taxpayer in the lowest individual tax bracket are taxed at a maximum capital gains tax rate of A 0 percent B 10 percent C 15 percent 43 Several items included within Schedule A have changed in 2018 from previous reporting Which of the following items has NOT changed reporting requirements A The AGI limitation for deducting charitable contributions B Miscellaneous itemized deduction not subject to the 2 floor C Miscellaneous itemized deduction subject to the 2 floor 44 During 2018, Scotty charged $5,000 on his credit card for his dependent sons medical expenses Payment to the credit card company had not been made by the time Scotty filed his income tax return in April 2019 However, in February 2018, Scotty paid a physician $2,800 for the medical expenses of his wife, who died in November 2017 Disregarding the adjusted gross income percentage threshold, what amount could Scotty claim in his 2018 income tax return for medical expenses A $2,800 B $5,000 C $7,800 45 Barbie and Ken Doll are married and will file a joint 2018 income tax return They feel their business goodwill will improve if they improve their appearance Therefore, during 2018, they had the following discretionary costs incurred for the purpose of improving their physical appearance and self esteem (i) a face lift for Barbie, performed by a licensed surgeon, $5,000 and (ii) a hair transplant for Ken, performed by a licensed surgeon, $5,000 Disregarding the adjusted gross income percentage threshold, how much of the doctors bills may they claim on their 2018 return as qualifying medical expenses A $0 B $5,000 C $10,000 46 Which one of the following is a miscellaneous itemized deduction A Qualified mortgage insurance premium B Casual gambling losses to the extent of gambling winnings C State income taxes 47 Some or all of the interest incurred on a qualified education loan may be A Deductible in computing AGI B Deductible as a miscellaneous itemized deduction C Never deductible 48 The Browns borrowed $30,000, secured by their home, to pay their sons college tuition At the time of the loan, the fair market value of their home was $400,000, and it was unencumbered by other debt The interest on the loan is treated for itemized deductions as A Deductible business interest B Non deductible home equity (mortgage) interest C Deductible home equity (mortgage) interest 49 Additional Medicare Tax on earned income is calculated on which Form A Form 8959 B Form 8960 C Schedule AMT 50 Which of the following statements is CORRECT regarding Additional Medicare Tax on earned income A There is no employer withholding requirement for the Additional Medicare Tax on earned income B Employers must withhold the tax if the employee is married and wages exceed $200,000 C Employers must withhold the tax if the employee is married and wages exceed $250,000

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26. Jim purchased one share of X42 Utility Company stock for $100. He received a dividend of $5. It was reported to him on Form

26.	Jim purchased one share of X42 Utility Company stock for $100. He received a dividend of $5. It was reported to him on Form 1099-DIV, included in Box 3: Nondividend distributions. Which of the following statements is CORRECT?

A. The dividend is not taxable as dividend income, and the basis of his stock is not $105. B. The dividend is not taxable as dividend income; however, it is reported as capital gain. C. The dividend is not taxable as dividend income, and the basis of his stock is now $95.

27.	Which of the following statements is CORRECT in regard to parents of a qualifying child, where the childs only income is $5,000 in unearned interest and dividends?

A. The parents are not able to claim a Child Credit for their child. B. The parents may claim up to a $500 Other dependent credit for this child. C. The parents may claim up to a $2,000 Child credit for this child.

28.	Which one of the following statements describes credits?

A. Credits generally have the same tax effect as deductions. B. Most credits are nonrefundable. C. Credits are equally applicable to the regular and alternative-minimum-tax regimes.

29.	Which one of the following statements describes the child-care and dependent-care credit?

A. The expenses must be made in order for the taxpayer to look for work. B. The expenses with respect to child care or dependent care that qualify for the credit are limited. C. The expenses must be made on behalf of more than one child or dependent.

30.	Which one of the following statements describes the child tax credit?

A. The amount of the tax credit is $500 per child. B. The amount of the tax credit is phased out at certain levels of adjusted gross income. C. The credit is not refundable.

31.	The Lifetime Learning credit may be taken for the following expenses:

A. Tuition, fees, books, and living expenses. B. Tuition, all fees, and books. C. Tuition and most fees.

32.	Which one of the following statements concerning estimated federal income tax is CORRECT?

A. Estimated payments may be taken as itemized deductions on Schedule A. B. Estimated taxes paid during the current year are taken as a credit against the taxpayers tax liability. C. Estimated payments are reported on Form W-2.

33.	To use the Tax Rate Schedules, the taxpayer generally must meet which one of the following criteria?

A. Have taxable income in excess of $100,000. B. Have adjusted gross income in excess of $125,000. C. Not be covered with at least a minimal essential coverage health insurance plan.

34.	Which one of the following describes income that might NOT be determined by use of the Tax Rate Tables or Tax Schedules?

A. Capital gains. B. Investment income. C. The taxable portion of Social Security income.

35.	For assets sold in 2018, the minimum holding period for determining long-term capital gains and losses is one day more than:

A. 99 days. B. Three months and 15 days. C. 12 months.

36.	In 2018, Ruth sold a painting for $25,000 that she had bought for her personal use in 1979 at a cost of $10,000. On her 2018 return, Ruth should treat the sale of the painting as a transaction resulting in:

A. Ordinary income. B. Long-term capital gain. C. No income as this is the sale of a personal asset.

37.	In 2018, Rex sold an auto for $10,000 that he had bought for his personal use in 2009 at a cost of $25,000. On his 2018 return, Rex should treat the sale of this personal asset as a transaction resulting in:

A. Ordinary income. B. Long-term capital gain. C. No gain or loss, as the auto was a personal use asset.

38.	Which of the following items must Forms 1099-B include?

A. Cost-basis information for all sales transactions. B. Cost-basis information for all covered security sales transactions. C. Cost-basis information for all capital gain or loss sales transactions.

39.	A taxpayer received a Form 1099-B reporting proceeds and basis for a 2018 sale of stock. Which of the following statements is NOT CORRECT regarding the proper reporting of 1099-B information in 2018?

A. Transactions reported on Form 1099-B for which basis was reported to the IRS and for which the taxpayer has no adjustments must be reported on Form 8949. B. Taxpayers may simply separate all Form 1099-B amounts into a short and long term summary, and report directly on revised Schedule D, Lines 1a (short-term) and 8a (long-term). C. Transactions reported on Form 1099-B for which basis was reported to the IRS and for which the taxpayer has no adjustments may be excluded from reporting on Form 8949.

40.	The lowest tax rate with respect to capital gains is afforded to which one of the following?

A. Sale of collectibles. B. Sales subject to unrecaptured 1250 rules. C. Gains from the sale of publicly traded stock.

41.	Excluding additional taxes on Net Investment Income, capital gains from the sale of stock held for six years on March 1, 2018, by a taxpayer in the highest individual tax bracket are taxed at a maximum capital-gains tax rate of:

A. 15 percent. B. 37 percent. C. 20 percent.

42.	Capital gains from the sale of stock held for six years on July 1, 2018, by a taxpayer in the lowest individual tax bracket are taxed at a maximum capital-gains tax rate of:

A. 0 percent. B. 10 percent. C. 15 percent.

43.	Several items included within Schedule A have changed in 2018 from previous reporting. Which of the following items has NOT changed reporting requirements?

A. The AGI limitation for deducting charitable contributions. B. Miscellaneous itemized deduction not subject to the 2% floor. C. Miscellaneous itemized deduction subject to the 2% floor.

44.

During 2018, Scotty charged $5,000 on his credit card for his dependent sons medical expenses. Payment to the credit-card company had not been made by the time Scotty filed his income tax return in April 2019. However, in February 2018, Scotty paid a physician $2,800 for the medical expenses of his wife, who died in November 2017. Disregarding the adjusted-gross-income percentage threshold, what amount could Scotty claim in his 2018 income tax return for medical expenses?

A. $2,800. B. $5,000. C. $7,800.

45.

Barbie and Ken Doll are married and will file a joint 2018 income tax return. They feel their business goodwill will improve if they improve their appearance. Therefore, during 2018, they had the following discretionary costs incurred for the purpose of improving their physical appearance and self-esteem: (i) a face lift for Barbie, performed by a licensed surgeon, $5,000; and (ii) a hair transplant for Ken, performed by a licensed surgeon, $5,000. Disregarding the adjusted-gross-income percentage threshold, how much of the doctors bills may they claim on their 2018 return as qualifying medical expenses?

A. $0. B. $5,000. C. $10,000.

46.	Which one of the following is a miscellaneous itemized deduction?

A. Qualified mortgage insurance premium. B. Casual gambling losses to the extent of gambling winnings. C. State income taxes.

47.	Some or all of the interest incurred on a qualified education loan may be:

A. Deductible in computing AGI. B. Deductible as a miscellaneous itemized deduction. C. Never deductible.

48.	The Browns borrowed $30,000, secured by their home, to pay their sons college tuition. At the time of the loan, the fair market value of their home was $400,000, and it was unencumbered by other debt. The interest on the loan is treated for itemized deductions as:

A. Deductible business interest. B. Non-deductible home equity (mortgage) interest. C. Deductible home equity (mortgage) interest.

49.	Additional Medicare Tax on earned income is calculated on which Form?

A. Form 8959. B. Form 8960. C. Schedule AMT.

50.	Which of the following statements is CORRECT regarding Additional Medicare Tax on earned income?

A. There is no employer withholding requirement for the Additional Medicare Tax on earned income. B. Employers must withhold the tax if the employee is married and wages exceed $200,000. C. Employers must withhold the tax if the employee is married and wages exceed $250,000.