61. Wendy received the following dividend income:

Capital, Inc. (ordinary dividends) $ 68

ERC (ordinary dividends) $757

Maapco (ordinary) $814

Maapco (reinvested) $858

Federal Credit Union $910

What is the amount to be reported on line 6, Schedule B?

a) $1,639

b) $2,497

c) $ 858 (not required to use Schedule B)

d) $1,768

Copyright 2016, The Income Tax School, Inc. All Rights Reserved Comp Mod 1 FE Student - 12

62. Mark and Alice had the following income:

Dividends from the credit union $ 974

Interest from National Bank $ 875

Conco ordinary dividends $ 658

Duval Fund (ordinary dividends) $ 169

Municipal bond interest $ 205

Series EE bond interest (education expenses) $ 547

Media Corp (liquidating dividends) $ 245

Interest received on a personal loan $1,458

What amount should be on Schedule B, Part I, line 2?

a) $3,854

b) $2,333

c) $3,307

d) $3,512

63. Mark and Alice had the following income:

Dividends from the credit union $ 974

Interest from National Bank $ 875

Conco ordinary dividends $ 658

Duval Fund (ordinary dividends) $ 169

Municipal bond interest $ 205

Series EE bond interest (education expenses) $ 547

Media Corp (liquidating dividends) $ 245

Interest received on a personal loan $1,458

What is the amount of income to be reported on line 6, Part II, Schedule B?

a) $1,072

b) $2,046

c) $ 827

d) $1,801

64. Mark and Alice had the following income:

Dividends from the credit union $ 974

Interest from National Bank $ 875

Conco ordinary dividends $ 658

Duval Fund (ordinary dividends) $ 169

Municipal bond interest $ 205

Series EE bond interest (education expenses) $ 547

Media Corp (liquidating dividends) $ 245

Interest received on a personal loan $1,458

What is the amount of income to be reported on line 4, Part I, Schedule B?

a) $4,059

b) $2,333

c) $3,307

d) $3,854

Copyright 2016, The Income Tax School, Inc. All Rights Reserved Comp Mod 1 FE Student - 13

65. Tony is a new tax preparer. The office manager at the location where he works cautions Tony

about common interview mistakes. Which of the following is a common mistake tax preparers

make when interviewing clients or potential clients?

a) Using Head of Household status for taxpayers who do not qualify

b) Asking questions to determine if spouses have lived together during the last six months

of the year

c) Using Qualifying Widow(er) status for a taxpayer who is a widow(er) and also has a

qualifying child

d) Preparing a tax return with a 1099R with a determinable taxable amount

66. In 2015, Josephine found an error in her 2013 return. She amended her return and found that

the IRS owed her an additional refund. She received her refund with interest on September

30, 2015. In what tax year should Josephine report the interest income?

a) 2014

b) 2013

c) 2015

d) Not taxable

67. Don is a single parent. His son is 19 (not a student) and his daughter is 17 (still a student).

Don claimed EIC on his tax return for both children. He later received a letter from the Internal

Revenue Service which disallowed EIC for his son. The letter also stated that Don's claim

was an error due to reckless or intentional disregard of the EIC rules. For how many years

will Don be denied EIC?

a) 10 years

b) 5 years

c) 2 years

d) 1 year

68. Last year Rick fraudulently claimed his cousin's children as dependents on his return in order

to receive earned income credit. The IRS discovered this when Rick's cousin also claimed

the children. Rick's cousin was able to prove he had the right to claim his children and the

EIC was denied on Rick's return. How long will EIC be prohibited if a taxpayer is denied EIC

due to fraud?

a) 10 years

b) 5 years

c) 2 years

d) 1 year

69. Walt was the preparer who neglected to complete Form 8867 or otherwise record information

needed for the return Rick fraudulently claimed the children for EIC purposes. After the IRS

was able to prove Rick had committed fraud it was shown that Walt failed to exercise due

diligence. What penalty will a tax preparer face if it is determined that he has failed to exercise

due diligence?

a) $100 per year

b) $500 per return

c) $500 per year

d) $100 per return

Copyright 2016, The Income Tax School, Inc. All Rights Reserved Comp Mod 1 FE Student - 14

70. Jack received a notice from the IRS about his 2013 tax return. He called the IRS and the

agent asked him to verify the adjusted gross income (AGI) on the return. On which form and

line is AGI found?

a) Line 21 of Form 1040

b) Line 6 of Form 1040EZ

c) Line 37 of Form 1040

d) Line 15 of Form 1040A

71. In which of the following scenarios does the taxpayer fail to meet the residency test for EIC

purposes?

a) A taxpayer whose child lived with him for 5 months and 29 days

b) A taxpayer whose eligible foster child lived with him all year

c) A taxpayer whose child lived with him all year. He and his spouse separated on May 29

d) A taxpayer who is 64 years old and lives alone

72. Trudy lives alone with her two children (ages 16 and 12) and her filing status is Head of

Household. Trudy's earned income and AGI was $31,000. Is Trudy eligible for EIC?

a) Yes

b) No, the taxpayer's earned income is not within the range to receive EIC

c) No, the taxpayer's children do not meet the age test to be a qualifying child

d) No, the taxpayer is not eligible due to her filing status

73. Jill prepares returns for many clients who are able to claim earned income credit. To be certain

she is practicing due diligence pertaining to the earned income credit, which of the following

forms must Jill prepare for these clients?

a) Form 1040

b) Form W-5

c) Form 8862

d) Form 8867

74. Lionel has heard many of his friends talk about getting a larger refund because they receive

earned income credit. Lionel is uncertain what makes a taxpayer eligible for EIC. Which of

the following is listed incorrectly as a condition of eligibility for purposes of earned income

credit?

a) The taxpayer must have earned income

b) The taxpayer must meet residency requirements

c) The taxpayer must meet the age requirement if he does not have a qualifying child

d) The taxpayer must have at least one qualifying child

75. Danika is a single mother with three children, ages 3, 7, and 9. Danika's tax return shows an

AGI of $32,765 which includes earned income of $32,700 and interest income of $65. She

meets the requirements for filing status Head of Household and supports her family without

any additional help from other sources. Which of the following statements is true?

a) Danika's EIC will be based on her earned income alone without considering her AGI

b) Danika's EIC will be the smaller of the two EIC amounts based on her AGI or her earned

income

c) Danika's EIC will be based on her AGI without considering the earned income amount

d) Danika is not eligible to receive EIC