Please anser tax questions for scenarios 1-4 on pages 1-4 on the provided file. Shouldn't take long only like 10 questions

Advanced Course Scenarios and Test Questions Directions The first four scenarios do not require you to prepare a tax return. Read the interview notes for each scenario carefully and use your training and resource materials to answer the questions after the scenarios. Advanced Scenario 1: Tracy and Chris Tabor Interview Notes Tracy is 40 years old, single, and a U.S. citizen with a valid Social Security number. She has a filing requirement. Tracy tells you she has chosen not to claim her son, Chris, as a dependent so he can get a higher refund. During the interview with Tracy, you determine the following facts: - Tracy's son Chris, age 19, is unmarried and was a full-time student during 2016. - Chris' income was $6,500 in wages. He does not provide more than half his own support. - Chris lived with Tracy all year. - Chris is a U.S. citizen with a valid Social Security number. Advanced Scenario 1: Test Questions 1. How should you advise Tracy and Chris? a. Chris can claim 1 exemption, because he had earned income. b. Chris can claim 1 exemption, because Tracy has decided not to claim him. c. Chris cannot claim his own exemption because his income was less than $10,000. d. Chris cannot claim his own exemption because Tracy can claim him as a dependent on her tax return. 2. Using Publication 4012, Who Must File tab, Chart B, is Chris required to file a tax return? a. Yes b. No Advanced Scenarios 67 Advanced Scenario 2: Mike Hastings Interview Notes Mike is 45 and made $36,000 in wages in 2016. He is single and pays all the cost of keeping up his home. Mike's daughter, Brittany, lived with Mike all year. Brittany's son, Hayden, was born in November 2016. Hayden lived in Mike's home since birth. Brittany is 18, single, and had $1,700 in wages in 2016. Mike provides more than half of the support for both Brittany and Hayden. Mike, Brittany, and Hayden are all U.S. citizens with valid Social Security numbers. Mike and Hayden had health insurance that qualified as minimum essential coverage. Brittany did not have health insurance at all in 2016. Advanced Scenario 2: Test Questions 3. Who can claim Hayden as a dependent? a. No one can claim Hayden because he was not a member of the household for more than six months. b. Mike cannot claim Hayden because Hayden is not Mike's child. c. Brittany can claim Hayden because she is his parent. d. Mike can claim Hayden; Brittany cannot claim Hayden because Brittany qualifies as Mike's dependent. 4. Who can Mike claim as a qualifying child(ren) for the earned income credit? a. Mike has no qualifying children. b. Mike can claim Brittany, but not Hayden. c. Mike can claim Hayden, but not Brittany. d. Mike can claim both Brittany and Hayden. 5. Brittany did not have health insurance at all in 2016. How does this affect Mike's return? a. There is no effect because Mike cannot claim Brittany as a dependent. b. Mike must claim a coverage exemption for Brittany or make a shared responsibility payment. c. It does not affect Mike's return. Brittany will have to claim a coverage exemption or make the shared responsibility payment on her own return. d. It doesn't affect Mike's return because Brittany is 18 years old. 68 Advanced Scenarios Advanced Scenario 3: Henry and Claudia Oberlin Interview Notes Henry and Claudia are married and want to file a joint return. They have one child, Alyssa, who is 5 years old and lived with them all year. Henry and Alyssa are U.S. citizens and have valid Social Security numbers. Claudia lives with Henry and Alyssa in the U.S. but is not lawfully present in the U.S. and has an Individual Taxpayer Identification Number (ITIN). Claudia did not have any health insurance for all of 2016. Henry and Alyssa had minimum essential coverage (MEC) all year. Henry earned $37,000 in wages and had no other income. Claudia had $5,000 in earned income. Henry and Claudia provided all the support for Alyssa. Advanced Scenario 3: Test Questions 6. Are Henry and Claudia eligible to claim the earned income credit? a. No, because Henry and Claudia's income is too high. b. No, because Claudia has an ITIN. c. Yes, because Alyssa is their qualifying child for EIC. d. Yes, if they file Married Filing Separate returns. 7. Claudia qualifies for a health coverage exemption. a. True b. False Advanced Scenarios 69 Advanced Scenario 4: Martin Huron Interview Notes Martin is married, but did not live with or have contact with his spouse this tax year. He does not know where she is. He indicated on the intake sheet that he is not legally separated. Martin does not have any dependents. Martin worked as a clerk and earned $36,000 in wages. He had no other income. In 2016, he took a computer class at the local university to improve his job skills. Martin has a receipt showing he paid $1,095 for tuition. He paid for all his educational expenses and did not receive any assistance or reimbursement. He paid $350 for a course book from an online bookseller. Purchase of the book was not a requirement of enrollment. Martin paid $90 for a parking permit. It was not a requirement of enrollment. Martin does not have enough deductions to itemize. He is a U.S. citizen with a valid Social Security number. Advanced Scenario 4: Test Questions 8. What is Martin's most advantageous allowable filing status? a. Married Filing Separately b. Head of Household c. Single d. Qualifying Widower 9. Which education benefit is Martin eligible to claim? a. American opportunity credit b. Lifetime learning credit c. Tuition and fees deduction d. He does not qualify for any education benefit 70 Advanced Scenarios Advanced Scenario 5: Lamar Wharton Directions Using the tax software, complete the tax return, including Form 1040 and all appropriate forms, schedules, or worksheets. Answer the questions following the scenario. Note: When entering Social Security numbers (SSNs) or Employer Identification Numbers (EINs), replace the Xs as directed, or with any four digits of your choice. Interview Notes In September 2016, Lamar enrolled in college to pursue a bachelor's degree. He had no other post-secondary education. Yuma College is a qualified educational institution. Lamar does not have a felony drug conviction. Lamar brought a Form 1098-T and an account statement from the college. His purchases at the college bookstore were for course-related books. The terms of Lamar's scholarship require that it be used to pay for tuition. Lamar took a distribution from his IRA to pay for some of his education expenses. All his IRA contributions were deductible in the year he made them. Lamar received a Form 1099-C for cancelled credit card debt. Using the insolvency determination worksheet in Publication 4012, you determine the value of Lamar's assets exceeded his liabilities. Therefore, Lamar was solvent at the time the credit card debt was cancelled. For the purposes of this scenario, Lamar lives in Tempe, AZ 85281. Lamar underestimated his 2016 income when he purchased minimum essential health care coverage through the Marketplace. Advanced Scenarios 71 72 Advanced Scenarios Advanced Scenarios 73 74 Advanced Scenarios Advanced Scenarios 75 76 Advanced Scenarios Advanced Scenarios 77 78 Advanced Scenarios Advanced Scenarios 79 Advanced Scenario 5: Test Questions 10. Lamar received Form 1095-A from the Marketplace. How is this information used on his tax return? a. The information is not needed to prepare his return. b. Enter $1,440 directly on Form 1040, page 2 on the premium tax credit line. c. The information is used on Form 8965. d. The information is used to determine the amount of premium tax credit. 11. Lamar must repay a portion of the advance premium tax credit that he received. a. True b. False 12. What is the total amount of qualified educational expenses used in the calculation of Lamar's American opportunity credit? $________. 13. Where is the cancelled debt on Form 1099-C reported on Lamar's tax return? a. It is not reported on the return b. On Form 1040, line 7 as wages c. On Form 1040, line 21 as other income d. On Schedule A as a miscellaneous deduction 14. Lamar qualifies for an exception to the 10% additional tax on the early distribution from his IRA. a. True b. False 80 Advanced Scenarios Advanced Scenario 6: Samantha Rollins Directions Using the tax software, complete the tax return, including Form 1040 and all appropriate forms, schedules, or worksheets. Answer the questions following the scenario. Note: When entering Social Security numbers (SSNs) or Employer Identification Numbers (EINs), replace the Xs as directed, or with any four digits of your choice. Interview Notes Samantha's husband died in March 2013. She has not remarried. Samantha owned and lived in her home since 2010. After struggling to make the mortgage payments for the last few years, she worked out a loan modification agreement with her lender. The modification reduced her principal balance and monthly payment and allowed her to stay in the home. Samantha purchased the home in 2010 for $160,000. In January 2016, at the time of the workout, the balance owed was $145,000. The home was never used in a business or as rental property. The mortgage was used to purchase, and was secured by, the home. Samantha has not filed for bankruptcy. Samantha provided the entire cost of maintaining the household and all the support for her children, Meredith and Oliver, in 2016. Her younger brother, Howard, is permanently and totally disabled. He received disability income which he used to provide more than half of his own support. Samantha lost her job in December 2015. She received unemployment for two months in 2016 until she found a new job. Samantha provides translation services to earn extra income. She received a Form 1099-MISC. Her only expense related to this income was $50 in office supplies. Meredith and Oliver attended day care while Samantha worked. Samantha, Meredith, and Oliver had health insurance that provided minimum essential coverage (MEC) paid by her new employer beginning on March 1, 2016. She and the children did not have MEC for January and February. Samantha, Meredith, and Oliver had health insurance through her previous employer until December 15, 2015. Howard had MEC all year. None of them purchased insurance through the Marketplace. Advanced Scenarios 81 82 Advanced Scenarios Advanced Scenarios 83 84 Advanced Scenarios Advanced Scenarios 85 86 Advanced Scenarios Advanced Scenarios 87 88 Advanced Scenarios Advanced Scenario 6: Test Questions 15. Which allowable filing status is most advantageous to Samantha? a. Qualifying Widow with Dependent Child b. Single c. Married Filing Separately d. Head of Household 16. Howard is Samantha's qualifying child for which of the following benefits? a. Exemption for a dependent b. Child tax credit c. Earned income credit d. All of the above 17. The basis of Samantha's home is reduced by $45,000. a. True b. False 18. What is the credit for child and dependent care expenses shown in the tax and credits section of Samantha's tax return? a. $836 b. $798 c. $760 d. $572 19. Samantha and her children did not have minimum essential coverage (MEC) for two months of the tax year. How does this affect her tax return? a. She can claim the short coverage gap exemption. b. She must make a shared responsibility payment for herself. c. She must make a shared responsibility payment for Meredith and Oliver. d. None of the above. 20. What is the amount of self-employment tax in the Other Taxes section of Samantha's Form 1040, page 2? $_______. Advanced Scenarios 89 Advanced Scenario 7: Quincy and Marian Pike Directions Using the tax software, complete the tax return, including Form 1040 and all appropriate forms, schedules, or worksheets. Answer the questions following the scenario. Note: When entering Social Security numbers (SSNs) or Employer Identification Numbers (EINs), replace the Xs as directed, or with any four digits of your choice. Interview Notes Quincy retired and began receiving retirement income on March 1, 2016. No distributions were received prior to his retirement. Quincy did not select a joint survivor annuity for these payments. Quincy brought last year's tax return. It includes a capital loss carryover worksheet. Quincy and Marian want to file a joint return. They provided all the cost of keeping up the home and all of the support for their son Lucas. Quincy had Medicare Part A and Part B health coverage all year. Marian and Lucas did not have health insurance at all for 2016. Marian and Lucas do not qualify for any health insurance coverage exemptions. Lucas has no filing requirement. 90 Advanced Scenarios Advanced Scenarios 91 92 Advanced Scenarios Advanced Scenarios 93 94 Advanced Scenarios Advanced Scenarios 95 96 Advanced Scenarios ABC INVESTMENTS 2016 TAX REPORTING STATEMENT 456 Pima Plaza Your City, YS ZIP Quincy and Marian Pike 388 Noble Circle Your City, YS ZIP Account No. 111-222 Recipient ID No. 317-00-XXXX Payer's Fed ID Number: 40-200XXXX Form 1099-DIV* 2016 Dividends and Distributions Copy B for Recipient (OMB NO. 1545-0110) 1a 1b 2a 2b 2c 2d 3 4 5 6 7 8 9 10 11 12 13 14 Total Ordinary Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .325.00 Qualified Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .300.00 Total Capital Gain Distributions (Includes 2b- 2d) . . . . . . . . . . . . . . . . .75.00 Capital Gains that represent Unrecaptured 1250 Gain . . . . . . . . . . . . . .0.00 Capital Gains that represent Section 1202 Gain. . . . . . . . . . . . . . . . . . .0.00 Capital Gains that represent Collectibles (28%) Gain. . . . . . . . . . . . . . .0.00 Nondividend Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.00 Federal Income Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.00 Investment Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.00 Foreign Tax Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15.00 Foreign Country or U.S. Possession. . . . . . . . . . . . . . . . . . . . . . . . . . . .0.00 Cash Liquidation Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.00 Non-Cash Liquidation Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.00 Exempt Interest Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.00 Specified Private Activity Bond Interest Dividends . . . . . . . . . . . . . . . . .0.00 State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State Identification No. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.00 Form 1099-MISC* 2016 Miscellaneous Income Copy B for Recipient (OMB NO. 1545-0115) 2 4 8 16 17 18 Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.00 Federal Income Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.00 Substitute Payments in Lieu of Dividends or Interest . . . . . . . . . . . . . . .0.00 State Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.00 State/ Payer's State No. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.00 Form 1099-INT* 2016 Interest Income Copy B for Recipient (OMB NO. 1545-0112) 1 2 3 4 5 6 7 8 9 10 Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .95.00 Early Withdrawal Penalty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25.00 Interest on U.S. Savings Bonds and Treas. Obligations . . . . . . . . . . . . .0.00 Federal Income Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.00 Investment Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.00 Foreign Tax Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.00 Foreign Country or U.S. Possession. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax-Exempt Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .150.00 Specified Private Activity Bond Interest . . . . . . . . . . . . . . . . . . . . . . . . .0.00 Tax-Exempt Bond CUSIP No. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Summary of 2016 Proceeds From Broker and Barter Exchange Transactions Sales Price of Stocks, Bonds, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,875.00 Federal Income Tax Withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.00 Gross Proceeds from each of your security transactions are reported individually to the IRS. Refer to the Form 1099-B section of this statement. Report gross proceeds individually for each security on the appropriate IRS tax return. Do not report gross proceeds in aggregate. Page 1 of 2 Advanced Scenarios 97 ABC INVESTMENTS 2016 TAX REPORTING STATEMENT 456 Pima Plaza Your City, YS ZIP Quincy and Marian Pike 388 Noble Circle Your City, YS ZIP Account No. 111-222 Recipient ID No. 317-00-XXXX Payer's Fed ID Number: 40-200XXXX FORM 1099-B* 2016 Proceeds from Broker and Barter Exchange Transactions Copy B for Recipient OMB NO. 1545-0715 Short-term transactions for which basis is reported to the IRS Report on Form 8949 with Box A checked and/or Schedule D, Part I (This Label is a Substitute for Boxes 1c & 6) 8 Description, 1d Stock or Other Symbol, CUSIP Action 1a Date of Sale or Exchange 1b Date of Acquisition 1e Quantity Sold (IRS Form 1099-B box numbers are shown below in bold type) 2a Sales Price of Stocks , Bonds, etc. (a) 3 Cost or Gain / Loss (-) Other Basis (b) 5 Wash Sale Loss Disallowed 4 Federal Income Tax Withheld 13 State 15 State Tax Withheld Dakota Co. Common Stock Sale 01/01/2016 09/01/2015 250.000 TOTALS 2,875.00 1,500.00 2,875.00 1,500.00 1,375.00 FORM 1099-B* 2016 Proceeds from Broker and Barter Exchange Transactions Copy B for Recipient OMB NO. 1545-0715 Long-term transactions for which basis is not reported to the IRS Report on Form 8949 with Box E checked and/or Schedule D, Part II (This Label is a Substitute for Boxes 1c & 6) 8 Description, 1d Stock or Other Symbol, CUSIP Action 1a Date of Sale or Exchange 1b Date of Acquisition 1e Quantity Sold (IRS Form 1099-B box numbers are shown below in bold type) 2a Sales Price of Stocks , Bonds, etc. (a) 3 Cost or Gain / Loss (-) Other Basis (b) 5 Wash Sale Loss Disallowed 4 Federal Income Tax Withheld 13 State 15 State Tax Withheld Iowa Co. Common Stock Sale 02/01/2016 06/23/2004 200.000 TOTALS 3,000.00 2,234.00 3,000.00 2,234.00 766.00 This is important tax information and is being furnished to the Internal Revenue Service. If you are required to file a return, a negligence penalty or other sanction may be imposed on you if this income is taxable and the IRS determines that it has not been reported. Page 2 of 2 98 Advanced Scenarios Advanced Scenarios 99 Advanced Scenario 7: Test Questions 21. What is the total taxable interest income shown on Line 8a of Form 1040? a. $70 b. $95 c. $150 d. $245 22. How does the code Q on Quincy's Form 1099-R from Essex Bank affect the return? a. The entire distribution is not taxable. b. Half of the distribution is taxable. c. The entire distribution is taxable. d. There is no such code. The taxpayer must get a corrected Form 1099-R from the bank. 23. What is the amount shown on Form 1040, Line 13 - Capital gain or loss? a. A gain of $2,215 b. A gain of $2,141 c. A gain of $1,766 d. A gain of $1,691 24. How much of the $17,500 gross distribution reported on Form 1099-R is taxable in 2016? $ ________. 25. Is Quincy's Social Security income taxable? a. Yes, a portion of the Social Security income is taxable. b. Yes, all of the Social Security income is taxable. c. No, because their total income is less than $32,000. d. No, Social Security benefits are never taxable. 26. What is the amount of the shared responsibility payment on the Pikes' Form 1040, page 2? $_________ 27. Are the Pikes entitled to claim an earned income credit for 2016? a. No, because their investment income exceeds the amount allowed to claim the credit. b. No, Quincy is over the age of 65. c. No, Lucas is not a qualifying child for purposes of the EIC. d. Yes, they are eligible for the credit. 100 Advanced Scenarios Advanced Scenario 8: Austin Drake Directions Using the tax software, complete the tax return, including Form 1040 and all appropriate forms, schedules, or worksheets. Answer the questions following the scenario. Note: When entering Social Security numbers (SSNs) or Employer Identification Numbers (EINs), replace the Xs as directed, or with any four digits of your choice. Interview Notes Austin works as a customer service employee during the day. He also has a business as a personal trainer, called Austin's Abs. After work, he travels to teach classes at the gym five days a week. Austin is a cash-basis taxpayer who materially participates in the operation of his business. He did not make any payments that would require him to file Form 1099. Austin uses business code 812190. He received Form 1099-MISC for classes he taught at the gym. He had an additional $3,729 cash income in payments from individual clients. He has a written mileage log showing the following miles for 2016. All his travel is within his local commuting area. - 3,750 miles from home to his main job - 2,750 miles from his main job to the gym - 1,200 miles from the gym each day to his home The total mileage on his car for 2016 was 11,000 miles. He placed his car in service on January 6, 2011. He always takes the standard mileage rate. This is Austin's only car and it was available for personal use. Austin has records for other expenses relating to his business: - Advertising: $300 - Supplies: $1,000 - Nutritional supplements for his own consumption: $675 - Business liability insurance: $610 - Business license: $150 Austin has a statement from his church stating he donated $500 on December 1, 2016. Austin also brought his Form 1098 showing the mortgage interest, mortgage insurance premium, and real estate tax he paid. Austin has receipts for an eye exam for $80 and prescription contact lenses for $300. Advanced Scenarios 101 This year, Austin will deduct state income tax on Schedule A. Last year, he deducted state sales tax instead of state income tax. Austin's school loan was for qualified education expenses at an eligible institution. Austin has never taken a distribution from a retirement account and he was not a full-time student during 2016. Austin has health insurance through his employer that qualifies as minimum essential coverage. His employer pays the premium. 102 Advanced Scenarios Advanced Scenarios 103 104 Advanced Scenarios Advanced Scenarios 105 106 Advanced Scenarios Advanced Scenarios 107 108 Advanced Scenarios Advanced Scenario 8: Test Questions 28. Where should Austin's cash income from his business be reported on the tax return? a. Cash income does not have to be reported b. Form 1040, Line 7 c. Form 1040, Line 21 d. Schedule C-EZ or C 29. What is Austin's mileage expense deduction (at the standard mileage rate) for his business as a personal trainer? a. $1,485 b. $2,025 c. $2,133 d. $4,158 30. Which item cannot be deducted by Austin as a business expense? a. Business license b. Business liability insurance c. Advertising d. Nutritional supplements 31. How does Austin's self-employment tax affect his tax return? a. Austin's self-employment tax is not reported anywhere on Form 1040. b. A portion of the self-employment tax is deducted as a business expense on Schedule C-EZ or C. c. The self-employment tax is shown on Form 1040, Other Taxes section, and the full amount is deducted on Schedule A, Taxes You Paid section. d. The self-employment tax is shown on Form 1040, Other Taxes section, and the deductible part is an adjustment on Form 1040, page 1. 32. What is the amount Austin can take as a student loan interest deduction? a. $0 b. $1,373 c. $2,500 d. $2,745 Advanced Scenarios 109 33. What are Austin's total itemized deductions on Schedule A, line 29? a. $6,952 b. $7,086 c. $7,906 d. $8,286 34. The amount of Austin's retirement savings contributions credit in the Tax and Credits section of Form 1040 is $100. a. True b. False 35. Austin is not able to pay the entire balance due by the due date of the return (without extensions). What are his options? a. He can submit a Form 9465, Installment Agreement Request. b. He can contact the IRS for a full pay 120-day agreement. c. He can pay using his credit card. d. Any of the above. 110 Advanced Scenarios Advanced Course Retest Questions Directions The first four scenarios do not require you to prepare a tax return. Read the interview notes for each scenario carefully and use your training and resource materials to answer the questions after the scenarios. Advanced Scenario 1: Tracy and Chris Tabor Interview Notes Tracy is 40 years old, single, and a U.S. citizen with a valid Social Security number. She has a filing requirement. Tracy tells you she has chosen not to claim her son, Chris, as a dependent so he can get a higher refund. During the interview with Tracy, you determine the following facts: - Tracy's son Chris, age 19, is unmarried and was a full-time student during 2016. - Chris' income was $6,500 in wages. He does not provide more than half his own support. - Chris lived with Tracy all year. - Chris is a U.S. citizen with a valid Social Security number. Advanced Scenario 1: Retest Questions 1. Chris can claim his own personal exemption since his mother has decided not to claim him as a dependent. a. True b. False 2. Using Publication 4012, Who Must File tab, Chart B, Chris has a filing requirement and must file a tax return. a. True b. False Advanced Scenarios Retest Questions 111 Advanced Scenario 2: Mike Hastings Interview Notes Mike is 45 and made $36,000 in wages in 2016. He is single and pays all the cost of keeping up his home. Mike's daughter, Brittany, lived with Mike all year. Brittany's son, Hayden, was born in November 2016. Hayden lived in Mike's home since birth. Brittany is 18, single, and had $1,700 in wages in 2016. Mike provides more than half of the support for both Brittany and Hayden. Mike, Brittany, and Hayden are all U.S. citizens with valid Social Security numbers. Mike and Hayden had health insurance that qualified as minimum essential coverage. Brittany did not have health insurance at all in 2016. Advanced Scenario 2: Retest Questions 3. Can Brittany claim Hayden as a dependent? a. No, because Hayden didn't live with Brittany for more than 6 months. b. No, because Brittany qualifies as Mike's dependent. c. Yes, because Brittany had earned income. d. Yes, because Brittany is Hayden's mother. 4. How many qualifying children does Mike have for the earned income credit? a. 0 b. 1 c. 2 5. If Brittany does not qualify for a health coverage exemption, Mike must make a shared responsibility payment. a. True b. False 112 Advanced Scenarios Retest Questions Advanced Scenario 3: Henry and Claudia Oberlin Interview Notes Henry and Claudia are married and want to file a joint return. They have one child, Alyssa, who is 5 years old and lived with them all year. Henry and Alyssa are U.S. citizens and have valid Social Security numbers. Claudia lives with Henry and Alyssa in the U.S. but is not lawfully present in the U.S. and has an Individual Taxpayer Identification Number (ITIN). Claudia did not have any health insurance for all of 2016. Henry and Alyssa had minimum essential coverage (MEC) all year. Henry earned $37,000 in wages and had no other income. Claudia had $5,000 in earned income. Henry and Claudia provided all the support for Alyssa. Advanced Scenario 3: Retest Questions 6. Henry and Claudia are eligible to claim the earned income credit. a. True b. False 7. Claudia must make a shared responsibility payment. a. True b. False Advanced Scenarios Retest Questions 113 Advanced Scenario 4: Martin Huron Interview Notes Martin is married, but did not live with or have contact with his spouse this tax year. He does not know where she is. He indicated on the intake sheet that he is not legally separated. Martin does not have any dependents. Martin worked as a clerk and earned $36,000 in wages. He had no other income. In 2016, he took a computer class at the local university to improve his job skills. Martin has a receipt showing he paid $1,095 for tuition. He paid for all his educational expenses and did not receive any assistance or reimbursement. He paid $350 for a course book from an online bookseller. Purchase of the book was not a requirement of enrollment. Martin paid $90 for a parking permit. It was not a requirement of enrollment. Martin does not have enough deductions to itemize. He is a U.S. citizen with a valid Social Security number. Advanced Scenario 4: Retest Questions 8. Martin's filing status is Single. a. True b. False 9. Martin is eligible to claim the lifetime learning credit. a. True b. False 114 Advanced Scenarios Retest Questions Advanced Scenario 5: Retest Questions Directions Read the information for Lamar Wharton beginning on page 71. 10. Lamar's Form 1095-A contains information that must be used to calculate his premium tax credit. a. True b. False 11. Lamar will receive an additional amount of premium tax credit on his tax return. a. True b. False 12. The total amount of qualified educational expenses used in the calculation of Lamar's 2016 American opportunity credit is: a. $3,300 b. $3,800 c. $4,000 d. $4,240 13. Lamar's cancelled debt from Form 1099-C does not need to be included on his federal income tax return. a. True b. False 14. Which exception can Lamar use to avoid the 10% additional tax on the early distribution from his IRA on Form 5329? a. He does not qualify for an exception b. Distribution made for higher education expenses c. Distribution made for purchase of a first home d. Distribution due to total and permanent disability Advanced Scenarios Retest Questions 115 Advanced Scenario 6: Retest Questions Directions Read the information for Samantha Rollins beginning on page 81. 15. Is Head of Household the most advantageous allowable filing status Samantha can use? a. Yes b. No 16. How many qualifying children does Samantha have for the earned income credit? a. 0 b. 1 c. 2 d. 3 17. The reduction in Samantha's basis reported on Form 982 is ________. a. $160,000 b. $145,000 c. $100,000 d. $45,000 18. What is the credit for child and dependent care expenses on Form 1040, line 49? $________. 19. Samantha and her children qualify for the short coverage gap exemption. a. True b. False 20. Samantha does not have to pay self-employment tax on the translation services income. a. True b. False 116 Advanced Scenarios Retest Questions Advanced Scenario 7: Retest Questions Directions Refer to the scenario information for Quincy and Marian Pike, beginning on page 90. 21. The total amount of taxable interest income shown on Line 8a is $245. a. True b. False 22. Quincy's entire $4,500 Roth IRA distribution is taxable. a. True b. False 23. The net capital gain or loss reported on Form 1040, Line 13 is a gain of $1,239. a. True b. False 24. How much of the $17,500 gross distribution reported on Form 1099-R from Hickory Corporation is taxable in 2016? a. $17,097 b. $17,016 c. $16,719 d. $16,562 25. A portion of Quincy's Social Security income is taxable. a. True b. False 26. The amount of shared responsibility payment on the Pikes' Form 1040, page 2 is $695. a. True b. False 27. The Pikes are entitled to an earned income credit for 2016. a. True b. False Advanced Scenarios Retest Questions 117 Advanced Scenario 8: Retest Questions Directions Refer to the scenario information for Austin Drake, beginning on page 101. 28. Austin must use Schedule C-EZ or C to report his cash income. a. True b. False 29. What is Austin's mileage expense deduction (at the standard mileage rate) for his business as a personal trainer? $______. 30. Austin cannot deduct the amount he pays for nutritional supplements. a. True b. False 31. The full amount of the self-employment tax is deducted on Schedule A, in the Taxes You Paid section. a. True b. False 32. How do you report qualified student loan interest paid? a. As an expense for an education credit b. As other income on Form 1040, line 21 c. As an itemized deduction on Schedule A d. As an adjustment to income on Form 1040, page 1 33. What is Austin's total itemized deductions on Schedule A, line 29? $______. 34. What is the amount of Austin's retirement savings contributions credit? $______. 35. Austin is not able to pay the entire balance due. One way to reduce the amount of penalties and interest is to file his return and pay as much as he can by the due date of the return (without extensions). a. True b. False 118 Advanced Scenarios Retest Questions