q1

Assume Karen is 12 years old and her only income is $5,500 of interest income from a bank account with money her parents have given her to save for college. If Karen does not elect to include her income on her parents' return, what is her income tax liability?

a. $564

b. $963

c. $445

d. $550

q2

In 2018, which of the following children would have income taxed at trust and estate rates?

a. A 12-year-old child with net unearned income of $3,200

b. A 9-year-old child with salary income of $1,000

c. A 13-year-old child with salary income of $12,000

d. A nonstudent, 19-year-old child with net unearned income of $12,000

e. All of these choices are correct.

q3

Becky is a cash basis taxpayer with the following transactions during her calendar tax year:

Cash basis revenue	$54,000
Cash basis expenses, except rent	25,000
Rent expense (paid on December 1) for use of a building for 24 months	24,000

What is the amount of Becky's taxable income from her business for this tax year?

a. $11,000

b. $27,500

c. $7,000 loss

d. $28,000

e. None of these choices are correct.

q4

Vernon is a cash basis taxpayer with a calendar tax year. On October 1, 2018, Vernon entered into a lease to rent a building for use in his business at $3,000 a month. On that day Vernon paid 18 months' rent on the building, a total of $54,000 ($3,000 18 months). How much may Vernon deduct for rent expense on his 2018 tax return?

a. $12,000

b. $36,000

c. $54,000

d. $0

e. None of these choices are correct.