Question 1 Which of the following statements is true? I. If Larry were to pass away this year, Lolita would be required to claim the face value of the life insurance received for federal income tax purposes. II. If Larry uses a transit pass valued at $100 per month given to him by his employer to commute to and from work, he will be required to add the value of the pass to his income for tax purposes. III. If the Andes want to reduce gross income for tax purposes, Larry and Lolita could contribute to a flexible spending plan to cover the cost of unreimbursed medical expenses. IV. Although the face value of the life insurance policy can be received tax free by Lolita if Larry were to pass away, the cash value will be fully taxable as income at the federal level. Group of answer choices II only III only I and III only II and IV only II, III, and IV only

Question 2 Larry and Lolita are considering moving their bank account balance to a safe municipal bond mutual fund. Before making the switch, they should be aware of which of the following? I. Given their federal marginal tax bracket, the bank account provides a higher after-tax yield. II. Interest and capital appreciation from the municipal bond fund is federally income tax exempt. III. Interest from the bonds will be state income tax free if the bonds held in the fund are from the state where the Andes live. IV. Municipal bond interest that is used to reinvest in the fund will grow on a tax-free basis. Group of answer choices I only III only II and III only II, III, and IV only I, II, III, and IV

Question 3 Which of the following tax items will be included when calculating the Andes gross income this year? I. Lolitas salary. II. The state tax refund from the previous year. III. The capital loss in United Motor Company. IV. Dividends earned, but not received, on the insurance policy. Group of answer choices I and II only I and IV only II and III only I, II, and IV only I, III, and IV only

Question 4 The Andes do not know whether they should take the standard deduction or itemize deductions this year. Which of the following statements is true in relation to this issue? Group of answer choices It does not matter which deduction amount Larry and Lolita choose because they are equal. Larry and Lolita should claim itemized deductions because this amount is greater than the standard deduction. Larry and Lolita should claim the standard deduction because this amount is greater than itemizing deductions. If Larry and Lolita sell the United Motor Company stock, the loss will reduce their itemized deductions, making the standard deduction more attractive. Both c and d are correct.

Question 5 Lolita and Larry are thinking about adding to their family next year. If Larry and Lolita do have a child, Lolita plans to be a stay-at-home mom. Larry is concerned about what will happen to their tax situation when Lolita stops working. One issue, in particular, that Larry and Lolita would like to discuss with their financial planner is whether they should sell the United Motor Company stock this year or wait until next year. What is the best recommendation given their current and project income tax situation? Group of answer choices Larry and Lolita should sell the stock this year while they are in the 22 percent marginal tax bracket because this will result in a larger deduction than waiting and selling when they are in a lower bracket. Larry and Lolita should sell the stock next year, making the deduction more valuable as an offset to Lolitas lost income. Larry and Lolita should sell the stock this year because the full value of the loss can be used this year to reduce their gross income level. Larry and Lolita should sell the stock next year because they currently do not need a tax loss to reduce their reportable income.

Question 6 The Andes are considering the possibility of moving to another state across the country so that Larry can work with his brother. Larry and his brother are employed in a similar line of work. If the Andes do move, which of the following expenses will be an allowable moving expense deduction? I. Payment of real estate expenses on the sale of their current home. II. Any loss that Larry and Lolita incur when selling their personal residence. III. Cost of travel expenses, such as lodging, while in transit from one town to another. IV. Cost of meals while in transit from one town to another. Group of answer choices III only I and III only II and III only III and IV only None of these expenses is deductible

Question 7 Which of the following tax planning strategies provides the greatest immediate tax benefit for the Andes? Group of answer choices Contributing the maximum allowable to a Roth IRA. Making the maximum allowable deductible contribution to a traditional IRA. Establishing and contributing to an immediate fixed annuity. Purchasing additional whole life insurance.

Question 8 Larry is considering changing jobs. A potential employer has offered him several employee benefits that make the job offer very attractive. Which of the following employee benefit alternatives will help reduce the Andes reportable gross income for federal income tax purposes if Larry takes the job and signs up for the benefit? I. The immediate right to contribute to a 401(k) plan. II. Employer-provided parking. III. Group term life insurance equal to three times salary. IV. The right to contribute to a Section 125 plan. Group of answer choices I only I and II only I and IV only II, III, and IV only I, II, III, and IV

Question 9 One month ago, Lolitas uncle gave Larry and Lolita a check for $25,000. Lolitas uncle lives in California, and on a recent trip to Reno, he hit a big jackpot. Lolitas uncle gave the gift as a way to share his good fortune with the family. Larry is concerned about the tax ramifications of the gift. Which statement(s) below is (are) true in this situation? I. Larry and Lolita are responsible for paying any applicable state and federal income tax on the full $25,000. II. Larry, Lolita, and Lolitas uncle are jointly responsible for paying any applicable any tax liability. III. Lolitas uncle is responsible for paying pay any applicable state and federal income taxes on the winnings. IV. Lolita and Larry need not pay any applicable income tax because the $25,000 is a gift. Group of answer choices I only II only III only II and III only III and IV only

Question 10 If Larry and Lolita finalize a divorce this year and the court orders Larry to pay alimony in the amount of $700 per month for six months (through December), and then $700 per month for fifteen years or until Lolita dies, which of the following statements will be true? Group of answer choices Larry and Lolita may not file married filing jointly when completing this years tax return. Lolita must file as head of household when completing this years tax return. Larry may take a $4,200 deduction from gross income related to the alimony payments. Lolita must report the alimony she receives as taxable income in future years. Both c and d are correct.

Question 11 How much in long-term capital gains did the Roths incur for the year? Group of answer choices -$3,000 $0 $1,000 $6,000

Question 12 What is the net gain or loss position of the Roths' capital transactions for the year? Group of answer choices The Roths suffered $1,000 in net short-term losses for the year. The Roths suffered $4,000 in net short-term losses for the year. The Roths suffered $10,000 in net short-term losses for the year. The Roths suffered $15,000 in net short-term losses for the year.

Question 13 How much (rounded) of Floras annuity distribution will be taxable this year? Group of answer choices 19 percent 67 percent 81 percent 100 percent

Question 14 Which of the following statements is true? Group of answer choices Iras employer will withhold $20,000 in federal taxes from the 401(k) distribution. Ira will owe an immediate 10 percent penalty on the 401(k) distribution. Ira will need to contribute only $80,000 to the IRA rollover to avoid penalties. Ira needs to roll over the 401(k) distribution to the IRA within thirty days to avoid taxes and penalties.

Question 15 Had Ira and Flora decided to give the XXP stock to a charity, they should have: I. sold the stock first and then made the donation for a deduction. II. donated the stock first and then taken the deduction. III. donated cash to the charity then sold the stock. Group of answer choices I only II only III only I, II, or III, because each strategy results in the same tax outcome

Question 16 Rather the donate cash to a charity, assume Ira and Flora decide to donate the KSU bond to a charity. In this situation, Ira and Flora should: I. sell the bond first and then make a donation for a tax deduction. II. donate the bond first and then take a tax deduction. III. donate the bond first and then deduct the loss. Group of answer choices I only II only III only I, II, or III, because each strategy results in the same tax outcome

Question 17 How much can the Roths deduct from their federal taxes for the Section 529 plan contribution? Group of answer choices $0 $1,000 $2,000 $1,600 $3,200

Question 18 In addition to the information already known about the Roths, you learn that Flora owns a vacant lot in Topeka that she purchased as an investment. She would like to exchange the lot so that she does not incur a tax liability. Which of the following properties can she take in trade to receive like-kind tax treatment? Group of answer choices A duplex in Wichita. Collector coins owned by a coin dealer. A mortgage on a rental house in Topeka. Either a or c.

Question 19 Instead of doing a straight exchange with someone, assume Flora finds a person who is willing to provide her a combination of property and cash for her vacant lot. Flora will receive $5,000 cash and a similar vacant lot across town valued at $10,000 (basis of $8,000). If her original lot has a fair market value of $20,000 and a basis of $5,000, how much will Flora realize on this transaction? Group of answer choices $0 $5,000 $8,000 $10,000 $15,000

Question 20 Using the information presented in the previous question, how much gain must Flora recognize on the exchange for income tax purposes? Group of answer choices $0 $5,000 $10,000 $15,000 $20,000