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