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Exam 3: Preparing Your Taxes

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Question 41

Multiple Choice

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Murray (age 68, single) sold his home owned for 35 years so that he could relocate to a place that is closer to where his grandchildren live. He realized a $400,000 capital gain on the home. Murray's tax liability on the capital gain is computed on:

A) $400,000.
B) $300,000.
C) $250,000.
D) $150,000.
E) $0.

F) All of the above
G) C) and E)

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Question 42

Multiple Choice

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Mark is not married and has dependent parents. He pays more than half of the cost of keeping up a home for himself and his parents. His tax filing status is:

A) single taxpayer.
B) married filing jointly.
C) married filing separately.
D) head of household.
E) qualifying widow with dependent child.

F) C) and D)
G) A) and E)

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Question 43

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INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. Tax [planning | preparation] software will be most helpful for a taxpayer who itemizes deductions but doesn't need tax advice.

If you are a professional who is likely to receive income that is not subject to withholding, then you are required to:

Dwayne and Gayle were divorced on September 29. They have not remarried since and have no dependents. Their filing status for the year will be married filing separately since they were married for more than half of the year.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. A tax credit is subtracted from your [ taxable income | tax liability ].

Gross income minus tax-exempt income equals adjusted gross income (AGI).

Your income tax withholding is dependent on:

A tax audit is an examination by local government officials to identify people who do not pay enough taxes.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. Your income tax filing status is determined primarily by your [ economic  | family ] situation.

In 2019, the total FICA tax rate was:

Sue and Tim are married taxpayers in the 32% marginal tax bracket. In 2018, they sold common stock shares, which they held for more than 3 months, for a capital gain of $3,800. They also sold some technology stock for a short-term capital loss of $9,000. In addition, they sold the home they had lived in for the past 10 years and experienced a $75,000 gain on the house. How much will their net capital gains (or losses) be for 2018? How much will they pay (or save) in taxes as a result of these transactions?

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. For tax years from 2018 through 2025, individuals are allowed a deduction of [ 20% | 25% ] of qualified business income.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. Dividends received from stocks are known as [ passive | portfolio ] income.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. The higher your income, the [ greater | smaller ] the probability you will be audited.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. The lowest marginal tax rate is currently [10% | 15%].

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. A tax credit could result from [ owning a home | adopting a child ].

Which of the following statements regarding tax credits is true?

A _____ would most likely have to pay estimated taxes.

Russ and Lois were married on December 30. Even though they were single for most of the year, they can legally file as married filing jointly taxpayers in the year of the wedding.