Question 1

Which one of the following is most apt to qualify as an itemized deduction?

Accepted Answer

A)  interest on a credit card or charge account
B)  unreimbursed job-related travel expenses
C)  cost of commuting to work
D)  life insurance premiums
E)  traffic violation feeF) C) and D)
G) A) and B) B

Question 2

Thomas Franklin claimed an additional $3,000 in deductions he knowingly knew he did not qualify for so he could reduce his tax bill.This is referred to as tax:

Accepted Answer

A)  avoidance.
B)  acceleration.
C)  evasion.
D)  delaying.
E)  deferment.F) A) and B)
G) B) and E)

Question 3

Most people pay federal income tax by:

Accepted Answer

A)  paying the total amount owed on April 15.
B)  filing quarterly tax payments.
C)  having amounts withheld from income.
D)  earning tax credits for various deductions.
E)  filing the 1040 EZ form.F) None of the above
G) A) and D)

Question 4

A person's filing status is affected by marital status and dependents.

Accepted Answer

A) True 
 B)False

Question 5

Which type of audit is the least complicated for taxpayers?

Accepted Answer

A)  a field audit
B)  an office audit
C)  a research audit
D)  a correspondence audit
E)  a documentation auditF) C) and D)
G) None of the above

Question 6

An estate tax is imposed on the value of an individual's property at the time of his or her death.

Accepted Answer

A) True 
 B)False

Question 7

Taxable income is used to compute a person's:

Accepted Answer

A)  exemptions.
B)  income tax.
C)  deductions.
D)  capital gains.
E)  exclusions.F) A) and E)
G) C) and E) B

Question 8

Mary Watson bought 20 shares of stock one and half years ago.She recently sold her stock making a profit of $1,400.She is in the 28% tax bracket.Her tax on this investment is:

Accepted Answer

A)  $140.
B)  $210.
C)  $280.
D)  $392.
E)  $462.F) A) and B)
G) None of the above

Question 9

The main purpose of taxes is to:

Accepted Answer

A)  generate revenue for funding government programs.
B)  reduce the chances of inflation.
C)  create jobs.
D)  discourage use of certain goods and services.
E)  decrease competition from foreign companies.F) None of the above
G) B) and E) A

Question 10

A short-term capital gain is profit earned on an investment that is:

Accepted Answer

A)  made involving small companies.
B)  not taxed as ordinary income.
C)  held less than 12 months.
D)  in foreign companies.
E)  made in real estatE.F) B) and D)
G) All of the above

Question 11

Tim Bridges owns a bass fishing boat.His state imposes an annual 3.25 percent tax on the current value of this boat.What type of tax is this most likely to be?

Accepted Answer

A)  general sales tax
B)  excise tax
C)  personal property tax
D)  income tax
E)  estate taxF) C) and E)
G) C) and D)

Question 12

What type of tax is imposed on the value of an individual's property at the time of his or her death?

Accepted Answer

A)  inheritance
B)  excise
C)  gift
D)  personal property
E)  estateF) B) and E)
G) None of the above

Question 13

Elizabeth Gleason just died.At the time of her death the total value of her assets was $150,000.The federal government collected $7,500 in taxes based on this value.What type of tax is this most likely to be?

Accepted Answer

A)  general sales tax
B)  excise tax
C)  personal property tax
D)  income tax
E)  estate taxF) C) and D)
G) A) and C)

Question 14

Mr.and Mrs.Keating want to give their son Dudley a total of $24,000.They each write him a check for $12,000 so they won't have to pay any gift tax.This is an example of:

Accepted Answer

A)  fraud.
B)  tax evasion.
C)  tax exclusion.
D)  tax avoidance.
E)  tax deferred incomE.F) C) and E)
G) D) and E)

Question 15

An office audit requires that a taxpayer visit an IRS office to clarify some aspect of his or her tax return.

Accepted Answer

A) True 
 B)False

Question 16

A person has $4,000 in medical expenses and an adjusted gross income of $32,000.If taxpayers are allowed to deduct the amount of medical expenses that exceed 7.5 percent of adjusted gross income,what would be the amount of the deduction in this situation?

Accepted Answer

A)  $300
B)  $1,600
C)  $2,400
D)  $4,000
E)  $32,000F) C) and D)
G) A) and E)

Question 17

Maryellen Epplin worked in Poland for part of the year and earned $50,000 while she was there.This income will not be included in her taxable income for the year.This represents a tax:

Accepted Answer

A)  deduction.
B)  exclusion.
C)  exemption.
D)  credit.
E)  refund.F) B) and C)
G) A) and D)

Question 18

When a taxpayer's income increases $1,000 and the taxes owed increases from $7,867 to $8,177,the marginal tax rate is ______ percent.

Accepted Answer

A)  15
B)  20
C)  25
D)  28
E)  31F) C) and D)
G) D) and E)

Question 19

An expense that would be included in the itemized deductions of a taxpayer is:

Accepted Answer

A)  personal postage expenses.
B)  life insurance premiums.
C)  real estate property taxes.
D)  a driver's license fee.
E)  annual interest paid on credit cards.F) A) and C)
G) B) and C)

Question 20

Michele Walsh is considering an additional charitable contribution of $2,000 to a tax-deductible charity,bringing her total itemized deductions to $16,000.If Michele is in a 28 percent tax bracket,how much will this $2,000 contribution reduce her taxes?

Accepted Answer

A)  $0
B)  $560
C)  $1,600
D)  $2,000
E)  $4,480F) B) and D)
G) A) and B)

Exam 4: Planning Your Tax Strategy

Which one of the following is most apt to qualify as an itemized deduction?

Correct AnswerverifiedB

Thomas Franklin claimed an additional $3,000 in deductions he knowingly knew he did not qualify for so he could reduce his tax bill.This is referred to as tax:

Correct AnswerverifiedShow Answer

Most people pay federal income tax by:

Correct AnswerverifiedShow Answer

A person's filing status is affected by marital status and dependents.

Correct AnswerverifiedShow Answer

Which type of audit is the least complicated for taxpayers?

Correct AnswerverifiedShow Answer

An estate tax is imposed on the value of an individual's property at the time of his or her death.

Correct AnswerverifiedShow Answer

Taxable income is used to compute a person's:

Correct AnswerverifiedB

Mary Watson bought 20 shares of stock one and half years ago.She recently sold her stock making a profit of $1,400.She is in the 28% tax bracket.Her tax on this investment is:

Correct AnswerverifiedShow Answer

The main purpose of taxes is to:

Correct AnswerverifiedA

A short-term capital gain is profit earned on an investment that is:

Correct AnswerverifiedShow Answer

Tim Bridges owns a bass fishing boat.His state imposes an annual 3.25 percent tax on the current value of this boat.What type of tax is this most likely to be?

Correct AnswerverifiedShow Answer

What type of tax is imposed on the value of an individual's property at the time of his or her death?

Correct AnswerverifiedShow Answer

Elizabeth Gleason just died.At the time of her death the total value of her assets was $150,000.The federal government collected $7,500 in taxes based on this value.What type of tax is this most likely to be?

Correct AnswerverifiedShow Answer

Mr.and Mrs.Keating want to give their son Dudley a total of $24,000.They each write him a check for $12,000 so they won't have to pay any gift tax.This is an example of:

Correct AnswerverifiedShow Answer

An office audit requires that a taxpayer visit an IRS office to clarify some aspect of his or her tax return.

Correct AnswerverifiedShow Answer

A person has $4,000 in medical expenses and an adjusted gross income of $32,000.If taxpayers are allowed to deduct the amount of medical expenses that exceed 7.5 percent of adjusted gross income,what would be the amount of the deduction in this situation?

Correct AnswerverifiedShow Answer

Maryellen Epplin worked in Poland for part of the year and earned $50,000 while she was there.This income will not be included in her taxable income for the year.This represents a tax:

Correct AnswerverifiedShow Answer

When a taxpayer's income increases $1,000 and the taxes owed increases from $7,867 to $8,177,the marginal tax rate is ______ percent.

Correct AnswerverifiedShow Answer

An expense that would be included in the itemized deductions of a taxpayer is:

Correct AnswerverifiedShow Answer

Michele Walsh is considering an additional charitable contribution of $2,000 to a tax-deductible charity,bringing her total itemized deductions to $16,000.If Michele is in a 28 percent tax bracket,how much will this $2,000 contribution reduce her taxes?

Correct AnswerverifiedShow Answer

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