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Exam 4: Individual Income Tax Overview, Dependents, and Filing Status

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Question 1

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John Maylor is a self-employed plumber of John's John Service, his sole proprietorship.In the current year, John's John Service had revenue of $120,000 and $40,000 of business expenses. John also received $2,000 of interest income from corporate bonds. What is John's adjusted gross income, assuming he had no other income or expenses? (ignore any deduction for self-employment tax.)

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$82,000, c...

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Question 2

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Lydia and John Wickham filed jointly in Year 1.They divorced in Year 2.Late in Year 2, the IRS discovered that the Wickhams underpaid their Year 1 taxes by $2,000.Both Lydia and John worked in Year 1 and received equal income but John had $2,000 less tax withheld than Lydia did.Who is legally liable for the tax underpayment?

A) Lydia.
B) John.
C) Both Lydia and John.
D) Neither Lydia nor John.

E) None of the above
F) A) and C)

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Question 3

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From AGI deductions are generally more valuable to taxpayers than for AGI deductions.

The Dashwoods have calculated their taxable income to be $88,000 for 2019, which includes $2,000 of long-term capital gains.Using the appropriate tax rate schedule, calculate the Dashwoods' income tax liability assuming they are married and file a joint return.

All of the following are tests for determining qualifying child status except the ________.

Taxpayers are generally allowed to claim deductions for expenditures unless a specific tax provision indicates the expenditure is not deductible.

In February of 2018, Lorna and Kirk were married.During 2019, Lorna received $40,000 of compensation from her employer and Kirk received $30,000 of compensation from his employer.The couple together reported $2,000 of itemized deductions.Lorna and Kirk filed separately in 2019.What is Lorna's taxable income and what is her tax liability? (Use the applicable tax rate schedule and round your answer to the nearest whole number.)

An individual may meet the relationship test to be a taxpayer's qualifying relative even if the individual has no family relationship with the taxpayer.

All of the following represent a type or character of income except:

Lebron received $50,000 of compensation from his employer and he received $400 of interest from a municipal bond.What is the amount of Lebron's gross income from these items?

Which of the following types of income are not considered ordinary income?

Jane and Ed Rochester are married with a 2-year-old child, who lives with them and whom they support financially.In 2019, Ed and Jane realized the following items of income and expense: $\begin{array} { l r } \text { Item}&\text { Amount } \\\text { Ed's Salary } & 35,000\\\text { Jarie's Salary } & 70,000 \\\text { Muricipal bond interest income } &400 \\\text { Qualified business income } & 1,000 \\\text { Alimony paid for AGI deduction) } &( 7,000 ) \\\text { Real property tax (from AGI deduction) } & ( 10,000 ) \\\text { Charitable contributions (from AGI) } &( 15,000 ) \\\end{array}$ They also qualified for a $2,000 child tax credit.Their employers withheld $5,800 in federal income taxes from their paychecks (in the aggregate).Finally, the 2019 standard deduction amount for MFJ taxpayers is $24,400. What are the couple's taxes due or tax refund? (Use the tax rate schedules, not tax tables.)

The standard deduction amount for married filing separately taxpayers (MFS)is less than the standard deduction amount for married filing jointly taxpayers.

For purposes of the qualifying child residence test, a child's temporary absence from the taxpayer's home to attend school full time is counted as though the child lived in the taxpayer's home during the absence.

Inventory is a capital asset.

Which of the following statements regarding dependents is true?

Taxpayers may prepay their tax liability through withholdings and through estimated tax payments.

For purposes of determining filing status, which of the following is not a requirement for a married taxpayer to be treated as unmarried at the end of the year?

Which of the following series of inequalities is generally most accurate?

It is generally more advantageous for liability protection purposes for a married couple to file separately than it is for them to file jointly.