51. Which of the common deductions below are allowed for both regular tax purposes and for AMT purposes?
a. The standard deduction
b. Personal and dependency exemptions
c. State income taxes, property taxes, and all other taxes deducted on Schedule A
d. Mortgage interest from the acquisition of a residence costing less than $1 million
e. Miscellaneous itemized deductions taken on Schedule A
52. Which of the common deductions below are allowed for regular tax purposes but not for AMT purposes?
a. The interest deduction for up to $100,000 of home equity debt which is not used to purchase or improve part of a principal residence
b. Cash charitable contributions
c. Moving expenses
d. IRAs
53. Which of the following is true of the alternative minimum tax?
a. The alternative minimum tax is designed to ensure that high income taxpayers do not pay excessive amounts of income tax.
b. For 2014, the alternative minimum tax rates are 20 percent and 30 percent, depending on the taxpayer's income.
c. The amount of a taxpayer's state income tax may not be deducted for the purpose of computing the alternative minimum tax.
d. All tax-exempt interest is a tax preference item for the alternative minimum tax.
e. None of the above are true.
54. For 2014, which of the following is a tax adjustment or tax preference item for the individual AMT computation?
a. Deduction of charitable contribution of tangible personal property
b. IRA contribution deduction
c. Miscellaneous itemized deductions
d. Moving expense deduction
e. None of the above
55. A parent may elect to include a child’s income in the parent’s return if:
a. The child is under age 18.
b. The child’s income is only from interest and dividend distributions.
c. The child’s gross income is more than $1,000 and less than $10,000.
d. All of the above must be met for a parent to elect to include a child’s income in the parent’s return.
56. In 2014, which of the following children would have income taxed at their parents' rates?
a. A 13-year-old child with salary income of $12,000
b. A year-old child with net unearned income of $2,000
c. A non-student, 19-year-old child with net unearned income of $12,000
d. A 9-year-old child with salary income of $1,000
e. All of the above
57. William and Irma have two children, Tom, age 13, and Sara, age 8. For 2014, Tom and Sara have a total parental tax of $5,600. Tom's net unearned income is $5,000, while Sara's net unearned income is $15,000. How much of the parental tax would be allocated to Sara on her 2014 tax return?
a. $0
b. $4,200
c. $2,800
d. $5,600
e. None of the above
58. Assume Karen is 12 years old and her only income is $2,500 of interest income from a bank account with money her parents have given her to save for college. What are the options Karen has for filing her tax return?
a. Karen must file a separate tax return and report all of her interest income at her separate rate of tax.
b. Karen must file a separate tax return and report all of her interest income at her parents’ rate of tax.
c. Karen can file a separate tax return or her parents can elect to include her in their tax return, paying tax on $500 of her interest income at their rate of tax.
d. Karen can file a separate return or her parents can elect to include her in their tax return, paying tax on the full $2,500 of her interest income at their rate of tax.
59. Which of the following types of income is not subject to the “kiddie tax?”
a. Interest income
b. Dividend income
c. Salary income
d. Capital gains on stock sales
e. All of the above are subject to the “kiddie tax”
60. Glen and Mary have two children, Chad, age 12, and Linda, age 8. For 2014, Chad has $4,000 in net unearned income and Linda has net unearned income of $1,000. If the total parental tax for 2014 is $1,500, how would the tax be allocated between Chad and Linda?
a. $1,500 to Chad and $0 to Linda
b. $1,200 to Chad and $300 to Linda
c. $1,120 to Chad and $280 to Linda
d. $750 to Chad and $750 to Linda
e. None of the above
61. Molly and Steve are married and live in Texas. Molly earns a salary of $50,000 and Steve owns a rental property that gives him $35,000 of income. If they filed separate tax returns, what amount of income would Steve report?
a. $35,000
b. $85,000
c. $42,500
d. $60,000
e. None of the above
62. Which one of the following conditions must be satisfied in order for a married taxpayer to be taxed on only his income if he resides in a community property state?
a. The husband and wife must live apart for the entire year.
b. The husband and wife must live apart for more than half the year.
c. The husband and wife must be in the process of filing for a divorce.
d. Only one of the spouses can be working and earning an income.
e. None of the above.
63. Which of the following is not a true statement regarding community property law?
a. For a married couple living in California, income derived from separate property is taxable to the owner of the property.
b. For a married couple living in Texas, income derived from separate property produces community income.
c. In all community property states, the salary of married spouses is allocated one-half to each spouse.
d. Colorado, Ohio, and Florida are community property states.
e. Property acquired before marriage in a community property state continues to be separate property.
64. Lee and Pat are married taxpayers living in Louisiana. Lee earns wages of $40,000 and has $5,000 of dividend income from separate property. Lee and Pat have interest income from community property of $10,000. If Lee and Pat file separate income tax returns, what amount of income must be included on Lee's separate tax return?
a. $50,000
b. $30,000
c. $27,500
d. $25,000
e. None of the above
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