Income Tax Module 2 Quiz 100%Verified
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Steve, age 38, spent the first six months of the current year working as a financial
planner for Question Capital Management. He took a new job out-of-state with
Investments, a financial planning firm. He feels as though he can become a partner at
the new firm within five years. His only regret is that he was required to move from
Texas, his home state, to Vermont. Kent had the following items of income and loss in
the current year:
Salary (combined for both jobs) $60,000
Long-term capital loss $500
Short-term capital loss $4,500
Moving expenses (paid by Steve) $4,000
What is Steve's adjusted gross income for the current year? - ANS-$57,000
$60,000 salary - $3,000 short-term capital loss = $57,000.
The $1,500 balance of short-term capital loss is carried over.
The $500 balance of long-term capital loss is carried over.
When a taxpayer has both short-term capital loss and a long-term capital loss, the
short-term capital loss is offset
against ordinary income, regardless of when the transaction occurred during the year.
The moving expense is not
deductible as Steve is not active duty military.
Bonnie, a widow, elected to receive the proceeds of a $100,000 face value insurance
policy on the life of her
deceased husband in ten annual installments of $11,900 each including interest
(beginning last year). In the
current year, she received $11,900, which included $1,900 interest. Bonnie dies in
December of the current year
after collecting the current year's payment. What is the amount subject to income tax on
her final tax return? - ANS-$1,900
Bonnie's final tax return should include only the interest portion of the $11,900 payment.
The payment portion
, attributable to the face amount of the policy is not taxable.
Bobby is age 62, single, and is a dependent of his daughter. During the current year,
Bobby received Social Security payments of $6,000, interest on a bank account of
$3,500, and $2,300 from a part-time job. What is Bobby's taxable income? -
ANS-$3,150
$3,500 Interest on bank account
2,300 Salary from part-time job (earned income)
$5,800 Taxable income before standard deduction
(2,650) Standard deduction (earned income of $2,300 + $350)
$3,150 Taxable income
* Social Security benefits are not taxable at his income (modified AGI) level. * Since he
is a dependent of another, his standard deduction is limited to the greater of: 1) $1,050,
or 2) earned income plus $350
George, age 21 is a full-time student at the University and is a dependent of his parents.
He had earned income of $2,000 from a part-time job. In addition he had $950 interest
from a savings account. He had total itemized deductions of $200 in the current year.
What is George's taxable income this year? - ANS-$600
$2,000 + $950 = $2,950 - $2,350 (earned income +350) therefore his taxable income is
$600.
Bill operates a publishing company. In the past he has used the cash basis method of
accounting. This year he has decided to switch to accrual. At the beginning of the year
he had accounts receivable of $90,000. Assuming the change in accounting method is
approved by the IRS, he will be required to make which adjustment? - ANS-+ $90,000
The adjustment will be $90,000 into income
Lane is single and has two dependent children. Financial records show the following
items in the current year:
Gift from a friend $12,000
Dividends received on stock $1,200
Prize won in state lottery $1,000
Salary from employer $35,000
Child support received from ex-spouse $6,000
Alimony received from ex-spouse (2016 divorce) $12,000
Long-term capital loss $5,000
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Steve, age 38, spent the first six months of the current year working as a financial
planner for Question Capital Management. He took a new job out-of-state with
Investments, a financial planning firm. He feels as though he can become a partner at
the new firm within five years. His only regret is that he was required to move from
Texas, his home state, to Vermont. Kent had the following items of income and loss in
the current year:
Salary (combined for both jobs) $60,000
Long-term capital loss $500
Short-term capital loss $4,500
Moving expenses (paid by Steve) $4,000
What is Steve's adjusted gross income for the current year? - ANS-$57,000
$60,000 salary - $3,000 short-term capital loss = $57,000.
The $1,500 balance of short-term capital loss is carried over.
The $500 balance of long-term capital loss is carried over.
When a taxpayer has both short-term capital loss and a long-term capital loss, the
short-term capital loss is offset
against ordinary income, regardless of when the transaction occurred during the year.
The moving expense is not
deductible as Steve is not active duty military.
Bonnie, a widow, elected to receive the proceeds of a $100,000 face value insurance
policy on the life of her
deceased husband in ten annual installments of $11,900 each including interest
(beginning last year). In the
current year, she received $11,900, which included $1,900 interest. Bonnie dies in
December of the current year
after collecting the current year's payment. What is the amount subject to income tax on
her final tax return? - ANS-$1,900
Bonnie's final tax return should include only the interest portion of the $11,900 payment.
The payment portion
, attributable to the face amount of the policy is not taxable.
Bobby is age 62, single, and is a dependent of his daughter. During the current year,
Bobby received Social Security payments of $6,000, interest on a bank account of
$3,500, and $2,300 from a part-time job. What is Bobby's taxable income? -
ANS-$3,150
$3,500 Interest on bank account
2,300 Salary from part-time job (earned income)
$5,800 Taxable income before standard deduction
(2,650) Standard deduction (earned income of $2,300 + $350)
$3,150 Taxable income
* Social Security benefits are not taxable at his income (modified AGI) level. * Since he
is a dependent of another, his standard deduction is limited to the greater of: 1) $1,050,
or 2) earned income plus $350
George, age 21 is a full-time student at the University and is a dependent of his parents.
He had earned income of $2,000 from a part-time job. In addition he had $950 interest
from a savings account. He had total itemized deductions of $200 in the current year.
What is George's taxable income this year? - ANS-$600
$2,000 + $950 = $2,950 - $2,350 (earned income +350) therefore his taxable income is
$600.
Bill operates a publishing company. In the past he has used the cash basis method of
accounting. This year he has decided to switch to accrual. At the beginning of the year
he had accounts receivable of $90,000. Assuming the change in accounting method is
approved by the IRS, he will be required to make which adjustment? - ANS-+ $90,000
The adjustment will be $90,000 into income
Lane is single and has two dependent children. Financial records show the following
items in the current year:
Gift from a friend $12,000
Dividends received on stock $1,200
Prize won in state lottery $1,000
Salary from employer $35,000
Child support received from ex-spouse $6,000
Alimony received from ex-spouse (2016 divorce) $12,000
Long-term capital loss $5,000
