South-Western Federal Taxation 2022: Individual Income Taxes (45th Edition) – James C. Yo, Exams of Law

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South-Western Federal Taxation 2022: Individual

Income Taxes (45th Edition) – James C. Young &

Annette Nellen – Complete Test Bank PDF

Chapters

1. An Introduction to Taxation and Understanding the Federal Tax Law
2. Working With the Tax Law
3. Tax Determination and Payments
4. Gross Income: Concepts and Inclusions
5. Gross Income: Exclusions
6. Deductions and Losses: In General
7. Deductions and Losses: Certain Business Expenses and Losses
8. Depreciation, Cost Recovery, Amortization, and Depletion
9. Employee and Self-Employed Related Expenses
10. Itemized Deductions
11. Tax Credits and Payments
12. Alternative Minimum Tax
13. Property Transactions: Determination of Gain or Loss
14. Property Transactions: Nontaxable Exchanges and Involuntary Conversions
15. Retirement Savings and Deferred Compensation
16. Tax Practice and Ethics
17. The Individual Alternative Minimum Tax
18. Credits and Special Taxes 1. Which of the following is generally included in gross income? A) Gifts received B) Inheritances received C) Child support payments D) Jury duty pay Jury duty pay is taxable income, while gifts, inheritances, and child support are generally excluded from gross income. 2. Which item is deductible as an itemized deduction? A) Political contributions B) State income taxes paid C) Fines and penalties D) Personal living expenses State and local income taxes paid are deductible as an itemized deduction up to the SALT limit.

B) Transportation C) Tuition and required fees D) Medical expenses Only tuition, fees, and course materials are qualified for the AOTC.

7. Which taxpayer may use the head of household filing status? A) A single person with no dependents B) A single parent who maintains a home for their dependent child C) A married person living with their spouse D) A married person filing jointly Head of household status requires maintaining a home for a qualifying person, such as a child. 8. Which of these fringe benefits is taxable to an employee? A) Group-term life insurance up to $50, B) De minimis fringe benefits C) Employer-paid health insurance premiums D) Group-term life insurance in excess of $50, The cost of group-term life insurance above $50,000 is taxable income to the employee. 9. Which is an adjustment to income (above-the-line deduction)? A) Mortgage interest B) Real estate taxes C) Contributions to a traditional IRA D) Charitable contributions Traditional IRA contributions are adjustments to income (Form 1040, Schedule 1).

10. Which is true about alimony received from a divorce finalized after 2018? A) It is deductible by the payer B) It is taxable to the recipient C) It is deductible and taxable D) It is not deductible and not taxable For divorces finalized after 12/31/18, alimony is neither deductible nor taxable. 11. Which of the following is not eligible for the earned income tax credit (EITC)? A) A single parent with one child and earned income of $20, B) A married taxpayer filing separately C) A married couple with three children and earned income of $30, D) A single taxpayer with no children and earned income of $9, Taxpayers who file MFS are ineligible for the EITC. 12. Which of these is considered self-employment income? A) Wages from a corporation B) Dividends C) Earnings from freelance work D) Interest income Freelance work income is subject to self-employment tax. 13. Which of the following must be capitalized rather than deducted? A) Utilities for office use B) Small tools under the de minimis safe harbor C) Office supplies D) Improvements that add value to business property

D) Income test Qualifying children are subject to age, support, residence, and relationship tests — but not an income test.

18. Which credit is partially refundable? A) Lifetime Learning Credit B) American Opportunity Credit C) Foreign Tax Credit D) Saver’s Credit Up to $1,500 of the AOTC can be refundable. 19. Which item is subject to the 3.8% Net Investment Income Tax? A) Wages B) Self-employment income C) Pension income D) Interest income for high-income taxpayers The NIIT applies to unearned investment income above threshold amounts. 20. Which income is excluded from gross income? A) Prizes B) Gambling winnings C) Life insurance proceeds received by beneficiary D) Cancellation of debt (not qualified) Life insurance death benefits are excluded from gross income. 21. Which is NOT a requirement to claim the standard deduction? A) Must not itemize B) Must not be claimed as a dependent on another return

C) Must have eligible filing status D) Must meet filing thresholds If claimed as a dependent, a taxpayer may have a limited standard deduction but not be completely disqualified.

22. Which of these is a nonrefundable tax credit? A) Earned Income Tax Credit B) Lifetime Learning Credit C) Additional Child Tax Credit D) Premium Tax Credit The LLC offsets tax liability but is not refundable. 23. A passive activity loss may generally be deducted: A) In full against active income B) Only against passive income C) Against portfolio income D) Against wages Passive activity losses can offset only passive income. 24. Which is true about moving expenses for 2022? A) Deductible for all employees B) Deductible for self-employed taxpayers C) Deductible only for active-duty military D) Fully deductible above-the-line Moving expenses are suspended except for active-duty military moving under orders.

D) Real estate taxes Up to $300 for educator expenses is deductible for AGI.

29. Which is NOT deductible? A) Gambling losses up to gambling winnings B) Business expenses C) Fines and penalties D) State income tax Fines and penalties are never deductible. 30. Which is true about the Qualified Business Income (QBI) deduction? A) Available to all C corporations B) Available to eligible pass-through entities C) Limited to wages only D) Not available to sole proprietors QBI is for pass-throughs like sole proprietors, partnerships, S corps. 31. Which is true about hobby losses? A) Deductible as business expenses B) May offset any income C) Reported on Schedule C D) Income must be reported, expenses are not deductible for 2022 Hobby losses are disallowed as deductions under TCJA. 32. The alternative minimum tax (AMT) primarily affects: A) Low-income taxpayers B) Retirees C) Higher-income taxpayers with preference items

D) Students AMT hits higher-income taxpayers with large deductions or certain credits.

33. Which is a Schedule C expense? A) Personal meals B) Advertising for business C) Personal legal fees D) Commuting to work Business advertising is deductible on Schedule C. 34. Which is not reported on Schedule E? A) Rental income B) Royalty income C) Wages D) Partnership income Wages are reported on Form 1040, not Schedule E. 35. Which is subject to capital gains tax treatment? A) Inventory sold B) Sale of stock held for investment C) Depreciation recapture D) Accounts receivable Sale of investment stock is capital gain/loss. 36. Which is NOT a deduction for AGI? A) Student loan interest B) Mortgage interest C) Alimony paid (for divorces before 2019)

C) Only for grad students D) Phased out for all taxpayers Interest on qualified Series EE bonds can be excluded when used for education.

41. Which benefit is NOT excludable? A) Employer-provided health insurance B) Up to $5,250 in education assistance C) Club dues for social purposes D) De minimis fringe benefits Club dues for social activities are taxable. 42. Which penalty is correct for underpayment of estimated tax? A) 10% B) An interest penalty based on short-term federal rate C) 50% D) Flat $ It’s an interest-based penalty calculated on the underpayment amount. 43. Which is true about casualty losses in 2022? A) Fully deductible B) Only deductible for federally declared disasters C) Never deductible D) Deductible on Schedule C only Only disaster losses in federally declared areas are deductible. 44. Which is NOT included in gross income? A) Lottery winnings B) Scholarships for room and board

C) Scholarships for tuition and fees D) Punitive damages Scholarships used for tuition and fees are excluded.

45. Which is subject to backup withholding? A) Wages B) Tax-exempt interest C) Payments where TIN is missing or incorrect D) Gifts Backup withholding applies to certain payments without a valid TIN. 46. Which of these is NOT subject to FICA tax? A) Salary B) Municipal bond interest C) Bonus income D) Tips Interest income is not subject to Social Security/Medicare tax. 47. Which is the correct due date for individual income tax returns (without extension) for 2022? A) March 15 B) May 1 C) April 18 D) December 31 For 2022, the due date was April 18 because April 15 was a holiday. 48. Which is true about penalty for early IRA withdrawal? A) Always 10%

D) May only file single To use the qualifying widow(er) status, the taxpayer must have a dependent child.

52. Which is NOT included in the definition of gross income? A) Rent received B) Farm income C) Child support received D) Prizes Child support is specifically excluded from gross income under IRC rules. 53. Which of these is an above-the-line deduction? A) Mortgage insurance premiums B) Self-employed health insurance premiums C) Medical expenses over 7.5% of AGI D) Real estate taxes Self-employed health insurance premiums are deductible for AGI. 54. Which expense qualifies for the adoption credit? A) Purchase of a house B) Court costs related to the adoption C) Costs for biological child D) Costs for stepchild adoption Qualified adoption expenses include court costs, attorney fees, and travel expenses directly related to the adoption. 55. Which is true about the premium tax credit (PTC)? A) Available for all taxpayers B) Available regardless of income

C) Available for taxpayers with Marketplace coverage D) Available for employer-sponsored insurance The PTC helps pay for Marketplace insurance premiums for qualifying taxpayers.

56. Which of these fringe benefits is taxable? A) Working condition fringe B) Cash award for length of service over $ C) De minimis meal D) Qualified transportation benefit under the limit Length of service awards over the excludable amount are taxable. 57. Which is true about a dependent’s standard deduction? A) They can claim any amount B) They have no standard deduction C) Limited to earned income + $400 (not exceeding regular standard deduction) D) Always equals $12, For 2022, a dependent’s standard deduction is the greater of $1,150 or earned income plus $400, up to $12,950. 58. Which is true about net capital loss for individuals? A) Fully deductible B) Not deductible C) Deductible up to $3,000 per year D) Carryforward not allowed Net capital losses are deductible against ordinary income up to $3,000 ($1, MFS).

D) Charitable contributions Medical expenses are deductible only to the extent they exceed 7.5% of AGI.

63. Which is true about a traditional IRA contribution for a high-income taxpayer? A) Always deductible B) May be nondeductible C) Only for self-employed D) Only for those over age 50 High-income taxpayers with employer plans may have to treat IRA contributions as nondeductible. 64. Which credit does NOT reduce AMT? A) Foreign tax credit B) Child tax credit C) Adoption credit D) Residential energy credit The adoption credit is nonrefundable but does not reduce AMT liability. 65. Which is true about a like-kind exchange for real estate? A) Results in immediate gain recognition B) Defers gain until property is disposed C) Not available after 2017 D) Available for all personal property Section 1031 defers gain until the replacement property is sold. 66. Which is deductible for rental property? A) Personal expenses B) Depreciation expense

C) Vacation expenses unrelated to rental D) Homeowner’s personal utilities Depreciation on rental property is deductible on Schedule E. 6 7. Which is excluded from gross income? A) Gambling winnings B) Partnership guaranteed payments C) Employer-paid health insurance D) Awards for scientific achievement Employer-paid health insurance premiums are generally excluded.

68. Which is true about 529 plan distributions? A) Always taxable B) Excludable if used for qualified education expenses C) Only for K- 12 D) Not allowed for graduate school Qualified distributions from 529 plans are tax-free. 69. Which is true about capital gains rates? A) Ordinary income rates always apply B) Special lower rates may apply C) Always 15% D) Always 20% Long-term capital gains may be taxed at 0%, 15%, or 20% depending on income level. 70. Which expense is NOT deductible for business meals in 2022? A) Meals with clients for business