Question

1.         Regarding the tax formula applicable to individual taxpayers, which of the following statements is correct?

a.         In arriving at AGI, a taxpayer may claim deductions for AGI or deductions from AGI, but not both.

b.         In arriving at taxable income, a taxpayer may claim deductions for AGI or deductions from AGI, but not both.

c.         If a taxpayer claims deductions for AGI, the standard deduction is not available.

d.         In arriving at taxable income, a taxpayer may claim itemized deductions or the standard deduction, but not both.

e.         In arriving at taxable income, a taxpayer may claim deductions for AGI or the standard deduction, but not both.

2.         Regarding the tax formula and its relationship to the 2019 Form 1040, which of the following statements, if any, is correct?

a.         Most exclusions from gross income are reported on page 2 of Form 1040.

b.         An above-the-line deduction refers to a deduction from AGI.

c.         A deduction reported on Schedule A is a deduction for AGI.

d.         A taxpayer's AGI amount appears both at the bottom of page 1 and at the top of page 2 of Form 1040.

e.         The Form 1040 line labeled “adjustments to income from Schedule 1, line 22” reports deductions for AGI. .

3.         Which, if any, of these statements regarding the standard deduction is correct?

a.         Taxpayers who qualify for additional standard deductions may not take the basic standard deduction.

b.         The standard deduction is not available to taxpayers who choose to deduct their personal and dependency exemptions.

c.         The standard deduction may be taken as a deduction from AGI only if no dependency exemptions are taken by the taxpayer.

d.         The basic standard deduction and the additional standard deduction amounts are indexed for inflation.

e.         Neither the basic standard deduction amount nor the additional standard deduction amount is indexed for inflation.

4.         During 2019, Marvin had the following transactions:

Salary                                                                              $50,000

Bank loan (proceeds used to buy personal auto)              10,000

Child support paid                                                            12,000

Alimony received from a 2017 divorce                              6,000

Gift from aunt                                                                   20,000

Marvin’s AGI is:

a.         $32,000.

b.         $38,000.

c.         $44,000.

d.         $56,000.

e.         $62,000.

5.         Sylvia, age 17, is claimed by her parents as a dependent for 2019. During 2019, she had wages from a part-time job of $2,000, capital gains income of $4,200, and no other income or deductions (except the standard deduction). Sylvia’s taxable income is:

a.         $6,200 – $2,350 = $3,850.

b.         $6,200 – $4,400 = $1,800.

c.         $6,200 – $4,550 = $1,650.

d.         $6,200 – $350 = $5,850.

e.         $6,200 – $1,050 = $5,150.

Answer 1

1.

d. In arriving at taxable income, a taxpayer may claim itemized deductions or the standard deduction, but not both.

2.

c.   A deduction reported on Schedule A is a deduction for AGI.

3.

e.  Neither the basic standard deduction amount nor the additional standard deduction amount is indexed for inflation.

4.

c. 44000

Calcualation = 50000+6000-12000= 44000

Reason : Gift and Bank Loan are not included in calculation of AGI\

5.

a. $6,200 - $ 2350 = $3850

Reason : Standard Deduction for dependent is higher of $1100 or Income Earned plus $350