CHAPTER 1 THE INDIVIDUAL INCOME TAX RETURN Group 1 – Multiple Choice Questions 1-1 1. D The income tax includes elements of social and economic policy (LO 1.1) 2. C The income tax was authorized by the 16th Amendment in 1913 (LO 1.1) 3. C The 1040A and 1040-EZ no longer exist and the 1120 is for corporations (LO 1.2) 4. D Partnerships use Form 1065 to report income tax information. A partner will report their share of income from a part- nership on a Form1040 (LO 1.2) 5. D Capital gains and losses are reported directly on the face of the Form 1040 (from Schedule D) (LO 1.2) 6. D A partnership is not generally a tax-paying entity (LO 1.2) 7. C Student loan interest is a for AGI deduction. The other responses are all itemized (from AGI) deductions (LO 1.3) 8. B The deduction for IRA contributions is a for AGI deduction (LO 1.3) 9. D $98,000 – $13,000 (standard deduction is less than itemized deductions) (LO 1.3) 10. D For AGI adjustments are deducted to get to AGI (LO 1.3) 11. B The larger of the two may be deducted (LO 1.3) 12. A An exclusion reduces gross income (LO 1.3) 13. B Filing thresholds generally are the same as the standard deduction amount (LO 1.4) 14. D Ben’s income would need to exceed the standard deduction to require filing a tax return (LO 1.4) 15. D $25,900 + $1,400 (LO 1.4) 16. C Single dependent over 65 and blind thresh- old is $4,500 for unearned income (LO 1.4) 17. C Joan qualifies as either single or head of household; however, head of household is more advantageous (LO 1.5) 18. D Although Dorothy does not live with Glenda, since Dorothy is a parent that Glenda supports, Glenda may file as head of household (LO 1.5) 19. D Taxpayer may file married filing jointly in year of spouse’s death (LO 1.5) 20. C Surviving spouse is preferred to head of household (LO 1.5) 21. E Either Margaret or her sister (but not both) may claim the mother as a dependent under a multiple support agreement (LO 1.6) 22. D The daughter fails the age test to be a qualifying child and she fails the gross income test ($4,400 in 2022) to be a qualifying relative (LO 1.6) 23. D The child tax credit in 2022 is $2,000 (LO 1.6) 24. B The child tax credit for the 13-year-old child is $2,000. The mother does not meet the support test and cannot be claimed (LO 1.6) 25. B Must be age 16 or under for child tax credit (LO 1.6) 26. A Head of household standard deduction plus additional standard deduction for age 65 ($19,400 + $1,750) (LO 1.7) 27. B Taxpayers age 65 or older are eligible for an additional standard deduction amount (LO 1.7) 28. B Taxpayers that are blind are eligible for an additional standard deduction amount (LO 1.7) 29. D Earned income plus $400 (LO 1.7) 30. E Standard deduction may not exceed typical amount (LO 1.7) 31. D Business inventory is not considered a capital asset (LO 1.8) 32. A Gain of $15,000 ($25,000 amount realized less $10,000 adjusted basis) has been held for more than 12 months and is long-term (LO 1.8) 33. C $10,000 = $240,000 – ($270,000 – $40,000) (LO 1.8) 34. A $43,000 – $3,000. Net capital losses of up to $3,000 may be deducted from ordinary income for individual taxpayers (LO 1.8) 35. C Line 7 is capital gain or (loss) (LO 1.9) 36. B Preparers must get a signed authorization to e-file from the taxpayer. (LO 1.10) 37. B About 90% of returns are filed electronically (LO 1.10)