Test Bank For Income Tax Fundamentals 2016 34th Edition

Test Bank For Income Tax Fundamentals 2016 34th Edition

Chapter 6 — Credits and Special Taxes

1. What would reduce income taxes more: a $100 tax credit or a $100 tax deduction?

ANSWER:   Tax credits reduce taxes more than deductions since credits are subtracted directly from the income tax. Deductions are subtracted from income before the income tax is calculated and therefore reduce taxes only by the tax rate (percentage) in effect.

POINTS:   1

DIFFICULTY:   Moderate

QUESTION TYPE:   Essay

HAS VARIABLES:   False

LEARNING OBJECTIVES:   ITF.WABG.16.LO:6-01 – LO:6-01

NATIONAL STANDARDS:   United States – BUSPROG: Analytic

STATE STANDARDS:   United States – AK – AICPA: FN-Reporting

KEYWORDS:   Bloom’s: Comprehension

2. The child tax credit is not available for children ages 17 and older.

  a.  True

  b.  False

ANSWER:   True

POINTS:   1

DIFFICULTY:   Easy

QUESTION TYPE:   True / False

HAS VARIABLES:   False

LEARNING OBJECTIVES:   ITF.WABG.16.LO:6-01 – LO:6-01

NATIONAL STANDARDS:   United States – BUSPROG: Analytic

STATE STANDARDS:   United States – AK – AICPA: FN-Reporting

KEYWORDS:   Bloom’s: Knowledge

3. The child tax credit is $1,000 per qualifying child unless it is phased out due to higher levels of parental income.

  a.  True

  b.  False

ANSWER:   True

POINTS:   1

DIFFICULTY:   Easy

QUESTION TYPE:   True / False

HAS VARIABLES:   False

LEARNING OBJECTIVES:   ITF.WABG.16.LO:6-01 – LO:6-01

NATIONAL STANDARDS:   United States – BUSPROG: Analytic

STATE STANDARDS:   United States – AK – AICPA: FN-Reporting

KEYWORDS:   Bloom’s: Knowledge

4. Denice is divorced and files a single tax return claiming her two children, ages 7 and 9, as dependents. Her AGI for 2015 is $81,500. Denice’s child tax credit for 2015 is:

  a.  $0

  b.  $350

  c.  $1,000

  d.  $1,650

  e.  $2,000

ANSWER:   d

RATIONALE:   (2 × $1,000) – [($81,500 – $75,000) / $1,000 rounded up to the nearest whole number × $50]

POINTS:   1

DIFFICULTY:   Moderate

QUESTION TYPE:   Multiple Choice

HAS VARIABLES:   False

LEARNING OBJECTIVES:   ITF.WABG.16.LO:6-01 – LO:6-01

NATIONAL STANDARDS:   United States – BUSPROG: Analytic

STATE STANDARDS:   United States – AK – AICPA: FN-Reporting

KEYWORDS:   Bloom’s: Comprehension

5. Curly and Rita are married, file a joint return, and have two dependent children, ages 11 and 13. Their AGI is $117,000. By how much is their child credit reduced in 2015?

  a.  $0

  b.  $300

  c.  $350

  d.  $700

  e.  $7,000

ANSWER:   c

RATIONALE:   ($117,000 – $110,000) / $1,000 rounded up to the nearest whole number × $50

POINTS:   1

DIFFICULTY:   Challlenging

QUESTION TYPE:   Multiple Choice

HAS VARIABLES:   False

LEARNING OBJECTIVES:   ITF.WABG.16.LO:6-01 – LO:6-01

NATIONAL STANDARDS:   United States – BUSPROG: Analytic

STATE STANDARDS:   United States – AK – AICPA: FN-Reporting

KEYWORDS:   Bloom’s: Comprehension