ACC 3410 Final Practice Exam MC

Stephanie and Mitch are married and they file a joint tax return. Mitch received a slightly higher salary than Stephanie did during the year. They both make very high salaries. Which of the following statements is true?

Stephanie and Mitch likely pay a tax marriage penalty.

Assuming the kiddie tax applies, what amount of a child's income is subject to the kiddie tax?

The net unearned income

The Olympians have three children. The kiddie tax applies to unearned income received by which of the following children?

Poseidon is a 20-year-old full-time student who does not support himself.

Which of the following statements regarding FICA taxes is true?

An employee who has two different employers during the year may be entitled to a tax credit for overpaid FICA taxes.

Which of the following suggests that a working taxpayer is an independent contractor rather than an employee?

All of these suggest independent contractor status

Which of the following best describes the deductions independent contractors may claim for valid business expenses?

For AGI deductions

The amount of expenditures eligible for the child and dependent care credit is the least of three amounts. Which of the following is not one of those amounts in 2025?

The dependent's earned income for the year

Which of the following is not true of the lifetime learning credit?

A taxpayer with multiple dependents can claim a credit for each dependent's qualifying expenses.

Which of the following statements regarding credits is correct?

Business credits that are generated in one year but are not utilized in that year may be carried back to the previous year and then forward to future years.

Cheryl is single. In 2025, she reported $100,000 of taxable income, including a long-term capital gain of $5,000. What is her gross tax liability? Note: Round your answer to the nearest whole dollar amount

$16,564

During 2025, Elijah (age 15) received $2,200 from a corporate bond. He also received $600 from a savings account established for him by his parents. Elijah lives with his parents and he is their dependent. What is Elijah’s taxable income?

$1,450

Kristen earned a $25,500 salary as an employee in 2025. How much should her employer have withheld from her paycheck for FICA taxes? Note: Round your answer to the nearest whole dollar amount.

$1,951

Which of the following is not one of the general tax credit categories?

Refundable business

The computation of the alternative minimum tax base begins with regular taxable income. Which of the following is not part of the formula for computing the alternative minimum tax base?

Subtract state income taxes paid

Which of the following statements concerning estimated tax payments and underpayment penalties for individuals is true in 2025?

All of these statements are true.

Frieda is 67 years old and deaf. If Frieda files as a head of household, what amount of standard deduction can she claim in 2025? See standard deduction amounts.

$25,625

Which of the following costs is deductible as an itemized medical expense?

Medical expenses incurred to prevent disease

Which of the following taxes will not qualify as an itemized deduction?

Gasoline excise taxes on personal travel

This year Norma, a single taxpayer, paid $11,200 of real estate taxes on her personal residence and $19,500 of state income taxes. Norma’s modified AGI is $540,000. Which of the following is true?

Norma can deduct $28,000 of the taxes as an itemized deduction.

When taxpayers donate cash and capital gain property to a public charity, the AGI percentage limitation is applied in the following order in 2025:

There is a 60 percent of AGI limit applied to the cash donation and the fair market value of the capital gain donation is subject to the lesser of a 30 percent of AGI limitation or a 50 percent of AGI limitation after subtracting the cash contributions.

Which of the following is a true statement?

A taxpayer who incurs acquisition indebtedness in 2018 may only deduct interest on up to $750,000 of home acquisition indebtedness.

Mary paid $15,000 of interest on her $300,000 acquisition debt for her home (fair market value of $500,000), $4,000 of interest on her $60,000 home-equity debt used to buy a new boat and car, $1,000 of credit card interest, and $3,000 of margin interest for the purchase of stock. Assume that Mary has $10,000 of interest income this year and no investment expenses. How much of the interest expense may she deduct this year?

$18,000

Which of the following is a true statement?

All of the choices are true.

John is a head of household with a dependent son, Mike, who is a full-time student. This year John made the following expenditures related to Mike's support: Auto insurance premiums $ 1,700

Room and board at Mike's school $2,200

Health insurance premiums $600

Travel (to and from school) $350

What amount can John include in his itemized deductions?

$600 included in John's medical expenses

This year Lisa paid $1,543 in federal gift taxes on a gratuitous transfer to her nephew. Lisa lives in Texas and does not pay any state or local income taxes. Which of the following is a true statement?

Lisa cannot deduct federal gift taxes.

Janet fell on the ice and injured her hip this winter. As a result she paid $3,000 for a visit to the hospital emergency room and $750 for follow-up visits with her doctor. While she recuperated, Janet paid $500 for prescription medicine and $600 to a therapist for rehabilitation. Insurance reimbursed Janet $1,200 for these expenses. What is the amount of Janet's deductible medical expense before considering any AGI limitations?

$3,650

Use the information below to answer questions 27 and 28:

Nancy (age 50) files single and reports AGI of $40,000. This year she has incurred the following medical expenses:

Dentist charges $ 90

Physician's fees $2,800

Cosmetic surgery $400

Cost of eyeglasses $250

Hospital charges $1,330

Prescription drugs $240

Over-the-counter drugs $75

Medical insurance premiums $1,200

Calculate the amount of medical expenses that will be included with Nancy’s other itemized deductions. Nancy can deduct $__________, after any AGI limitation is considered:

$2,910

Use the information below to answer questions 27 and 28:

Nancy (age 50) files single and reports AGI of $40,000. This year she has incurred the following medical expenses:

Dentist charges $ 90

Physician's fees $2,800

Cosmetic surgery $400

Cost of eyeglasses $250

Hospital charges $1,330

Prescription drugs $240

Over-the-counter drugs $75

Medical insurance premiums $1,200

For itemized deductions, the deduction for medical expenses is limited to the amount of unreimbursed medical expenses paid during the year reduced by __________ of the taxpayer’s AGI.

7.5%

Use the information below to answer questions 29 and 30:

Peter has AGI of $70,000 and has made the following payments this tax year:

State income tax withholding $ 1,900

State income tax estimated payments $850

Federal income tax withholding $7,100

Social Security tax withheld from wages $4,800

State excise tax on liquor $400

State inheritance tax $1,200

County real estate tax $790

School district tax on realty $510

Calculate the amount of taxes that Peter can include with his itemized deductions. Peter can deduct $__________, after any limitation is considered:

$4,050

Use the information below to answer questions 29 and 30:

Peter has AGI of $70,000 and has made the following payments this tax year:

State income tax withholding $ 1,900

State income tax estimated payments $850

Federal income tax withholding $7,100

Social Security tax withheld from wages $4,800

State excise tax on liquor $400

State inheritance tax $1,200

County real estate tax $790

School district tax on realty $510

When calculating itemized deductions in 2025, the total state and local taxes cap is reduced by 30% of the excess of the taxpayer’s modified AGI over the phase-out threshold. However, the cap is not reduced below $____________. (The amount is different if you are married filing separately).

$10,000