ACC 547 Final Exam MCQ 1) A family with $45,000 in assets and $22,000 of liabilities would have a net worth of A. $67,000 B. $45,000 C. $22,000 D. $23,000 2) A budget deficit would result when a person's or family's A. assets exceed liabilities B. net worth decreases C. actual expenses are greater than planned expenses D. actual expenses are less than planned expenses 3) The payment items that should be budgeted first are A. unplanned living expenses B. fixed expenses C. investment funds D. variable expenses 4) Which of the following statements regarding tax credits is true? A. None of the answer choices are correct. B. Tax credits reduce taxable income dollar for dollar. C. Tax credits reduce taxes payable dollar for dollar. D. Tax credits provide a greater tax benefit the greater the taxpayer's marginal tax rate. 5) The tax base for an individual tax return is A. adjusted gross income minus from AGI deductions B. realized income from whatever source derived C. adjusted gross income D. gross income 6) Which of the following statements regarding exemptions is correct? A. Taxpayers subtract exemption deductions from adjusted gross income to determine taxable income. B. Personal exemptions are more valuable than dependency exemptions. C. Exemption amounts are considered to be for AGI deductions. D. Taxpayers filing a married filing jointly return are limited to two exemptions on their tax returns. 7) Which of the following has the lowest authoritative weight? A. Interpretive regulation B. Legislative regulation C. Revenue ruling D. Private letter ruling 8) Which of the following has the highest authoritative weight? A. Tax article B. Text book C. Revenue ruling D. Private letter ruling 9) Jaime recently found a "favorable" trial level court opinion directly on point for her tax question. Which trial level court would he prefer to have issued the opinion? A. Divorce Court B. District Court C. Tax Court D. Circuit Court 10) Sam saved diligently for his college education by putting part of his pay into U.S. Series EE saving bonds. Sam purchased the bonds for $6,500, and this year he redeemed the bonds for $7,200. He has no other income this year. What amount must Sam include in his gross income? A. $700 unless Sam uses the proceeds to pay for his college tuition and fees B. $6,500 C. $7,200 D. A maximum of $350 if Sam uses the proceeds to pay for his college tuition and fees 11 ) Jill currently lives in the suburbs and commutes 25 miles to her office in downtown Freeport. She is considering quitting her current job to look for new employment in the downtown. Which of the following statements best describes how Jill can satisfy the distance test for deducting moving expenses if she accepts a new job in downtown Freeport? A. Jill cannot satisfy the distance test if she accepts a job in downtown Freeport. B. Jill must move 25 miles east from downtown Freeport. C. Jill must move at least 25 miles further away from downtown Freeport. D. Jill need not move her residence because she is starting a new job. 12) Congress allows self - employed taxpayers to deduct the cost of health insurance above the line (for AGI) because A. health insurance premiums cannot be deducted otherwise B. self - employed taxpayers need an alternate mechanism for reducing the cost of health care C. employers are allowed to deduct social security (FICA) taxes as a business expense D. this deduction provides a measure of equity between employees and the self - employed 13) Jim was in an auto accident this year. Jim paid $2,450 to repair his car after the accident, and his insurance only reimbursed him $400. Jim bought his car several years ago for $15,000. What casualty loss deduction from this accident can Jim combine with his other casualty losses in computing his itemized deductions? A. $12,550 B. $2,050 C. $2,450 D. $1,550 14) Rhianna and Jay are married filing jointly in 2009. They have six children for whom they may claim the child tax credit. Their AGI was $123,440. What amount of child tax credit may they claim on their 2009 tax return? A. $4,000 B. $6,000 C. $5,300 D. $12,000 15) Which of the following is a miscellaneous itemized deduction that is not subject to the 2 percent of AGI floor? A. Tax preparation fees B. Fees for investment advice C. Gambling losses to the extent of gambling winnings D. Employee business expenses 16) Beth's business purchased only one asset during the current year. It placed in service machinery (7 - year property) on December 1 with a basis of $50,000. Calculate the maximum depreciation expense (ignoring Section 179 or bonus expensing): A. $10,000 B. $2,500 C. $1,785 D. $7,145 17) Bateman Corporation sold an office building that it used in its business for $800,000. Bateman bought the building ten years ago for $600,000 and has claimed $200,000 of depreciation expense. What is the amount and character of Bateman's gain or loss? A. $400,000 capital gain