1. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Comprehensive Volume 1 Chapter 3 Computing the Tax

2. C3-2 Responder Question TRUE/FALSE As used in the income tax formula, gross income would not include the receipt of a loan the taxpayer obtained from a bank.

3. C3-3 Responder Question TRUE/FALSE As used in the income tax formula, gross income would not include the receipt of a loan the taxpayer obtained from a bank. ANS: T Borrowing money does not result in gross income.

4. C3-4 Responder Question For the 2012 tax year, Grandpa is single, blind, and age 65. He paid $750 in real estate property taxes and has no other deductions. What is his Standard Deduction?

5. C3-5 Responder Question For the 2012 tax year, Grandpa is single, blind, and age 65. He paid $750 in real estate property taxes and has no other deductions. What is his Standard Deduction? SD = $5,950 (BSD) + $1,450 (ASD) + $1,450 (ASD) = $8,850

6. C3-6 Responder Question TRUE/FALSE Darren, age 20 and not disabled, earns $4,500 during 2012. Darren’s parents cannot claim him as a dependent unless he is a full-time student.

7. C3-7 Responder Question TRUE/FALSE Darren, age 20 and not disabled, earns $4,500 during 2012. Darren’s parents cannot claim him as a dependent unless he is a full-time student. ANS: T Being age 20, Darren cannot be a qualifying child unless he is a full-time student. As a qualifying child, he is exempt from the gross income test.

8. C3-8 Responder Question For the 2012 tax year, Homer & Marge are married filing jointly with 3 dependents. Their AGI is $350,000. In whole dollars, what is the amount of their exemption?

9. C3-9 Responder Question For the 2012 tax year, Homer & Marge are married filing jointly with 3 dependents. Their AGI is $350,000. In whole dollars, what is the amount of their exemption? $19,000 = $3,800 x 5

10. C3-10 Responder Question TRUE/FALSE Surviving spouse filing status begins in the year in which the deceased spouse died.

11. C3-11 Responder Question TRUE/FALSE Surviving spouse filing status begins in the year in which the deceased spouse died. ANS: F Surviving spouse filing status begins in the year following the year of death. The surviving taxpayer files MFJ or MFS in the year in which the deceased spouse died.

12. C3-12 Responder Question TRUE/FALSE Warren sold his personal use automobile for a loss of $9,000. He also sold a personal coin collection for a gain of $10,000. As a result of these sales, $1,000 is subject to income tax.

13. C3-13 Responder Question TRUE/FALSE Warren sold his personal use automobile for a loss of $9,000. He also sold a personal coin collection for a gain of $10,000. As a result of these sales, $1,000 is subject to income tax. ANS: F Warren must recognize a capital gain of $10,000 on the sale of the coin collection. The $9,000 loss on the sale of the personal use automobile is nondeductible.

14. © 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. 14 If you have any comments or suggestions concerning this PowerPoint Presentation for South-Western Federal Taxation, please contact: Dr. Donald R. Trippeer, CPA trippedr@oneonta.edu SUNY Oneonta