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CH 01 The Individual Income Tax Return
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- The US federal tax law's sole purpose is to raise revenue.
- True
- False
ANSWER: False
- Which of the following is not a goal of the tax law?
- Encouraging certain social goals such as contributions to charity.
- Encouraging certain economic goals such as a thriving business community.
- Encouraging smaller families.
- Raising revenue to operate the government.
- None of these are goals of the tax law.
ANSWER: c
- Which one of the following provisions was passed by Congress to meet a social goal of the tax law?
- The deduction for job hunting expenses.
- The charitable deduction.
- The moving expense deduction for adjusted gross income.
- The deduction for soil and water conservation costs available to farmers.
- None of these.
ANSWER: b
- Which of the following is not a goal of the tax law?
- Ensuring that all persons pay the same amount of tax.
- Economic goals such as reduction in unemployment.
- Social goals such as lowering the cost of adoption.
- Raise adequate revenue to operate the government.
ANSWER: a
- List two general objectives of the tax code.
ANSWER: The tax code promotes social goals, economic goals, and raising revenue.
- Mark a “Yes” to each of the following if it is an objective of the tax code. Otherwise mark with a “No.”
- To provide a car to each American.
- To promote giving to charities.
- To encourage taxpayers to send their children to college.
- To raise money to operate the government.
- To promote the use of solar energy.
ANSWER: a. No
- Yes
- Yes
- Yes
- Yes
- A corporation is a reporting entity but not a tax-paying entity.
- True
- False
(Income Tax Fundamentals 2022, 40e Gerald Whittenburg, Martha Altus-Buller, Steven Gill) (Test Bank Latest Edition 2023-24, Grade A+, 100% Verified) 1 / 4
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CH 01 The Individual Income Tax Return
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ANSWER: False
- Partnership capital gains and losses are allocated separately to each of the partners.
- True
- False
ANSWER: True
- In 2021, Wesley has a fairly simple tax situation with moderate wage income and a modest amount of interest income.
Wesley, age 45, wishes to use the easiest possible tax form. He may file:
- Form 1040EZ
- Form 1040A
- Form 1040
- Form 1065
- None of these
ANSWER: c
- Which of the following forms may be filed by individual taxpayers?
- Form 1040
- Form 1041
- Form 1065
- Form 1120
- None of these
ANSWER: a
11. Partnerships:
- Are not taxable entities.
- Are taxed in the same manner as individuals.
- File tax returns on Form 1120.
- File tax returns on Form 1041.
ANSWER: a
- Which of the following is correct?
- An individual is a reporting entity but not a taxable entity.
- A partnership is a taxable entity and a reporting entity.
- A corporation is a reporting entity but not a taxable entity.
- A partnership is a reporting entity but not a taxable entity.
ANSWER: d
13. In 2021, Schedule 1 of Form 1040 is used to report:
- Salary income.
- Capital gains and losses.
- Withholding on wages.
- Unemployment compensation.
ANSWER: d
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CH 01 The Individual Income Tax Return
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14. Partnership income is reported on:
- Form 1040PTR.
- Form 1120S.
- Form 1040X.
- Form 1065.
ANSWER: d
- In 2021, depending on the amounts of income and other tax information, some individuals may report their income on:
- Form 1040A.
- Form 1065.
- Form 1120.
- Form 1041.
- None of these.
ANSWER: e
- Which of the following is not considered one of the five basic taxable or reporting entities?
- Partnership
- Corporation
- Portfolio
- Individual
- Trust
ANSWER: c
- Mark each of the following as a taxable entity, a reporting entity, or both:
- Individuals
- Corporations
- Partnerships
ANSWER: a. Taxable and reporting entity
- Taxable and reporting entity
- Reporting entity
- List if a form is used for an individual, a corporation, or a partnership tax return.
- Form 1065
- Schedule A, Itemized Deductions
- Form 1040
- Form 1120
- Schedule B, Interest and Dividends
ANSWER: a. Partnership
- Individual
- Individual
- Corporation
- Individual
- Distinguish between reporting entities and taxable entities and give examples of each.
ANSWER: A partnership is an example of a reporting entity. It pays no tax but must report partnership income or loss and the allocation of income or loss to partners. Individuals, corporations, estates, and certain trusts are 3 / 4
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CH 01 The Individual Income Tax Return
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examples of taxable entities whose income is subject to federal income taxation.
- Married taxpayers may double their standard deduction amount by filing separate returns.
- True
- False
ANSWER: False
- An item is not included in gross income unless the tax law specifies that the item is subject to taxation.
- True
- False
ANSWER: False
- For taxpayers who do not itemize deductions, the standard deduction amount is subtracted from the taxpayer's adjusted
- True
- False
gross income.
ANSWER: True
- An individual is a head of household. What is her 2021 standard deduction?
- $12,550
- $25,100
- $18,800
- $18,650
- None of these
ANSWER: c
- Eugene and Velma are married. For 2021, Eugene earned $25,000 and Velma earned $30,000. They have decided to
- $10,800
- $18,000
- $12,600
- $21,000
- None of these
file separate returns. They have no deductions for adjusted gross income. Eugene's itemized deductions are $14,200 and Velma's are $4,000. Assuming Eugene and Velma do not live in a community property state and Eugene deducts the greater of the standard deduction or itemized deductions, what is Eugene's taxable income?
ANSWER: a
- Oscar and Mary have no dependents and file a joint income tax return for 2021. They have adjusted gross income (all
- $115,200
- $93,600
- $102,000
- $110,000
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wages) of $140,000 and itemized deductions of $30,000. What is the amount of taxable income that Oscar and Mary must report on their 2021 income tax return?
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