Chapter 04 – Planning Your Tax Strategy
58. (p. 130) Union dues, fees for tax return preparation, and other miscellaneous expenses are:
59. (p. 130) Which one of the following is most apt to qualify as an itemized deduction?
60. (p. 130) For which of the following types of credit plans is the interest tax deductible?
Chapter 04 – Planning Your Tax Strategy
61. (p. 130) Which one of these investments produces tax-exempt income?
62. (p. 131) Capital gains refer to:
63. (p. 131) A short-term capital gain is profit earned on an investment that is:
Chapter 04 – Planning Your Tax Strategy
64. (p. 132) Which one of these statements correctly applies to a Roth IRA?
65. (p. 113) An itemized deduction of $500 with a 36 percent tax rate would reduce a person’s
taxes by:
66. (p. 131) A traditional IRA, Keogh plan, and 401(k) plan are examples of:
Chapter 04 – Planning Your Tax Strategy
67. (p. 106) John Camey goes into a local department store and purchases a new suit. He pays
$43 in taxes on this purchase. What type of tax is this most likely to be?
68. (p. 106) The state of Oklahoma imposes a tax of $.17 per gallon on gasoline. What type of
tax is this most likely to be?
69. (p. 106) Tim Bridges owns a bass fishing boat. His state imposes an annual 3.25 percent tax
on the current value of this boat. What type of tax is this most likely to be?
Chapter 04 – Planning Your Tax Strategy
70. (p. 107) Drew Davis earns $4,500 per month from his job at Cisco Systems; $900 is withheld
from this amount each month for taxes. What type of tax is this most likely to be?
71. (p. 106) Elizabeth Gleason just died. At the time of her death the total value of her assets was
$150,000. The federal government collected $7,500 in taxes based on this value. What type of
tax is this most likely to be?
72. (p. 128) Mr. and Mrs. Keating want to give their son Dudley a total of $24,000. They each
write him a check for $12,000 so they won’t have to pay any gift tax. This is an example of:
Chapter 04 – Planning Your Tax Strategy
73. (p. 112) Kim Ye is single and earns $40,000 in taxable income. He uses the following tax
rate schedule to calculate the taxes he owes.
Calculate the dollar amount of estimated taxes that Kim owes.
74. (p. 112) Joan Sanchez is single and earns $40,000 in taxable income. She uses the following
tax rate schedule to calculate the taxes she owes.
What is Joan’s marginal tax rate?
Chapter 04 – Planning Your Tax Strategy
75. (p. 112) Al Barkley is single and earns $40,000 in taxable income. He uses the following tax
rate schedule to calculate the taxes he owes.
What is Al’s average tax rate?
76. (p. 109) Alex Bates goes on Jeopardy and earns $875,000 in winnings. What type of income
is this?
Chapter 04 – Planning Your Tax Strategy
77. (p. 109) Randal Ice has adjusted gross income of $32,000. He has medical expenses for the
year of $6000. How much of these expenses can he deduct from adjusted gross income?
78. (p. 109) Haley Thomas has adjusted gross income of $40,000. She paid $3,600 in property
taxes during the year. How much of the tax can she deduct from adjusted gross income?
Chapter 04 – Planning Your Tax Strategy
79. (p. 110) Mike Hansen has adjusted gross income of $28,000. During the year, Mike decided
he needed a larger home. He purchased a home on a golf course in the same town as his first
home. Mike incurred $7,500 in moving expenses. How much of this can he deduct from
adjusted gross income?
80. (p. 109) Maryellen Epplin worked in Poland for part of the year and earned $50,000 while
she was there. This income will not be included in her taxable income for the year. This
represents a tax:
Chapter 04 – Planning Your Tax Strategy
81. (p. 127) Elaine’s Embroidery Emporium which is run out of Elaine’s home is visited by an
IRS agent who wants to verify the office expenses Elaine claims are valid. What type of IRS
audit is this?
82. (p. 130) A allows a taxpayer to put pre-tax dollars into an employer-sponsored program to
cover medical and child care costs.
83. (p. 133) Which one of the following is a retirement plan sponsored by an employer?
Chapter 04 – Planning Your Tax Strategy
84. (p. 133) Which one of the following is a retirement plan that allows a $5,000 annual
contribution with tax-free earnings after five years?
85. (p. 110) The interest paid on which type of loan is not tax deductible?
86. (p. 127) Approximately what percent of tax filers are audited each year?
Chapter 04 – Planning Your Tax Strategy
87. (p. 111) Ms. Nelson is a single mom with three children; Dana is 18 and a high school senior,
Derrick is 20 and a college sophomore, and Tonya is 25 and unemployed. All three children
live at home. How many exemptions can Ms. Nelson claim on her tax return?
88. (p. 113) Many taxpayers with high incomes and high amounts of deductions must pay an
additional tax referred to as the ________________ tax.
89. (p. 114) Not included in the recent tax credits is a/an _______________ tax credit.
Chapter 04 – Planning Your Tax Strategy
90. (p. 129) Thomas Franklin claimed an additional $3,000 in deductions he knowingly knew he
did not qualify for so he could reduce his tax bill. This is referred to as tax:
91. (p. 129) Michael closed on his new home December 31, 2009 instead of January 1, 2010. As
a result, Michael
Chapter 04 – Planning Your Tax Strategy
92. (p. 129) Mary Watson bought 20 shares of stock one and half years ago. She recently sold
her stock making a profit of $1,400. She is in the 28% tax bracket. Her tax on this investment
is:
93. (p. 108-113) How is taxable income computed?
Chapter 04 – Planning Your Tax Strategy
94. (p. 117 – 120) What factors determine whether a taxpayer will use the Form 1040EZ, Form
1040A, or Form 1040?
95. (p. 121-124) Cameron Nelson wants to complete his own federal income tax return. He has
several questions about the tax form to use and what items should be reported as income.
What sources of assistance would you recommend for Cameron?
Chapter 04 – Planning Your Tax Strategy
96. (p. 109) Why would tax-exempt income provide greater short-term financial benefits than
tax-deferred income?
97. (p. 133) What are the advantages of a 401K?
Chapter 04 – Planning Your Tax Strategy
98. (p. 132) Explain the difference between a short-term capital gain and a long-term capital
gain.