Income Tax Fundamentals 2012, 30th ed. - CengageBrain

Licensed to:
1-32 Chapter 1 The Individual Income Tax Return
LO 1.8
LO 1.8
LO 1.8
LO 1.10
15. Jayne purchased General Motors stock 6 years ago for $20,000. In 2011, she sells the
stock for $35,000. What is Jayne’s gain or loss?
a. $15,000 long-term
b. $15,000 short-term
c. $15,000 ordinary
d. $15,000 extraordinary
e. No gain or loss is recognized on this transaction
16. Alexis purchased a rental house 3 years ago for $285,000. Her depreciation to date is
$35,000. Due to a decrease in real estate prices, she sells the house for only $275,000 in
2011. What is her gain or loss for tax purposes?
a. $0
b. $10,000 loss
c. $10,000 gain
d. $35,000 loss
e. $25,000 gain
17. Shannon has a long-term capital loss of $7,000 on the sale of bonds in 2011. His taxable
income without this transaction is $48,000. What is his taxable income considering
this capital loss?
a. $55,000
b. $48,000
c. $45,000
d. $41,000
e. Some other amount
18. Electronically filed tax returns:
a. May not be transmitted from a taxpayer’s home computer
b. Constitute more than 90 percent of the returns filed with the IRS
c. Have error rates similar to paper returns
d. Offer faster refunds than paper returns
GROUP 2:
PROBLEMS
.............................................................................................
LO 1.1 1. List three major purposes the tax system is meant to serve:
a. _______________________________________________________________________
b. _______________________________________________________________________
c. _______________________________________________________________________
LO 1.3 2. Jason and Mary are married taxpayers in 2011. They are both under age 65 and in good
health. For this tax year they have a total of $41,000 in wages and $500 in interest
income. Jason and Mary’s deductions for adjusted gross income amount to $5,000
and their itemized deductions equal $7,950. They claim two exemptions for the year
on their joint tax return.
a. What is the amount of Jason and Mary’s adjusted gross $ ____________
income?
b. What is the amount of their itemized deductions or
$ ____________
standard deduction?
c. What is their 2011 taxable income? $ ____________
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