CPA Regulation (REG) : Individual Tax Issues
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Example Questions
Example Question #21 : Individual Tax Issues
Mike and Maggie met at a New Year’s Eve party held December 31, Year 12. They instantly bonded, fell madly in love, and were married at 11:49pm that night. Identify Maggie’s filing status for Year 12.
Head of household
Single
Surviving spouse
Married filing jointly
Married filing jointly
For tax purposes, the taxpayer’s status as either single or married (if filing jointly) for a tax year is dependent upon the taxpayer’s status as of the end of the tax year. Since Maggie was married by the end of the tax year, the only applicable status from the options above is “married filing jointly.”
Example Question #4 : Selecting A Filing Status
Jacob and Sarah are in the process of obtaining a divorce. While not legally separated yet, Jacob has moved out of the house by October of the current year. The couple’s children lived with Sarah in the family home for more than half of the tax year. What filing status can Sarah use to file her current year tax return?
Single
Married filing jointly/separately
Surviving spouse
Head of household
Married filing jointly/separately
The two taxpayers are still married at year-end and can file as either joint or separate.
Example Question #5 : Selecting A Filing Status
Taylor, whose spouse had died during the prior year has not remarried. Taylor maintains a home for the dependent child. What is Taylor’s most advantageous filing status?
Qualifying widower with dependent child
Single
Married filing separately
Head of household
Qualifying widower with dependent child
A qualifying widower is a taxpayer who may use the joint tax return standard deduction and rates for each of two taxable year following the death of a spouse unless he or she remarries.
Example Question #6 : Selecting A Filing Status
Can two taxpayers who were married but lived apart during the year file as married filing jointly?
Yes
Only if they live within the same state
Only if they have dependent children
No
Yes
The criteria for married filing jointly is simply marriage. Distance, children, or any other factor do not play a role. If the couple was legally separated, they would not be able to file married filing jointly either.
Example Question #1 : Taxable Income
The following year-1 annual report was received by Clark from the qualified defined contribution plan provided by Clark's employer:
- Beginning balance: $12,700
- Employer contribution: 600
- Plan earnings: 250
- Ending balance: $13,550
What income must be included in Clark's gross income for year 1?
$600
$850
$0
$250
$0
Clark did not receive the money in the qualified defined contribution plan, and as such will not have to report the income. Depending on the type of defined contribution plan, Clark may have to report benefits received as income, but only after he is eligible for regular distributions from the retirement plan.
Example Question #2 : Taxable Income
With regard to the inclusion of Social Security benefits in gross income, for the Year 18 tax year, which of the following statements is correct?
The Social Security benefits in excess of modified adjusted gross income are included in gross income.
The Social Security benefits in excess of one half the modified adjusted gross income are included in gross income.
Eighty-five percent of the Social Security benefits is the maximum amount of benefits to be included in gross income.
The Social Security benefits in excess of the modified adjusted gross income over a threshold amount are included in gross income.
Eighty-five percent of the Social Security benefits is the maximum amount of benefits to be included in gross income.
Inclusion of Social Security benefits in gross income is largely dependent on the amount and types of other income a taxpayer receives in the year. The result is that these benefits may not be taxed at all, or that at most 85% of benefits will be included in gross income.
Example Question #3 : Taxable Income
Parker was employed for part of the year. Parker received $35,000 of wages, $6,400 from a state unemployment compensation plan, and $2,000 from her former employer’s company paid supplemental unemployment benefit plan. What is the amount of Parker’s gross income?
$37,000
$35,000
$43,400
$41,400
$43,400
Each of these items is included in taxable income. Wages are generally taxable, as are any unemployment benefits received, no matter the source.
Example Question #24 : Individual Tax Issues
A cash basis taxpayer should report gross income:
Only for the year in which income is actually received whether in cash or in property
Only for the year in which income is actually received in cash
For the year in which income is either actually or constructively received whether in cash or in property
For the year in which income is either actually or constructively received in cash only
For the year in which income is either actually or constructively received whether in cash or in property
A cash basis taxpayer should report gross income for the year in which income is either actually or constructively received, whether in cash or in property.
Example Question #25 : Individual Tax Issues
Of the following amounts, which represents an adjustment to AGI for the current tax year?
Alimony paid to a former spouse pursuant to a divorce agreement executed in 2019
Child support paid to a former spouse pursuant to a divorce agreement executed in 2019
Child support paid to a former spouse pursuant to a divorce agreement executed in 2014
Alimony paid to a former spouse pursuant to a divorce agreement executed in 2014
Alimony paid to a former spouse pursuant to a divorce agreement executed in 2014
Alimony paid to a former spouse based on a divorce agreement executed on or before 12/31/18 is an adjustment to gross income.
Example Question #21 : Individual Tax Issues
Of the following, which is an itemized deduction?
Qualified charitable contributions
Expenses related to house maintenance
Expenses related to moving principal residence
Expenses related to educating
Qualified charitable contributions
Qualified charitable contributions are the only itemized deductions listed here.
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