Bcom Bachelor of Commerce Bachelor of Commerce: Income Tax Laws 2

Question 1

Under the US tax code, which filing status generally results in the lowest tax liability for an eligible taxpayer?

Accepted Answer

Married Filing Jointly

Answer

Married Filing Jointly typically provides the widest tax brackets and most favorable rates, resulting in the lowest overall tax liability for eligible couples.

Question 2

What is the term for the reduction in the value of a tangible business asset over its useful life for tax purposes?

Accepted Answer

Depreciation

Answer

Depreciation is the systematic allocation of a tangible asset's cost over its IRS-prescribed useful life, reducing taxable income each year.

Question 3

A taxpayer sells stock held for 14 months at a $10,000 gain. How is this gain classified for federal income tax purposes?

Accepted Answer

Long-term capital gain

Answer

Assets held more than 12 months qualify as long-term capital gains, taxed at preferential rates of 0%, 15%, or 20% depending on income.

Question 4

Which of the following is NOT a requirement to claim the Earned Income Tax Credit (EITC)?

Accepted Answer

Must own a primary residence

Answer

The EITC has no homeownership requirement; eligibility is based on earned income, filing status, investment income limits, and qualifying children.

Question 5

Under IRC Section 179, what is the primary tax benefit for businesses purchasing qualified property?

Accepted Answer

Immediate expensing of the full cost in the year of purchase

Answer

Section 179 allows businesses to immediately deduct the full cost of qualifying property in the year it is placed in service, subject to annual dollar limits.

Bcom Bachelor of Commerce Practice Test

Bcom Bachelor of Commerce Practice Test

Bcom Bachelor of Commerce Bachelor of Commerce: Income Tax Laws 2