IRS Taxation for Individuals 2

Question 1

A single taxpayer has $80,000 in wages and $5,000 in qualified dividends. How are the qualified dividends taxed for a taxpayer in the 22% ordinary income bracket?

Accepted Answer

At 15% preferential rate

Answer

At 22% ordinary income rate

Answer

At 0% because they are exempt

Answer

At 20% because income exceeds $80,000

Question 2

Which of the following expenses is deductible as a medical expense on Schedule A?

Accepted Answer

Prescription eyeglasses and contact lenses

Answer

Gym membership for general fitness

Answer

Cosmetic surgery to improve appearance

Answer

Teeth whitening procedure

Question 3

A taxpayer sells their primary residence after living there for 18 months. What is the maximum capital gains exclusion available?

Accepted Answer

$125,000 — prorated for time lived there

Answer

$0 — no exclusion applies

Answer

$250,000 — prorated for partial ownership

Answer

$500,000 — full exclusion applies

Question 4

What is the 'kiddie tax' and when does it apply?

Accepted Answer

A tax that applies a parent's rate to a child's unearned income above a threshold

Answer

A tax on children who earn wages under age 14

Answer

A penalty for claiming a child as a dependent incorrectly

Answer

A flat 10% tax on any income earned by a dependent under 19

Question 5

A married couple filing jointly has $300,000 in net investment income and $250,000 in modified AGI. What additional tax may apply?

Accepted Answer

3.8% Net Investment Income Tax on the lesser of NII or MAGI over threshold

Answer

0.9% Additional Medicare Tax on wages

Answer

3.8% Net Investment Income Tax on all investment income

Answer

No additional tax applies below $400,000 MAGI

Question 6

Which of the following is NOT a qualifying relative for dependency purposes?

Accepted Answer

A sibling who is age 25, not a student, and earns $8,000

Answer

A cousin who lives with the taxpayer all year and earns $3,000

Answer

A parent who does not live with the taxpayer but receives more than half their support

Answer

A nephew who lives with the taxpayer all year and earns $2,000

Question 7

A taxpayer contributes $6,500 to a traditional IRA but is covered by a workplace retirement plan and has AGI of $85,000 (single). What portion is deductible?

Accepted Answer

Not deductible — income exceeds phaseout range

Answer

Full $6,500 is deductible

Answer

Partially deductible — phaseout applies

Answer

$3,250 — always 50% deductible