The lifetime learning credit can be used toward the cost of any course of instruction to acquire or improve a taxpayer's job skills, no matter the age of the taxpayer. True or False True False
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- Deductions (Obj. 3) Use the knowledge you have acquired from Chapters 1 through 6 to identify the following expenditures as (A) deductible for AGI (B) deductible from AGI or (C) not deductible. Ignore any AGI limitations. A Purchase of uniforms for work suitable for street wear B Homeowner’s insurance on the taxpayer’s main home C Union Dues paid by a steelworker D Unreimbursed employee business travel expense E Mortgage interest on rental property F Unreimbursed storm damage to trees in main home’s yard in federally-declared disaster area G Loss on sale of the taxpayer’s personal car not in federally declared disaster area H Repairs to friend’s car for damage caused when taxpayer’s car hit friend’s car-Which of the following should not be claimed as deductions from gross income? * interest payment on loans for the purchase of machinery and equipment used inbusiness. salaries and bonuses paid to employees. discounts given to senior citizens on certain goods and services. advertising expense to maintain some form of goodwill for the taxpayer’s business.The use of the earned income credit could result in a taxpayer receiving a refund even though the taxpayer has not paid any income taxes.TrueFalse
- Which of the following is a true statement? Multiple Choice Rental expenses are deducted for AGI but all other business expenses must be itemized. To deduct expenses associated with any profit motivated activity taxpayers must maintain a high level of involvement or effort in the activity throughout the entire tax year. Business activities cannot require a relatively high level of involvement or effort from the taxpayer. Congress allows self-employed taxpayers to deduct the employer portion of their self-employment tax for AGI. All of the choices are true.What is the maximum investment income a taxpayer is allowed to have and still be allowed to claim the earned income credit?$ Why is there an investment income limit in the tax law regarding the credit? The earned income credit is meant to assistTheme: AGI Examine the case below and do the following:1.Indicates the income items that are part of the gross income.2.Indicates the salary exclusions.3.Identify the deductions to which the taxpayer is entitled to calculate the adjusted gross income.4.Calculate adjusted gross income.5.Indicates the status that the taxpayer must file. Case 3 Carmelo Báez is a veteran, retired and receives a pension of $40,000 a year. In addition, he hit the lotto and received a prize of $15,000. He is married to Josefa Martinez, who is also retired and receives a pension of $25,000 a year. They both own a clothing business from which they earn $50,000 a year. They also receive interest from the bank on $3,000 and dividends on a $10,000 investment in a business.
- True or False Points paid in connection with the purchase of a second residence may be deducted in the year paid. Answer: Points paid to refinance a mortgage on a principal residence are fully deductible in the year paid. Answer: If an employee incurs travel expenditures and is fully reimbursed by the employer, neither the reimbursement nor the deduction is reported on the employeeʹs tax return if reporting is pursuant to an accountable plan. Answer: answer all 3Which of the followings is included in taxpayer’s gross income (i.e., taxable)? a.Compensatory damage payments received from physical injury by accident caused by other party. b.Punitive damage payments received. c.Accident and health insurance payments received as loss of income under the policy purchased by the taxpayer. d.Qualified employee discount up to the gross profit percentage for goods. It is nondiscriminatory and employees work for the line of business in which the goods are being sold. e. Employee’s salary during the year, which is contributed to employee’s qualified pension plan.Ac. Which of the following statements regarding the home office deduction is true? In order to qualify for the deduction, a portion of the taxpayer's home must be used regularly and exclusively to meet with clients or customers. A home office deduction is not allowed for using the home office for administrative or management activities only. The home office deduction is limited to the taxable income of the business before the deduction. A depreciation deduction is not allowed for a home office.
- Which of the following statement is true? A. Lifetime learning tax credit is available for each qualified student including taxpayers and dependents. B. Tax credits reduces a taxpayer’s taxable income dollar for dollar. C. The child tax credit is subject to phase-out based on the taxpayer’s AGI. D. To qualify for the earned income credit, the taxpayer must have a qualified dependent. E. The American opportunity credit is available only for those students who are in their first or second year of post-secondary education.The cost of educational assistance extended by an employer to the dependents of an employee shall be treated as taxable fringe benefits if the assistance was provided through a competitive scheme under the scholarship program of the company. TRUE OR FALSE?The QBI deduction will reduce both the income tax and self-employment taxes owed by a self-employed individual. True False