Tax Segment 4 - Tax Law Updates

1. The maximum recovery rebate credit is $600 ($1,200 if married filing jointly) plus $300 for each qualifying child. You may be able to take this credit if                                                                  

A. You did not get an economic stimulus payment.
B. Your economic stimulus payment was less than $600 ($1,200 if MFJ for 2007) plus $300 for each qualifying child you had for 2008.
C. Either A or B above.
D. You received an economic stimulus payment in 2007.

2. New rules apply to losses of personal use property attributable to federal declared disasters declared in tax years beginning after 2007 and that occurred before 2010. A federally declared disaster is   

A. Any disaster determined by the President of the United States to warrant assistance by the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Acts.
B. Any disaster determined by the Governor of the state where the disaster happened.
C. Any disaster determined by the county in which the disaster happened.
D. Any of the above.

3. If you claimed a casualty or theft loss deduction and in a later year you received more reimbursement than you expected, you   

A. Re-compute the tax for the year in which you claimed the deduction.
B. Must include the reimbursement in your income for the year in which it was received only to the extent the original deduction reduced your tax for the earlier year.
C. Must file an amended income tax return (Form 1040X) for the tax year in which you claimed the deduction.
D. None of the above.

4. If you choose to file an amended return reducing a prior casualty or theft loss deduction, any underpayment of tax resulting from the reduced deduction will not have to be paid with the amended return.

True False

5. Tax-exempt interest on the following is not an item of AMT tax preference and therefore is not subject to the AMT if issued after July 30, 2008.

A. An exempt facility bond for which 95% or more of the net proceeds are to be used to provide qualified residential rental projects.
B. A qualified mortgage bond.
C. A qualified veteran's mortgage bond.
D. All of the above.

6. An AMT adjustment is required for depreciation of qualified disaster assistance property that is eligible for the special depreciation allowance.                                   

True False

7. The 90% qualified disaster loss limit on the alternative tax net operating loss deduction (ATNOLD) does not apply to the portion of an ATNOLD attributable to qualified disaster losses.

True False

8. The following apply to the AMT for the Kansas Disaster area.           

A. No AMT adjustment is required for depreciation of qualified recovery assistance property that is eligible for the special depreciation allowance.
B. The 90% limit on the ATNOLD does not apply to the portion of an ATNOLD attributable to qualified recovery assistance losses.
C. Both A and B above.
D. An AMT adjustment is required for depreciation of qualified recovery assistance property that is eligible for the special depreciation allowance.

9. For tax years beginning after 2007, the 5% maximum tax rate on qualified dividends and net capital gain (the excess of net long-term capital gain over net short-term capital loss) is                                

A. Reduced to 0% and this applies for both regular tax and AMT.
B. Reduced to 15% and this only applies to regular tax.
C. Increased to 5% and this only applies to AMT.
D. Reduced to 0% and this applies only to the AMT.
 

10. The rules regarding the age of a child whose investment income may be taxed at the parent's tax rate have changed for 2008. These rules

A. Will not continue to apply to a child under age 18.
B. Will apply in certain cases to a child who was age 18 at the end of 2008 and did not have earned income that was more than half of the child's support. 
C. Will apply in certain cases to a child who was a full-time student over age 18 and under age 24 at the end of 2008 and had earned income that was more than half of the child's support.
D. Either A or B above.
 

11. For tax years beginning after 2007 and before 2011, gross income

A. Includes rebates or reductions of property or income taxes provided by a state or local government for providing services as a member of a qualified emergency response organization.
B. Includes qualified payments made by a state or local government for providing services as a member of a qualified emergency response organization.
C. Does not include rebates or reductions of property or income taxes provided by a state or local government for providing services as a member of a qualified emergency response organization.
D. None of the above.

12. If you do not file your return by the due date (including extensions) you may have to pay a failure-to-file penalty. For income tax returns required to be filed after 2008, the failure-to-file penalty for returns more than 60 days after the due date is increased. In this situation, the minimum penalty is   

A. $135.
B. 100% of the unpaid tax.
C. The smaller of A or B above.
D. $100

13. For tax years 2009 and 2010, changes have been made to the American opportunity tax credit. The following is one of the these changes.

A. The maximum amount of the Hope credit increases to $5,500 per student.
B. The Hope credit can now be claimed only for the first two years of post-secondary education.
C. The term "qualified tuition and related expenses" has been expanded to include expenditures for "course materials".
D. All of the above.

14. For tax years 2009 and 2010, generally 40% of the Hope credit is now a refundable credit, which means that you receive up to _________ even if you owe no taxes.

A. $2,500.
B. $1,000.
C. $500
D. $100

15. Any economic recovery payment you receive during 2009 is taxable.  

True False              

16. The $250 economic recovery payments are being made to most people who

A. Receive social security benefits, supplemental security income (SSI), railroad retirement benefits or veteran disability compensation or pension benefits.
B. Live in a U.S. state, the District or Columbia, Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa, or the Northern Mariana Islands.
C. Both A and B above.
D. Apply for the credit.

17. Two new credits you may be able to take for 2009 are

A. The Hope credit and the American opportunity tax credit.
B. The Making work pay credit and the Government retiree credit.
C. The economic recovery credit and the Government retiree credit.
D. All of the above.

18. You may be able to take the Making work pay credit if you have earned income from work and

A. Your modified AGI is $95,000 ($190,000 if MFJ) or more.
B. You are a nonresident alien.
C. You can be claimed as a dependent on someone else's return.
D. None of the above
 

19. Even if your federal income tax withholding is reduced during 2009 because of the Making work credit, you must claim the credit on your return to benefit from it.  

True False

20. The Making work pay credit is 6.2% of your earned income but cannot be more than $400 ($800 if MFJ) and it will be reduced if                                         

A. You don't qualify for the government retiree credit.
B. You receive a $250 economic recovery payment.
C. Your modified AGI is not more than $25,000 ($50,000 if MFJ).
D. Any of the above.

21. To claim either the Making Work Credit or the Government retiree credit, you must include your social security number or the identification number issue by the IRS.

True False

22. Both the Making Work Pay credit and the Government retiree credits are refundable and generally you will use

A. Schedule M (Form 1040A or 1040).
B. Schedule L (Form 1040A or 1040).
C. Schedule C (Form 1040A or 1040).
D. Form 1040 alone to take the credits.

23. If you are filing Form 1040EZ, you can take the Making Work Pay credit on that form and you do not have to file Schedule M.  

True False

24. For any tax year beginning in 2009, each recipient of unemployment compensation can exclude for gross income up to ________ of the amount he or she received during the year.

A. $2,500.
B. $3,000.
C. $2,400.
D. $1,000.

25. The following change to the AMT went into effect for 2009.

A. Qualified motor vehicle tax is allowed against AMT.
B. The AMT exemption amount for a child has decreased.
C. The AMT exemption amount has decreased.
D. All of the above

26. Tax-exempt interest on specified private activity bonds issued in 2009 or 2010 is

A. An item of tax preference and therefore subject to the AMT.
B. Not an item of tax preference and therefore not subject to the AMT.
C. Not an item of tax preference and therefore subject to the AMT.
D. None of the above.

27. For 2009, a qualifying child is defined as

A. A child younger than you.
B. A child who does not file a joint return unless the return was filed only as a claim for refund.
C. A child you claim that is your child and if not your child, your AGI must be higher than the highest AGI of any parent of the child.
D. All of the above.

28. For 2009, your qualifying child for purposes of the child tax credit is a qualifying child only if you can and do claim an exemption for him or her.

True False

29. In 2009, you can deduct the state or local sales and excise taxes imposed on the purchase of a qualified motor vehicle after February 16, 2009, and before 2010.

True False

30. The definition of qualified higher education expenses for tax-free distributions fro a qualified tuition program is expanded to include amounts paid in 2009 or 2010 for the purchase of equipment that is to be used by the beneficiary and the beneficiary's family during any of the years the beneficiary is enrolled at an eligible educational institution. Such equipment as

A. Computer software.
B. Any computer or related peripheral equipment.
C. Fiber optic cable related to computer use, and internet access and related services.
D. Any of the above