Document 1516 3664

South-Western Federal Taxation 2016
Essentials of Taxation Individuals and

Business Entities 19th Edition Raabe
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Chapter 09 - Individuals As The Taxpayer
1. Under the Federal income tax formula for individuals, a choice must be made between claiming deductions for AGI and
itemized deductions.
a. True
b. False
ANSWER: False
RATIONALE: Even though a taxpayer chooses to itemize, deductions for AGI can be claimed.
POINTS: 1
DIFFICULTY: Easy
LEARNING OBJECTIVES: SIIT.HOSM.15.LO: 3-01 - LO: 3-01
NATIONAL STANDARDS: United States - BUSPORG: Analytic
STATE STANDARDS: United States - AK - AICPA: FN-Reporting
KEYWORDS: Bloom's: Comprehension
OTHER: Time: 2 min.
2. Under the Federal income tax formula for individuals, the determination of adjusted gross income (AGI) precedes that
of taxable income (TI).
a. True
b. False
ANSWER: True
RATIONALE: The determination of AGI precedes (not follows) the determination of taxable income (TI).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
3. Under the income tax formula, a taxpayer must choose between deductions for AGI and the standard deduction.
a. True
b. False
ANSWER: False
RATIONALE: The choice is between deductions from AGI and the standard deduction.
POINTS: 1
DIFFICULTY: Easy
KEYWORDS: Bloom's: Knowledge
OTHER: Time: 2 min.
4. After Ellie moves out of the apartment she had rented as her personal residence, she recovers her damage deposit of
$1,000. The $1,000 is not income to Ellie.
a. True
b. False
Cengage Learning Testing, Powered by Cognero Page 1
ANSWER: True
RATIONALE: The $1,000 is a nontaxable return of capital.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
5. An “above the line” deduction refers to a deduction for AGI.

a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
6. Because they appear on page 1 of Form 1040, itemized deductions are also referred to as “page 1 deductions.”
a. True
b. False
ANSWER: False
RATIONALE: What is described are deductions for AGI. Itemized deductions are also known as deductions
from AGI and appear on page 2 of Form 1040.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
7. A decrease in a taxpayer’s AGI could increase the amount of medical expenses that can be deducted.
a. True
b. False
ANSWER: True
RATIONALE: A decrease in AGI may increase the medical expense deduction due to the 10% (or 7.5%)
floor imposed.
POINTS: 1
DIFFICULTY: Easy
STATE STANDARDS: United States - AK - AICPA: FN-Measurement -
AICPA: FN-Measurement
OTHER: Time: 2 min.
8. An increase in a taxpayer’s AGI could decrease the amount of charitable contribution that can be claimed.
a. True
b. False
ANSWER: False
RATIONALE: An increase in AGI increases the allowable charitable contribution that can be claimed due to
the 50% ceiling imposed.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
9. Adjusted gross income (AGI) appears at the bottom of page 1 and at the top of page 2 of Form 1040.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
10. All exclusions from gross income are reported on Form 1040.
a. True
b. False
ANSWER: False
RATIONALE: Gifts and inheritances are two major exclusions not reported on Form 1040.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
11. The filing status of a taxpayer (e.g., single, head of household) must be identified before the applicable standard
deduction is determined.
a. True
b. False
ANSWER: True
RATIONALE: The filing status is relevant in determining the amount of the standard deduction available.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
12. Lee, a citizen of Korea, is a resident of the U.S. Any rent income Lee receives from land he owns in Korea is not
subject to the U.S. income tax.
a. True
b. False
ANSWER: False
RATIONALE: Under the global system of taxation followed by the U.S., foreign-sourced income is subject
to tax. Although Lee is not a citizen, he is a resident of the U.S.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
13. The additional standard deduction for age and blindness is greater for married taxpayers than for single taxpayers.
a. True
b. False
ANSWER: False
RATIONALE: For 2015, compare $1,550 (single) with $1,250 (married).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
14. The basic and additional standard deductions both are subject to an annual adjustment for inflation.
a. True
b. False
ANSWER: True
RATIONALE: The inflation adjustment is made annually to both the basic standard deduction and the
additional standard deduction.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
15. Many taxpayers who previously itemized will start claiming the standard deduction when they purchase a home.
a. True
b. False
ANSWER: False
RATIONALE: Just the opposite is the case. The deduction for property taxes and mortgage interest
expense usually makes itemizing preferable to the standard deduction.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
16. Once they reach age 65, many taxpayers will switch from itemizing their deductions from AGI and start claiming the
standard deduction.
a. True
b. False
ANSWER: True
RATIONALE: Not only is the additional standard deduction now available but also the mortgage interest
deduction on the personal residence has declined (or disappeared).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
17. Claude’s deductions from AGI exceed the standard deduction allowed for 2015. Under these circumstances, Claude
cannot claim the standard deduction.
a. True
b. False
ANSWER: False
RATIONALE: The choice is elective. Claude may wish to avoid the time and trouble of completing Schedule
A.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
18. As opposed to itemizing deductions from AGI, the majority of individual taxpayers choose the standard deduction.
a. True
b. False
ANSWER: True
RATIONALE: Approximately two-thirds do so.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
19. Howard, age 82, dies on January 2, 2015. On Howard’s final income tax return, the full amount of the basic and
additional standard deductions will be allowed even though Howard lived for only 2 days during the year.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
20. In 2015, Ed is 66 and single. If he has itemized deductions of $7,400, he should not claim the standard deduction
alternative.
a. True
b. False
ANSWER: False
RATIONALE: The standard deduction yields $7,850 ($6,300 + $1,550).
POINTS: 1
DIFFICULTY: Easy
KEYWORDS: Bloom's: Application
OTHER: Time: 2 min.
21. Jason and Peg are married and file a joint return. Both are over 65 years of age and Jason is blind. Their standard
deduction for 2015 is $16,350 ($12,600 + $1,250 + $1,250 + $1,250).
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
22. Derek, age 46, is a surviving spouse. If he has itemized deductions of $12,900 for 2015, Derek should not claim the
standard deduction.
a. True
b. False
ANSWER: True
RATIONALE: The standard deduction would only provide $12,600.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
23. Buddy and Hazel are ages 72 and 71 and file a joint return. If they have itemized deductions of $14,600 for 2015, they
should not claim the standard deduction.
a. True
b. False
ANSWER: False
RATIONALE: The standard deduction provides $15,100 ($12,600 + $1,250 + $1,250).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
24. Clara, age 68, claims head of household filing status. If she has itemized deductions of $10,500 for 2015, she should
not claim the standard deduction.
a. True
b. False
ANSWER: False
RATIONALE: The standard deduction yields $10,800 ($9,250 + $1,550).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
25. Monique is a resident of the U.S. and a citizen of France. If she files a U.S. income tax return, Monique cannot claim
the standard deduction.
a. True
b. False
ANSWER: False
RATIONALE: Either U.S. citizenship or residency will suffice in order to claim the standard deduction.
Monique is not a nonresident alien.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
26. Dan and Donna are husband and wife and file separate returns for the year. If Dan itemizes his deductions from AGI,
Donna cannot claim the standard deduction.
a. True
b. False
ANSWER: True
RATIONALE: If Dan itemizes, Donna must itemize.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
27. Benjamin, age 16, is claimed as a dependent by his parents. During 2015, he earned $850 at a car wash. Benjamin’s
standard deduction is $1,400 ($1,050 + $350).
a. True
b. False
ANSWER: False
RATIONALE: His standard deduction is the greater of $1,050 or $1,200 ($850 + $350).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
28. Debby, age 18, is claimed as a dependent by her mother. During 2015, she earned $1,100 in interest income on a
savings account. Debby’s standard deduction is $1,450 ($1,100 + $350).
a. True
b. False
ANSWER: False
RATIONALE: Debby’s standard deduction is the minimum allowed of $1,050.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
29. Katrina, age 16, is claimed as a dependent by her parents. During 2015, she earned $5,600 as a checker at a grocery
store. Her standard deduction is $5,950 ($5,600 earned income + $350).
a. True
b. False
ANSWER: True
RATIONALE: Her standard deduction cannot exceed the regular standard deduction available to single
persons (or $6,300 for 2015).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
30. A dependent cannot claim a personal exemption on his or her own return.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
31. When separate income tax returns are filed by married taxpayers, one spouse cannot claim the other spouse as an
exemption.
a. True
b. False
ANSWER: False
RATIONALE: An exemption is allowed if the spouse has no gross income and is not claimed as a
dependent by another.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
32. Butch and Minerva are divorced in December of 2015. Since they were married for more than one-half of the year,
they are considered as married for 2015.
a. True
b. False
ANSWER: False
RATIONALE: They must be married at the end of the year (unless one spouse dies) in order to be
considered married.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
33. For the year a spouse dies, the surviving spouse is considered married for the entire year for income tax purposes.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
34. In determining whether the gross income test is met for dependency exemption purposes, only the taxable portion of a
scholarship is considered.
a. True
b. False
ANSWER: True
RATIONALE: For the support test, all of the scholarship is disregarded. Scholarships are treated differently
for purposes of the gross income test.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
35. Albert buys his mother a TV. For purposes of meeting the support test, Albert cannot include the cost of the TV.
a. True
b. False
ANSWER: False
RATIONALE: Capital expenditures can be considered in determining support. It is assumed that the TV is
largely for the mother’s use.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
36. If an individual does not spend funds that have been received from another source (e.g., interest on municipal bonds),
the unexpended amounts are not considered for purposes of the support test.
a. True
b. False
ANSWER: True
RATIONALE: The funds are counted only if used for support purposes.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
37. Using borrowed funds from a mortgage on her home, Leah provides 52% of her own support, while her sons furnished
the rest. Leah can be claimed as a dependent under a multiple support agreement.
a. True
b. False
ANSWER: False
RATIONALE: The sons do not provide more than half of their mother’s support. In this situation, the mother
is self-supporting.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
38. Roy and Linda were divorced in 2014. The divorce decree awards custody of their children to Linda but is silent as to
who is entitled to claim them as dependents. If Roy furnished more than half of their support, he can claim them as
dependents in 2015.
a. True
b. False
ANSWER: False
RATIONALE: Not unless Linda consents.
POINTS: 1
DIFFICULTY: Easy

OTHER: Time: 2 min.
39. In 2015, Hal furnishes more than half of the support of his ex-wife and her father, both of whom live with him. The
divorce occurred in 2014. Hal may claim the father-in-law and the ex-wife as dependents.
a. True
b. False
ANSWER: True
RATIONALE: The father-in-law meets the relationship test, but the ex-wife does not. Except in the year of
divorce, an ex-wife can be a dependent under the member of the household test.
POINTS: 1
DIFFICULTY: Moderate
OTHER: Time: 2 min.
40. After her divorce, Hope continues to support her ex-husband’s sister, Cindy, who does not live with her. Hope can
claim Cindy as a dependent.
a. True
b. False
ANSWER: True
RATIONALE: For purposes of the relationship test, divorce does not change “in-law” status.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
41. Darren, age 20 and not disabled, earns $4,000 during 2015. Darren’s parents cannot claim him as a dependent unless
he is a full-time student.
a. True
b. False
ANSWER: True
RATIONALE: Being age 20, Darren cannot be a qualifying child unless he is a full-time student. He cannot
be a qualifying relative, since he does not meet the gross income test.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
42. Lucas, age 17 and single, earns $6,000 during 2015. Lucas’s parents cannot claim him as a dependent if he does not
live with them.
a. True
b. False
ANSWER: True
RATIONALE: Lucas does not meet the definition of a qualifying child if the abode test is failed. Lucas also
fails the gross income test for a qualifying relative.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
43. Sarah furnishes more than 50% of the support of her son and daughter-in-law who live with her. If the son and
daughter-in-law file a joint return, Sarah cannot claim them as dependents.
a. True
b. False
ANSWER: False
RATIONALE: If certain conditions are satisfied (e.g., they did not have to file but did so to obtain a refund),
the son and daughter-in-law can qualify as Sarah’s dependents.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
44. Kim, a resident of Oregon, supports his parents who are residents of Canada but citizens of Korea. Kim can claim his
parents as dependents.
a. True
b. False
ANSWER: True
RATIONALE: The parents are residents of Canada.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
45. Stealth taxes are directed at lower income taxpayers.
a. True
b. False
ANSWER: False
RATIONALE: Stealth taxes do not begin until taxpayers reach significant income levels.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
46. In determining the filing requirement based on gross income received, both additional standard deductions (i.e., age
and blindness) are taken into account.
a. True
b. False
ANSWER: False
RATIONALE: The additional standard deduction for blindness is not taken into account.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
47. For dependents who have income, special filing requirements apply.
a. True
b. False
ANSWER: True
RATIONALE: The regular filing requirements do not apply in this situation.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
48. A taxpayer who itemizes must use Form 1040, and cannot use Form 1040EZ or Form 1040A.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
49. An individual taxpayer uses a fiscal year of March 1 to February 28. The due date of this taxpayer’s Federal income
tax return is May 15 of each tax year.
a. True
b. False
ANSWER: False
RATIONALE: The tax return is due on or before the fifteenth day of the fourth month following the end of
the fiscal year. Here, the due date is June 15.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
50. Married taxpayers who file a joint return cannot later (i.e., after the filing due date) switch to separate returns for that
year.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
51. Married taxpayers who file separately cannot later (i.e., after the due date for filing) change to a joint return.
a. True
b. False
ANSWER: False
RATIONALE: Such a change is allowed.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
52. Surviving spouse filing status begins in the year in which the deceased spouse died.
a. True
b. False
ANSWER: False
RATIONALE: Surviving spouse filing status begins in the year following the year of death.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
53. In January 2015, Jake’s wife dies and he does not remarry. For tax year 2015, Jake may not be able to use the filing
status available to married persons filing joint returns.
a. True
b. False
ANSWER: True
RATIONALE: If the executor of his wife’s estate does not agree to filing a joint return, Jake’s only option is
to file using married, filing separate status.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
54. For tax purposes, married persons filing separate returns are treated the same as single taxpayers.
a. True
b. False
ANSWER: False
RATIONALE: Single taxpayers can enjoy many tax benefits that are unavailable to married persons filing
separately—e.g., earned income credit, credit for child and dependent care expenses,
deduction for interest paid on student loans.
POINTS: 1
OTHER: Time: 2 min.
55. Katelyn is divorced and maintains a household in which she and her daughter, Crissa, live. Crissa, age 22, earns
$11,000 during 2015 as a model. Katelyn does not qualify for head of household filing status.
a. True
b. False
ANSWER: True
RATIONALE: Crissa is not Katelyn’s dependent. She fails the age test for qualifying child purposes and the
gross income test for the qualifying relative category.
POINTS: 1
OTHER: Time: 2 min.
56. Ed is divorced and maintains a home in which he and a dependent friend live. Ed does not qualify for head of
household filing status.
a. True
b. False
ANSWER: True
RATIONALE: To be head of household, the dependent involved must meet the relationship test. This is not
the case with a friend.
POINTS: 1
OTHER: Time: 2 min.
57. In terms of income tax consequences, abandoned spouses are treated the same way as married persons filing separate
returns.
a. True
b. False
ANSWER: False
RATIONALE: An abandoned spouse is treated as a single taxpayer. Consequently, an abandoned spouse
qualifies for head of household filing status.
POINTS: 1
OTHER: Time: 2 min.
58. Since an abandoned spouse is treated as not married and has one or more dependent children, he or she qualifies for
the standard deduction available to head of household.
a. True
b. False
ANSWER: True
RATIONALE: One of the advantages of being an abandoned spouse is head of household filing status.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
59. Currently, the top income tax rate in effect is not the highest it has ever been.
a. True
b. False
ANSWER: True
RATIONALE: The income tax rates in effect in 1944-1945 ranged from 23% to 94%.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
60. In terms of timing as to any one year, the Tax Tables are available before the Tax Rate Schedules.
a. True
b. False
ANSWER: False
RATIONALE: Just the reverse is the case.
POINTS: 1
DIFFICULTY: Easy

OTHER: Time: 2 min.
61. The kiddie tax does not apply to a child whose earned income is more than one-half of his or her support.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
62. Once a child reaches age 19, the kiddie tax no longer applies.
a. True
b. False
ANSWER: False
RATIONALE: The kiddie tax does apply if the child is a full-time student under age 24.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
63. When the kiddie tax applies and the parents are divorced, the applicable parent (for determining the parental tax) is the
one with the greater taxable income.
a. True
b. False
ANSWER: False
RATIONALE: The applicable parent is the one who has custody.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
64. When the kiddie tax applies, the child need not file an income tax return because the child’s income will be reported
on the parents’ return.
a. True
b. False
ANSWER: False
RATIONALE: The child need not file only if the parental election (if available) is made and the parent picks
up all of the child’s income.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
65. A child who has unearned income of $2,100 or less cannot be subject to the kiddie tax.
a. True
b. False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
66. A child who is married cannot be subject to the kiddie tax.

a. True
b. False
ANSWER: False
RATIONALE: If he or she does not file a joint return, such child is not exempt from the kiddie tax.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
67. In terms of the tax formula applicable to individual taxpayers, which, if any, of the following statements is correct?
a. In arriving at taxable income, a taxpayer must choose between the standard deduction and deductions from
AGI.
b. In arriving at AGI, personal and dependency exemptions must be subtracted from gross income.
c. In arriving at taxable income, a taxpayer must choose between the standard deduction and claiming personal
and dependency exemptions.
d. The formula does not apply if a taxpayer elects to claim the standard deduction.
e. None of these.
ANSWER: a
RATIONALE: The standard deduction is not an alternative; it is a component of the tax formula (choice d.).
Personal and dependency exemptions are subtracted after AGI is determined (choice b.).
The choice is between the standard deduction and deductions from AGI (choice a.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
68. In terms of the tax formula applicable to individual taxpayers, which, if any, of the following statements is correct?
a. In arriving at AGI, a taxpayer must elect between claiming deductions for AGI and deductions from AGI.
b. In arriving at taxable income, a taxpayer must elect between claiming deductions for AGI and deductions from
AGI.
c. If a taxpayer has deductions for AGI, the standard deduction is not available.
d. In arriving at taxable income, a taxpayer must elect between deductions for AGI and the standard deduction.
e. None of these.
ANSWER: e
RATIONALE: AGI is computed by claiming deductions for and no election is required (choice a.). In arriving
at taxable income, deductions for AGI are allowed (choice b.) and the election is between
deductions from AGI and the standard deduction (choices c. and d.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
69. Regarding the tax formula and its relationship to Form 1040, which, if any, of the following statements is correct?
a. Most exclusions from gross income are reported on page 2 of Form 1040.
b. An “above the line deduction” refers to a deduction from AGI.
c. A “page 1 deduction” refers to a deduction for AGI.
d. The taxable income (TI) amount appears both at the bottom of page 1 and at the top of page 2 of Form 1040.
e. None of these.
ANSWER: c
RATIONALE: Most exclusions are not reported on Form 1040, but those that are appear on page 1—not on
page 2 (choice a.). A “page 1 deduction” as well as an “above the line deduction” are
deductions for AGI (choices b. and c.). AGI, not TI, is at the bottom of page 1 and the top of
page 2 of Form 1040 (choice d.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
70. Which of the following items, if any, is deductible?

a. Parking expenses incurred in connection with jury duty—taxpayer is a dentist.
b. Substantiated gambling losses (not in excess of gambling winnings) from state lottery.
c. Contributions to mayor’s reelection campaign.
d. Speeding ticket incurred while on business.
e. Premiums paid on personal life insurance policy.
ANSWER: b
RATIONALE: All other choices are not deductible —either as dfor or dfrom AGI.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 2 min.
71. Which, if any, of the following is a deduction for AGI?

a. Contributions to a traditional Individual Retirement Account.
b. Child support payments.
c. Funeral expenses.
d. Loss on the sale of a personal residence.
e. Medical expenses.
ANSWER: a
RATIONALE: IRA contributions (choice a.) are deductions for AGI. Child support payments (choice b.),
funeral expenses (choice c.), and personal capital losses (choice d.) are nondeductible items.
Medical expenses are deductions from AGI.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
72. Which, if any, of the following is a deduction for AGI?

a. State and local sales taxes
b. Interest on home mortgage
c. Charitable contributions
d. Unreimbursed moving expenses of an employee
e. None of these

ANSWER: d
RATIONALE: All other items (choices a., b., and c.) are deductions from AGI.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
73. Which, if any, of the statements regarding the standard deduction is correct?
a. Some taxpayers may qualify for two types of standard deductions.
b. Not available to taxpayers who choose to deduct their personal and dependency exemptions.
c. May be taken as a for AGI deduction.
d. The basic standard deduction is indexed for inflation but the additional standard deduction is not.
e. None of these.
ANSWER: a
RATIONALE: An example of two additional standard deductions would be a taxpayer who is age 65 (or
older) and blind (choice a.). Both the basic and the additional standard deductions are subject
to indexation (choice d.). Personal and dependency exemptions are deductible in any event
(choice b.). The standard deductions are in lieu of deductions from AGI—not for AGI (choice
c.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
74. Which, if any, of the following statements relating to the standard deduction is correct?
a. If a taxpayer dies during the year, his (or her) standard deduction must be prorated.
b. If a taxpayer is claimed as a dependent of another, his (or her) additional standard deduction is allowed in full
(i.e., no adjustment is necessary).
c. If spouses file separate returns, both spouses must claim the standard deduction (rather than itemize their
deductions from AGI).
d. If a taxpayer is claimed as a dependent of another, no basic standard deduction is allowed.
e. None of these.
ANSWER: b
RATIONALE: In the case of death, no apportionment is required and the full standard deduction is allowed
(choice a.). If married taxpayers file separate returns and one spouse itemizes, the other
spouse must also itemize. However, there is no requirement that they each claim the
standard deduction—although they may do so (choice c.). A basic standard deduction is
allowed for dependents although its determination is subject to special rules (choice d.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
75. During 2015, Marvin had the following transactions:
Salary $50,000
Bank loan (proceeds used to buy personal auto) 10,000
Alimony paid 12,000
Child support paid 6,000
Gift from aunt 20,000
Marvin’s AGI is:
a. $32,000.
b. $38,000.
c. $44,000.
d. $56,000.
e. $64,000.
ANSWER: b
RATIONALE: $50,000 (salary) – $12,000 (alimony) = $38,000. The gift is an exclusion while the child
support is nondeductible. Amounts borrowed are not income.
POINTS: 1
OTHER: Time: 10 min.
76. During 2015, Esther had the following transactions:
Salary $70,000
Interest income on Xerox bonds 2,000
Inheritance from uncle 40,000
Contribution to traditional IRA 5,500
Capital losses 2,500
Esther’s AGI is:
a. $62,000.
b. $64,000.
c. $67,000.
d. $102,000.
e. $104,000.
ANSWER: b
RATIONALE: $70,000 (salary) + $2,000 (interest) – $5,500 (IRA contribution) – $2,500 (capital losses) =
$64,000. The inheritance is a nontaxable exclusion. The capital losses are deductible.
POINTS: 1
77. During 2015, Sarah had the following transactions:
Salary $ 80,000
Interest income on City of Baltimore bonds 1,000
Damages for personal injury (car accident) 100,000
Punitive damages (same car accident) 200,000
Cash dividends from Chevron Corporation stock 7,000
Sarah’s AGI is:
a. $185,000.
b. $187,000.
c. $285,000.
d. $287,000.
e. $387,000.
ANSWER: d
RATIONALE: $80,000 (salary) + $200,000 (punitive damages) + $7,000 (cash dividends) = $287,000. The
damages from personal injury and the municipal bond interest are nontaxable exclusions.
POINTS: 1
78. In 2015, Cindy had the following transactions:
Salary $90,000
Short-term capital gain from a stock investment 4,000
Moving expense to change jobs (11,000)
Received repayment of $20,000 loan she made to her sister in 2011 (includes no interest) 20,000
State income taxes (5,000)
Cindy’s AGI is:
a. $114,000.
b. $103,000.
c. $98,000.
d. $94,000.
e. $83,000.
ANSWER: e
RATIONALE: $90,000 (salary) + $4,000 (gain on stock investment) – $11,000 (moving expenses) =
$83,000. The loan repayment of $20,000 is a return of capital and has no effect on gross
income. State income taxes paid are a deduction from AGI (or a standard deduction) and has
no impact on the determination of AGI.
POINTS: 1
79. Sylvia, age 17, is claimed by her parents as a dependent. During 2015, she had interest income from a bank savings
account of $2,000 and income from a part-time job of $4,200. Sylvia’s taxable income is:
a. $4,200 – $4,550 = $0.
b. $6,200 – $5,700 = $500.
c. $6,200 – $4,550 = $1,650.
d. $6,200 – $1,000 = $5,200.
e. None of these.
ANSWER: c
RATIONALE: Sylvia’s standard deduction is $4,200 (earned income) + $350 = $4,550. Thus, her taxable
income is $1,650 ($6,200 – $4,550). She is not eligible for a personal exemption.
POINTS: 1
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80. Tony, age 15, is claimed as a dependent by his grandmother. During 2015, Tony had interest income from Boeing
Corporation bonds of $1,000 and earnings from a part-time job of $800. Tony’s taxable income is:
a. $1,800.
b. $1,800 – $800 – $1,050 = ($50).
c. $1,800 – $1,150 = $650.
d. $1,800 – $1,050 = $750.
e. None of these.
ANSWER: c
RATIONALE: Tony’s standard deduction of $1,150 ($800 + $350) partially offsets his gross income of
$1,800, resulting in taxable income of $650.
POINTS: 1
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81. Wilma, age 70 and single, is claimed as a dependent on her daughter’s tax return. During 2015, she had interest
income of $2,500 and $800 of earned income from babysitting. Wilma’s taxable income is:
a. $700.
b. $900.
c. $1,750.
d. $2,250.
e. None of these.
ANSWER: e
RATIONALE: $3,300 gross income – greater of $1,050 or ($800 earned income + $350) – $1,550
(additional standard deduction for age 65 and older) = $600. She is not eligible for a personal
exemption.
POINTS: 1
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82. Kyle and Liza are married and under 65 years of age. During 2015, they furnish more than half of the support of their
19-year old daughter, May, who lives with them. She graduated from high school in May 2014. May earns $15,000 from a
part-time job, most of which she sets aside for future college expenses. Kyle and Liza also provide more than half of the
support of Kyle’s cousin who lives with them. Liza’s father, who died on January 3, 2015, at age 90, has for many years
qualified as their dependent. How many personal and dependency exemptions should Kyle and Liza claim?
a. Two
b. Three
c. Four
d. Five
e. None of these

ANSWER: c
RATIONALE: Four (Kyle, Liza, cousin, and the father). May cannot be claimed because she is not a
qualifying child and is subject to the gross income test. Kyle’s cousin does not meet the
relationship test but is a member of their household. It is assumed that Liza’s father, as was
true in the past, qualified as a dependent up to the point of death.
POINTS: 1
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83. Merle is a widow, age 80 and blind, who is claimed as a dependent by her son. During 2015, she received $4,800 in
Social Security benefits, $2,500 in bank interest, and $1,800 in cash dividends from stocks. Merle’s taxable income is:
a. $4,300 – $1,050 – $3,100 = $150.
b. $4,300 – $3,100 = $1,200.
c. $4,300 – $1,050 – $1,550 = $1,700.
d. $9,100 – $1,050 – $3,100 = $4,950.
e. None of these.
ANSWER: a
RATIONALE: Although Merle has no earned income, she is entitled to a minimum regular standard
deduction of $1,050. She also is allowed additional standard deductions for age and blindness
of $3,100 ($1,550 + $1,550). At this level of income, the Social Security benefits are a
nontaxable exclusion.
POINTS: 1
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84. Evan and Eileen Carter are husband and wife and file a joint return for 2015. Both are under 65 years of age. They
provide more than half of the support of their daughter, Pamela (age 25), who is a full-time medical student. Pamela
receives a $5,000 scholarship covering her tuition at college. They furnish all of the support of Belinda (Evan’s
grandmother), who is age 80 and lives in a nursing home. They also support Peggy (age 66), who is a friend of the family
and lives with them. How many dependency exemptions may the Carters claim?
a. Two
b. Three
c. Four
d. Five
e. None of these
ANSWER: b
RATIONALE: Three (Pamela, Belinda, and Peggy). Pamela is not a qualifying child—although a full-time
student, she is not under age 24. Pamela does meet the qualifying relative category as the
type of scholarship aid she receives is nontaxable (the gross income test is satisfied). Belinda
is not a member of the household but satisfies the relationship test. Peggy does not satisfy
the relationship test but is a member of the household.
POINTS: 1
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85. In which, if any, of the following situations may the individual not be claimed as a dependent of the taxpayer?
a. A former spouse who lives with the taxpayer (divorce took place last year).
b. A stepmother who does not live with the taxpayer.
c. A married daughter who lives with the taxpayer.
d. A half-brother who does not live with the taxpayer and is a citizen and resident of Canada.
e. A cousin who does not live with the taxpayer.
ANSWER: e
RATIONALE: Except in the year of divorce, a former spouse can qualify under the member of the
household test (choice a.). The stepmother meets the relationship test (choice b.). A married
daughter can be claimed as long as she does not violate the joint return test (choice c.). In
the case of the half brother, only Canada or Mexico can satisfy the residency test (choice d.).
A cousin does not satisfy the relationship test so must be a member of the household (choice
e.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
86. During 2015, Lisa (age 66) furnished more than 50% of the support of the following persons:
∙ Lisa’s current husband who has no income and is not claimed by someone else as a dependent.
∙ Lisa’s stepson (age 19) who lives with her and earns $6,000 as a dance instructor. He dropped
out of school a year ago.
∙ Lisa’s ex-husband who does not live with her. The divorce occurred two years ago.
∙ Lisa’s former brother-in-law who does not live with her.
Presuming all other dependency tests are met, on a separate return how many personal and dependency exemptions may
Lisa claim?
a. Two
b. Three
c. Four
d. Five
e. None of these
ANSWER: b
RATIONALE: All of the persons listed except the ex-husband meet either the relationship or member of the
household tests. The current husband qualifies as he has no income and is not claimed as a
dependent by someone else. The stepson does not avoid the gross income limitation of a
qualifying relative. He is not a qualifying child under 19 years of age.
POINTS: 1
DIFFICULTY: Easy
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OTHER: Time: 5 min.
87. A qualifying child cannot include:

a. A nonresident alien.
b. A married son who files a joint return.
c. A daughter who is away at college.
d. A brother who is 28 years of age and disabled.
e. A grandmother.
ANSWER: e
RATIONALE: A grandmother does not meet the relationship test (choice e.). A qualifying child can be a
nonresident alien under the adopted child exception (choice a.). The filing of a joint return is
not fatal if filing is not required and its purpose is to obtain a tax refund (choice b.). A
temporary absence is permissible under the domicile test (choice c.). A brother meets the
relationship test, and disability waives the age test (choice d.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
88. Ellen, age 12, lives in the same household with her father, grandfather, and uncle. The cost of maintaining the
household is provided by her grandfather (40%) and her uncle (60%). Disregarding tie-breaker rules, Ellen is a qualifying
child as to:
a. Only her father.
b. Only her grandfather and uncle.
c. Only her uncle.
d. All parties involved (i.e., father, grandfather, and uncle).
e. None of these.
ANSWER: d
RATIONALE: Under the abode and relationship tests, Ellen is a qualifying child as to all parties. The
amount of support provided by each person is not relevant.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
89. Millie, age 80, is supported during the current year as follows:
Percent of Support
Weston (a son) 20%
Faith (a daughter) 35%
Jake (a cousin) 25%
Brayden (unrelated close family friend) 20%
During the year, Millie lives in an assisted living facility. Under a multiple support agreement, indicate which parties can
qualify to claim Millie as a dependent.
a. Weston and Faith.
b. Faith.
c. Weston, Faith, Jake, and Brayden.
d. Faith, Jake, and Brayden.
e. None of these.
ANSWER: a
RATIONALE: Weston and Faith are the only persons who appear to qualify (choice a.). They qualify
because they contribute more than 10% of the support. Jake does not qualify because he
satisfies neither the relationship nor member of the household tests. (This eliminates choices
c. and d.) Brayden does not meet the relationship test, and he does not satisfy the member of
the household test. For a multiple support agreement to be effective, the qualifying
individuals collectively must provide greater than 50% of the support.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
90. The Hutters filed a joint return for 2015. They provide more than 50% of the support of Carla, Melvin, and Aaron.
Carla (age 18) is a cousin and earns $2,800 from a part-time job. Melvin (age 25) is their son and is a full-time law
student. He received from the university a $3,800 scholarship for tuition. Aaron is a brother who is a citizen of Israel but
resides in France. Carla and Melvin live with the Hutters. How many personal and dependency exemptions can the
Hutters claim on their Federal income tax return?
a. Two
b. Three
c. Four
d. Five
e. None of these
ANSWER: c
RATIONALE: The Hutters can claim two personal exemptions and two dependency exemptions. Carla is a
qualifying relative and passes the gross income test. Melvin is not a qualifying child due to
age (not under 24) but is a qualifying relative. Melvin also meets the gross income test since
this type of scholarship is nontaxable. Aaron meets neither the residency nor citizenship
requirement.
POINTS: 1
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91. Which of the following characteristics correctly describes the procedure for the phaseout of exemptions?
a. The threshold amounts are different and depend on filing status (e.g., joint return, single).
b. The threshold amounts are indexed for inflation each year.
c. The phaseout procedure is known as a “stealth tax.”
d. For the phaseout procedure to be applied, a taxpayer’s AGI must exceed the threshold amount.
e. All of these.
ANSWER: e
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
92. Regarding the rules applicable to filing of income tax returns, which, if any, of the following is an incorrect statement:
a. Married persons who file joint returns cannot later (after the due date of the return) substitute separate returns.
b. Married persons who file separate returns can later (after the due date of the return) substitute a joint return.
c. The usual test as to when a taxpayer must file a return is based on the total of the following: personal
exemption + basic standard deduction + both additional standard deductions.
d. Special filing requirement rules exist for taxpayers who are claimed as dependents of another.
e. None of these.
ANSWER: c
RATIONALE: Choice c. would be correct if it included only the additional standard deduction for age, as
that for blindness is not considered.
POINTS: 1
DIFFICULTY: Easy

OTHER: Time: 5 min.
93. Kyle, whose wife died in December 2012, filed a joint tax return for 2012. He did not remarry, but has continued to
maintain his home in which his two dependent children live. What is Kyle’s filing status as to 2015?
a. Head of household
b. Surviving spouse
c. Single
d. Married filing separately
e. None of these
ANSWER: a
RATIONALE: Kyle, who filed a joint return in 2012, was entitled to file as a surviving spouse in 2013 and
2014. In 2015, he will be entitled to file as a head of household.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
94. Emily, whose husband died in December 2014, maintains a household in which her dependent mother lives. Which (if
any) of the following is her filing status for the tax year 2015? (Note: Emily is the executor of her husband’s estate.)
a. Single
b. Married, filing separately
c. Surviving spouse
d. Head of household
e. Married, filing jointly
ANSWER: d
RATIONALE: She does not qualify for surviving spouse status in 2015.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
95. Which of the following taxpayers may file as a head of household in 2015?
Ron provides all the support for his mother, Betty, who lives by herself in an apartment in Fort Lauderdale. Ron pays the
rent and other expenses for the apartment and properly claims his mother as a dependent.
Tammy provides over one-half the support for her 18-year old brother, Dan. Dan earned $4,200 in 2015 working at a fast
food restaurant and is saving his money to attend college in 2016. Dan lives in Tammy’s home.
Joe’s wife left him late in December of 2014. No legal action was taken and Joe has not heard from her in 2015. Joe
supported his 6-year-old son, who lived with him throughout 2015.
a. Ron only
b. Tammy only
c. Joe only
d. Ron and Joe only
e. Ron, Tammy, and Joe
ANSWER: e
RATIONALE: Ron may file as a head of household. His mother is not required to live in his household in
order for him to qualify as a head of household.
Tammy can claim Dan as a dependent because Dan is a qualifying child and is not subject to
the gross income requirement. Joe can file as a head of household under the abandoned
spouse rules.
POINTS: 1
96. Nelda is married to Chad, who abandoned her in early June of 2015. She has not seen or communicated with him since
then. She maintains a household in which she and her two dependent children live. Which of the following statements
about Nelda’s filing status in 2015 is correct?
a. Nelda can use the rates for single taxpayers.
b. Nelda can file a joint return with Chad.
c. Nelda can file as a surviving spouse.
d. Nelda can file as a head of household.
e. None of these statements is appropriate.
ANSWER: d
RATIONALE: Nelda does meet the “abandoned spouse” rules. Therefore, she can file as a head of
household.
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
97. Arnold is married to Sybil, who abandoned him in 2014. He has not seen or communicated with her since April of that
year. He maintains a household in which their son, Evans, lives. Evans is age 25 and earns over $6,000 each year. For tax
year 2015, Arnold’s filing status is:
a. Married, filing jointly.
b. Head of household.
c. Married, filing separately.
d. Surviving spouse.
e. Single.
ANSWER: c
RATIONALE: Because Arnold is still treated as being married, his only option is married, filing separately
(choice c.). Arnold cannot file jointly without Sybil’s consent (choice a.). He is not an
abandoned spouse since Evans is not a dependent child. Evans cannot be claimed as a
qualifying child (age test) and is not a qualifying relative (gross income test).
POINTS: 1
DIFFICULTY: Easy
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OTHER: Time: 5 min.
98. Regarding the Tax Tables applicable to the Federal income tax, which of the following statements is correct?
a. For any one year, the Tax Tables are issued by the IRS after the Tax Rate Schedules.
b. The Tax Tables will always yield the same amount of tax as the Tax Rate Schedules.
c. Taxpayers can elect as to whether the use the Tax Tables or the Tax Rate Schedules.
d. The Tax Tables can be used by an estate but not by a trust.
e. No correct answer given.
ANSWER: a
RATIONALE: In any one year, the Tax Rate Schedules are issued after the Tax Tables (choice a.).
Because of the way the Tables are structured, a minor variation in the tax can occur (choice
b.). Where applicable, the Schedules must be used and taxpayers do not have an election
(choice c.). The Tax Tables cannot be used by either an estate or trust (choice d.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
99. In which, if any, of the following situations will the kiddie tax not apply?
a. The child is married but does not file a joint return.
b. The child has unearned income of $2,100 or less.
c. The child has unearned income that exceeds more than half of his (or her) support.
d. The child is under age 24 and a full-time student.
e. None of these.
ANSWER: b
RATIONALE: Choice c. would be appropriate if the reference was to earned (not unearned) income. Choice
a. would be correct if a joint return is filed. As to choice d., the kiddie tax could apply if the
child was under age 24.

POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
100. Which, if any, of the following is a correct statement relating to the kiddie tax?
a. If the parents are divorced, the income of the noncustodial parent is used to determine the allocable parental
tax.
b. The components for the application of the kiddie tax are not subject to adjustment for inflation.
c. If the kiddie tax applies, the parents must include the income of the child on their own income tax return.
d. The kiddie tax does not apply if both parents of the child are deceased.
e. None of these.
ANSWER: d
RATIONALE: Adjustments are made to reflect inflation—for 2015 the reduction to arrive at net unearned
income is $2,100 ($1,050 + $1,050) (choice b.). Choice c. is correct only if the parental
election is made. For divorced parents, it is the taxable income of the custodial parent that is
used to arrive at the allocable parental tax (choice a.).
POINTS: 1
DIFFICULTY: Easy
OTHER: Time: 5 min.
101. Emily had the following transactions during 2016:
Salary $90,000
Interest income on bonds—
Issued by City of Nashville $4,000
Issued by Chevron Corporation 5,000 9,000
Alimony received 5,000
Child support received 20,000
City and state income taxes paid (5,000)
Bank loan obtained to pay for car purchase 15,000
What is Emily’s AGI for 2016?
ANSWER: $100,000. $90,000 (salary) + $5,000 (interest on Chevron Corporation bonds) + $5,000
(alimony received). Interest on the City of Nashville bonds is an exclusion from gross
income. The bank loan has no tax effect, as Emily is obligated to repay the amount borrowed.
City and state income taxes are deductions from AGI.
POINTS: 1
DIFFICULTY: Easy
102. Edgar had the following transactions for 2015:
Salary $ 80,000
Alimony paid (4,000)
Recovery from car accident—
Personal injury damages $40,000
Punitive damages 70,000 110,000
Gift from parents 20,000
Property sales—
Loss on sale of boat (used for pleasure and owned 4 years) ($4,000)
Gain on sale of ADM stock (held for 10 months as an investment) 4,000 (–0–)
What is Edgar’s AGI for 2015?
ANSWER: $150,000. $80,000 (salary) – $4,000 (alimony paid) + $70,000 (punitive damage award) +
$4,000 (short-term capital gain on the sale of stock investment). The personal injury recovery
and the gift from Edgar’s parents are exclusions from gross income. The loss from the sale of
the boat is personal and, therefore, nondeductible. The short-term capital gain on the sale of
the ADM stock is taxed in full as ordinary income.
POINTS: 1
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103. Taylor had the following transactions for 2015:
Salary $ 85,000
Moving expenses incurred to change jobs (12,000)
Inheritance received from deceased uncle 300,000
Life insurance proceeds from policy on uncle’s life (Taylor was named the beneficiary) 200,000
Cash prize from church raffle 3,000
Payment of church pledge (4,500)
What is Taylor’s AGI for 2015?
ANSWER: $76,000. $85,000 (salary) + $3,000 (raffle prize) – $12,000 (moving expenses). The
inheritance and life insurance proceeds are exclusions from gross income. The payment by
Taylor of her church pledge is a deduction from AGI. Thus, it does not enter into the
determination of AGI.
POINTS: 1
104. In 2015, Tom is single and has AGI of $50,000. He is age 70, has no dependents, and has itemized deductions (i.e.,
from AGI) of $7,000. Determine Tom’s taxable income for 2015.
ANSWER: $38,150. Tom’s standard deduction is $6,300 (basic) + $1,550 (additional) for a total of
$7,850. Consequently, he should select the standard deduction option since it exceeds his
itemized deductions of $7,000. Thus, his taxable income is determined as follows: $50,000
(AGI) – $7,850 (standard deduction) – $4,000 (personal exemption) = $38,150.
POINTS: 1
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105. Warren, age 17, is claimed as a dependent by his father. In 2015, Warren has dividend income of $1,500 and earns
$400 from a part-time job.
a. What is Warren’s taxable income for 2015?
b. Suppose Warren earned $1,200 (not $400) from the part-time job. What is Warren’s taxable
income for 2015?
ANSWER: a. $850. Warren’s standard deduction is $1,050 (the greater of $400 (earned income) +
$350 or $1,050). Thus, $1,500 + $400 – $1,050 = $850 taxable income.
b. $1,150. Warren’s standard deduction now becomes $1,550 ($1,200 + $350). Thus,
$1,500 + $1,200 – $1,550 = $1,150 taxable income.
POINTS: 1
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106. Meg, age 23, is a full-time law student and is claimed by her parents as a dependent. During 2015, she received
$1,400 interest income from a bank savings account and $6,100 from a part-time job. What is Meg’s taxable income for
2015?
ANSWER: $1,200. Meg’s standard deduction is the greater of $6,100 (earned income) + $350 or $1,050.
But the $6,450 is limited to $6,300 (the standard deduction allowed a single person). Thus,
$1,400 + $6,100 – $6,300 = $1,200 taxable income.
POINTS: 1
DIFFICULTY: Easy
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107. Heloise, age 74 and a widow, is claimed as a dependent by her daughter. For 2015, she had income as follows:
$2,500 interest on municipal bonds; $3,200 Social Security benefits; $3,000 income from a part-time job; and $2,800
dividends on stock investments. What is Heloise’s taxable income for 2015?
ANSWER: $900. $3,000 (income from job) + $2,800 (dividends) – $3,350 (basic standard deduction is
$3,000 + $350; this is greater than $1,050) – $1,550 (additional standard deduction for age) =
$900. The Social Security benefits of $3,200 and the interest on municipal bonds of $2,500
are not taxable.
POINTS: 1
DIFFICULTY: Easy
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108. Pedro is married to Consuela, who lives with him. Both are U.S. citizens and residents of Nebraska. Pedro furnishes
all of the support of his parents, who are citizens and residents of Mexico. He also furnishes all of the support of
Consuela’s parents, who are citizens and residents of El Salvador. Consuela has no gross income for the year. If Pedro
files as a married person filing separately, how many personal and dependency exemptions can he claim on his return?
ANSWER: Four. A personal exemption for Pedro and Consuela and dependency exemptions for Pedro’s
parents. Consuela can be claimed because she has no income. Presumably she is not being
claimed as a dependent by another. Although Pedro’s parents are neither U.S. citizens nor
residents, they are residents of Mexico. Consuela’s parents meet neither the citizenship nor
residency tests.
POINTS: 1
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109. Homer (age 68) and his wife Jean (age 70) file a joint return. They furnish all of the support of Luther (Homer’s 90-
year old father), who lives with them. In 2015, they received $6,000 of interest income on city of Chicago bonds and
interest income on corporate bonds of $48,000. Compute Homer and Jean’s taxable income for 2015.
ANSWER: $20,900. Their gross income is $48,000 since the $6,000 interest on municipal bonds is an
exclusion. They are entitled to a basic standard deduction of $12,600 and additional standard
deductions of $1,250 each for being age 65 or older. They can claim a dependency exemption
for Luther and two personal exemptions for themselves. Thus, $48,000 – $12,600 – $2,500 (2
× $1,250) – $12,000 (3 × $4,000) = $20,900.
POINTS: 1
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110. Ellen, age 39 and single, furnishes more than 50% of the support of her parents, who do not live with her; their only
source of income are Social Security benefits. Ellen practices as a self-employed interior decorator and has gross income
in 2015 of $120,000. Her deductions are as follows: $30,000 business and $8,100 itemized.
a. Can Ellen qualify for head of household filing status? Explain.
b. What is Ellen’s taxable income for 2015?

ANSWER: Ellen can qualify for head of household filing status if she furnishes more than half of
a.
the cost of maintaining her parents’ household. Also, at least one of Ellen’s parents
must qualify as her dependent. Given that her parent's only income is from Social
Security (which is an exclusion), they both should qualify as Ellen's dependents.
b. $68,750. $120,000 (gross income) - $30,000 (business deductions for AGI) = $90,000
(AGI) – $9,250 (standard deduction) – $4,000 (personal exemption) – $8,000
(dependency exemptions for parents) = $68,750 taxable income.
POINTS: 1
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SIIT.HOSM.15.LO: 3-04 - LO: 3-04
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111. In 2015, Ashley earns a salary of $55,000, has capital gains of $3,000, and receives interest income of $5,000. Her
husband died in 2014. Ashley has a dependent son, Tyrone, who is age 8. Her itemized deductions are $9,000.
a. What is her filing status?

b. Calculate Ashley’s taxable income for 2015.
ANSWER: a. Ashley satisfies the requirements for a surviving spouse.
b. Salary $55,000
Capital gains 3,000
Interest 5,000
AGI $63,000
Less: Standard deduction (12,600)
Less: Personal exemption and dependency deduction ($4,000 × 2) (8,000)
Taxable income $42,400
POINTS: 1
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112. Mr. Lee is a citizen and resident of Hong Kong, while Mr. Anderson is a citizen and resident of the U.S. In the
taxation of income, Hong Kong uses a territorial approach, while the U.S. follows the global system. In terms of effect,
explain what this means to Mr. Lee and Mr. Anderson.
ANSWER: Mr. Lee is taxed only on the income he receives from Hong Kong, while Mr. Anderson is
taxed on his global income. Under the U.S. approach, a citizen or resident is taxed on a
worldwide basis. Since the U.S. system could lead to the same income being taxed twice,
various relief provisions are necessitated (e.g., foreign tax credit).
POINTS: 1
DIFFICULTY: Easy
113. The Deweys are expecting to save on their taxes for 2015. Not only have both incurred large medical expenses, but
both reached age 65. During the year, they also recognized a $30,000 loss on some land they sold which was purchased as
an investment several years ago. Are the Deweys under a mistaken understanding regarding their tax position? Explain.
ANSWER: The Deweys are expecting to qualify for two additional standard deductions and anticipating
a deduction for medical expenses. The two objectives cannot coexist. Claiming a medical
deduction requires that they itemize. Taxpayers who itemize, however, cannot claim any type
of standard deduction. Regarding the capital loss, and presuming no capital gains, only
$3,000 can be deducted against their other income. The balance of $27,000 must be carried
over to future years.
POINTS: 1
DIFFICULTY: Easy
SIIT.HOSM.15.LO: 3-02 - LO: 3-02
SIIT.HOSM.15.LO: 3-08 - LO: 3-08
114. Deductions for AGI are often referred to as “above-the-line” or “page 1” deductions. Explain.
ANSWER: “Above the line” means before the bottom line of page 1 of Form 1040, which is AGI. These
deductions appear on page 1 of Form 1040.
POINTS: 1
DIFFICULTY: Easy
SIIT.HOSM.15.LO: 3-02 - LO: 3-02
115. Adjusted gross income (AGI) sets the ceiling or the floor for certain deductions. Explain and illustrate what this
statement means.
ANSWER: By a ceiling what is meant is that the deduction cannot exceed a percentage of AGI. Thus, the
charitable contribution deduction cannot exceed 50% of a taxpayer’s AGI. By a floor what is
meant is that a deduction is allowed only if it exceeds a percentage of AGI. Thus, the
deduction for medical expenses is limited to the excess of these expenses over 10% (or 7.5%)
of AGI.
POINTS: 1
DIFFICULTY: Easy

116. During the current year, Doris received a large gift from her parents and a sizeable inheritance from an uncle. She
also paid premiums on an insurance policy on her life. Doris is confused because she cannot find any place on Form 1040
to report these items. Explain.
ANSWER: Gifts and inheritances are exclusions from gross income. Like most exclusions, they are not
reported on Form 1040. Premiums on a personal life insurance policy are nondeductible.
Nondeductible items, such as these premiums, are not reported on Form 1040
POINTS: 1
DIFFICULTY: Easy
117. Mel is not quite sure whether an expenditure he made is a deduction for AGI or a deduction from AGI. Since he
plans to choose the standard deduction option for the year, does the distinction matter? Explain.
ANSWER: It makes a great deal of difference if the expenditure is a deduction for AGI. If it is, Mel will
benefit taxwise. It makes no difference, however, if it is a deduction from. The standard
deduction is in lieu of itemized deductions.
POINTS: 1
DIFFICULTY: Easy
118. When filing their Federal income tax returns, the Youngs always claimed the standard deduction. After they
purchased a home, however, they started to itemize their deductions from AGI.
a. Explain the reason for the change.
b. Suppose they purchased the home in November 2014, but did not start itemizing until tax
year 2015. Why the delay as to itemizing?
ANSWER: a. The interest on the home mortgage and the property taxes gave the Youngs itemized
deductions in excess of the applicable standard deduction.
b. The home mortgage interest and property taxes for two months (i.e., November and
December) may not have been enough to place the Youngs in a position to exceed the
applicable standard deduction for 2014. In 2015, however, a full 12 months worth of
home mortgage interest and property taxes in involved.
POINTS: 1
DIFFICULTY: Easy
119. The Dargers have itemized deductions that exceed the standard deduction. However, when they file their joint return,
they choose the standard deduction option.
a. Is this proper procedure?
b. Aside from a possible misunderstanding as to the tax law, what might be the reason for the
Darger’s choice?
ANSWER: a. Yes. The choice between itemizing and claiming the standard deduction is elective and
up to the taxpayer.
The excess of the itemized deductions over the standard deduction may be marginal, and
b.
the Dargers are willing to forgo the effort of itemizing for a small tax savings. Also, they
may not maintain the records (i.e., substantiation) that some itemized deductions
require.
POINTS: 1
DIFFICULTY: Easy
120. Under what circumstances, if any, may an ex-spouse be claimed as a dependent?

ANSWER: As an ex-spouse does not meet the relationship test, he or she must be a member of the
taxpayer’s household. The association cannot be in violation of local law and the year
involved cannot be the year of the divorce.
POINTS: 1
DIFFICULTY: Easy
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Still Olivia kept silent and it was the old man who answered Aunt
Cassie. “He wanted to be buried here.... He wrote to ask me, when he was
dying.”
“He had no right to make such a request. He forfeited all rights by his
behavior. I say it again and I’ll keep on saying it. He ought never to have
been brought back here ... after people even forgot whether he was alive or
dead.”
The perilous calm had settled over Olivia.... She had been looking out of
the window across the marshes into the distance, and when she turned she
spoke with a terrible quietness. She said: “You may do with Horace
Pentland’s body what you like. It is more your affair than mine, for I never
saw him in my life. But it is my son who is dead ... my son, who belongs to
me more than to any of you. You may bury Horace Pentland on the same
day ... at the same service, even in the same grave. Things like that can’t
matter very much after death. You can’t go on pretending forever.... Death
is too strong for that. It’s stronger than any of us puny creatures because it’s
the one truth we can’t avoid. It’s got nothing to do with prejudices and pride
and respectability. In a hundred years—even in a year, in a month, what will
it matter what we’ve done with Horace Pentland’s body?”
She rose, still enveloped in the perilous calm, and said: “I’ll leave
Horace Pentland to you two. There is none of his blood in my veins.
Whatever you do, I shall not object ... only I wouldn’t be too shabby in
dealing with death.”
She went out, leaving Aunt Cassie exhausted and breathless and
confused. The old woman had won her battle about the burial of Horace
Pentland, yet she had suffered a great defeat. She must have seen that she
had really lost everything, for Olivia somehow had gone to the root of
things, in the presence of John Pentland, who was himself so near to death.
(Olivia daring to say proudly, as if she actually scorned the Pentland name,
“There is none of his blood in my veins.”)
But it was a defeat which Olivia knew she would never admit: that was
one of the qualities which made it impossible to deal with Aunt Cassie.
Perhaps, even as she sat there dabbing at her eyes, she was choosing new
weapons for a struggle which had come at last into the open because it was
impossible any longer to do battle through so weak and shifting an ally as
Anson.
She was a natural martyr, Aunt Cassie. Martyrdom was the great
feminine weapon of her Victorian day and she was practised in it; she had
learned all its subtleties in the years she had lain wrapped in a shawl on a
sofa subduing the full-blooded Mr. Struthers.
And Olivia knew as she left the room that in the future she would have
to deal with a poor, abused, invalid aunt who gave all her strength in doing
good works and received in return only cruelty and heartlessness from an
outsider, from an intruder, a kind of adventuress who had wormed her way
into the heart of the Pentland family. Aunt Cassie, by a kind of art of which
she possessed the secret, would somehow make it all seem so.
2
The heat did not go away. It hung in a quivering cloud over the whole
countryside, enveloping the black procession which moved through the
lanes into the highroad and thence through the clusters of ugly stucco
bungalows inhabited by the mill-workers, on its way past the deserted
meeting-house where Preserved Pentland had once harangued a tough and
sturdy congregation and the Rev. Josiah Milford had set out with his flock
for the Western Reserve.... It enveloped the black, slow-moving procession
to the very doors of the cool, ivy-covered stone church (built like a stage
piece to imitate some English county church) where the Pentlands
worshiped the more polite, compromising gods scorned and berated by the
witch-burner. On the way, beneath the elms of High Street, Polish women
and children stopped to stare and cross themselves at the sight of the grand
procession.
The little church seemed peaceful after the heat and the stir of the
Durham street, peaceful and hushed and crowded to the doors by the
relatives and connections of the family. Even the back pews were filled by
the poor half-forgotten remnants of the family who had no wealth to carry
them smoothly along the stream of life. Old Mrs. Featherstone (who did
washing) was there sobbing because she sobbed at all funerals, and old
Miss Haddon, the genteel Pentland cousin, dressed even in the midst of
summer in her inevitable cape of thick black broadcloth, and Mrs. Malson,
shabby-genteel in her foulards and high-pitched bonnet, and Miss
Murgatroyd whose bullfinch house was now “Ye Witch’s Broome” where
one got bad tea and melancholy sandwiches....
Together Bishop Smallwood and Aunt Cassie had planned a service
calculated skilfully to harrow the feelings and give full scope to the vast
emotional capacities of their generation and background.
They chose the most emotional of hymns, and Bishop Smallwood,
renowned for his effect upon pious and sentimental old ladies, said a few
insincere and pompous words which threw Aunt Cassie and poor old Mrs.
Featherstone into fresh excesses of grief. The services for the boy became a
barbaric rite dedicated not to his brief and pathetic existence but to a
glorification of the name he bore and of all those traits—the narrowness, the
snobbery, the lower middle-class respect for property—which had
culminated in the lingering tragedy of his sickly life. In their respective
pews Anson and Aunt Cassie swelled with pride at the mention of the
Pentland ancestry. Even the sight of the vigorous, practical, stocky Polish
women staring round-eyed at the funeral procession a little before, returned
to them now in a wave of pride and secret elation. The same emotion in
some way filtered back through the little church from the pulpit where
Bishop Smallwood (with the sob in his voice which had won him prizes at
the seminary) stood surrounded by midsummer flowers, through all the
relatives and connections, until far in the back among the more obscure and
remote ones it became simply a pride in their relation to New England and
the ancient dying village that was fast disappearing beneath the inroads of a
more vigorous world. Something of the Pentland enchantment engulfed
them all, even old Mrs. Featherstone, with her poor back bent from washing
to support the four defective grandchildren who ought never to have been
born. Through her facile tears (she wept because it was the only pleasure
left her) there shone the light of a pride in belonging to these people who
had persecuted witches and evolved transcendentalism and Mr. Lowell and
Doctor Holmes and the good, kind Mr. Longfellow. It raised her somehow
above the level of those hardy foreigners who worshiped the Scarlet Woman
of Rome and jostled her on the sidewalks of High Street.
In all the little church there were only two or three, perhaps, who
escaped that sudden mystical surge of self-satisfaction.... O’Hara, who was
forever outside the caste, and Olivia and old John Pentland, sitting there
side by side so filled with sorrow that they did not even resent the antics of
Bishop Smallwood. Sabine (who had come, after all, to the services) sensed
the intensity of the engulfing emotion. It filled her with a sense of slow,
cold, impotent rage.
As the little procession left the church, wiping its eyes and murmuring in
lugubrious tones, the clouds which a little earlier had sprung up against the
distant horizon began to darken the whole sky. The air became so still that
the leaves on the tall, drooping elms hung as motionless as leaves in a
painted picture, and far away, gently at first, and then with a slow,
increasing menace, rose the sound of distant echoing thunder. Ill at ease, the
mourners gathered in little groups about the steps, regarding alternately the
threatening sky and the waiting hearse, and presently, one by one, the more
timorous ones began to drift sheepishly away. Others followed them slowly
until by the time the coffin was borne out, they had all melted away save for
the members of the “immediate family” and one or two others. Sabine
remained, and O’Hara and old Mrs. Soames (leaning on John Pentland’s
arm as if it were her grandson who was dead), and old Miss Haddon in her
black cape, and the pall-bearers, and of course Bishop Smallwood and the
country rector who, in the presence of this august and saintly pillar of the
church, had faded to insignificance. Besides these there were one or two
other relatives, like Struthers Pentland, a fussy little bald man (cousin of
John Pentland and of the disgraceful Horace), who had never married but
devoted himself instead to fathering the boys of his classes at Harvard.
It was this little group which entered the motors and hurried off after the
hearse in its shameless race with the oncoming storm.
The town burial-ground lay at the top of a high, bald hill where the first
settlers of Durham had chosen to dispose of their dead, and the ancient
roadway that led up to it was far too steep and stony to permit the passing
of motors, so that part way up the hill the party was forced to descend and
make the remainder of the journey on foot. As they assembled, silently but
in haste, about the open, waiting grave, the sound of the thunder
accompanied now by wild flashes of lightning, drew nearer and nearer, and
the leaves of the stunted trees and shrubs which a moment before had been
so still, began to dance and shake madly in the green light that preceded the
storm.
Bishop Smallwood, by nature a timorous man, stood beside the grave
opening his jewel-encrusted Prayer Book (he was very High Church and
fond of incense and precious stones) and fingering the pages nervously,
now looking down at them, now regarding the stolid Polish grave-diggers
who stood about waiting to bury the last of the Pentlands. There were
irritating small delays, but at last everything was ready and the Bishop,
reading as hastily as he dared, began the service in a voice less rich and
theatrical than usual.
“I am the Resurrection and the Life, saith the Lord....”
And what followed was lost in a violent crash of thunder so that the
Bishop was able to omit a line or two without being discovered. The few
trees on the bald hill began to sway and rock, bending low toward the earth,
and the crape veils of the women performed wild black writhings. In the
uproar of wind and thunder only a sentence or two of the service became
audible....
“For a thousand years in Thy sight are but as yesterday, seeing that the
past is as a watch in the night....”
And then again a wild, angry Nature took possession of the services,
drowning out the anxious voice of the Bishop and the loud theatrical sobs of
Aunt Cassie, and again there was a sudden breathless hush and the sound of
the Bishop’s voice, so pitiful and insignificant in the midst of the storm,
reading....
“O teach us to number our days that we may apply our hearts unto
wisdom.”
And again:
“For as much as it hath pleased Almighty God in His Providence to take
out of the world the soul of our deceased brother.”
And at last, with relief, the feeble, reedlike voice, repeating with less
monotony than usual: “The Grace of our Lord Jesus Christ and the Love of
God and the Fellowship of the Holy Ghost be with us all evermore. Amen.”
Sabine, in whose hard nature there lay some hidden thing which exulted
in storms, barely heard the service. She stood there watching the wild
beauty of the sky and the distant sea and the marshes and thinking how
different a thing the burial of the first Pentland must have been from the
timorous, hurried rite that marked the passing of the last. She kept seeing
those first fanatical, hard-faced, rugged Puritans standing above their tombs
like ghosts watching ironically the genteel figure of the Apostle to the
Genteel and his jeweled Prayer Book....
The Polish grave-diggers set about their work stolidly indifferent to the
storm, and before the first motor had started down the steep and stony path,
the rain came with a wild, insane violence, sweeping inward in a wall
across the sea and the black marshes. Sabine, at the door of her motor,
raised her head and breathed deeply, as if the savage, destructive force of
the storm filled her with a kind of ecstasy.
On the following day, cool after the storm and bright and clear, a second
procession made its way up the stony path to the top of the bald hill, only
this time Bishop Smallwood was not there, nor Cousin Struthers Pentland,
for they had both been called away suddenly and mysteriously. And Anson
Pentland was not there because he would have nothing to do with a
blackguard like Horace Pentland, even in death. In the little group about the
open grave stood Olivia and John Pentland and Aunt Cassie, who had come
because, after all, the dead man’s name was Pentland, and Miss Haddon, (in
her heavy broadcloth cape), who never missed any funeral and had learned
about this one from her friend, the undertaker, who kept her perpetually au
courant. There were not even any friends to carry the coffin to the grave,
and so this labor was divided between the undertaker’s men and the grave-
diggers....
And the service began again, read this time by the rector, who since the
departure of the Bishop seemed to have grown a foot in stature....
“I am the Resurrection and the Life, saith the Lord....
“For a thousand years in Thy sight are but as yesterday, seeing that is
past as a watch in the night....
“O teach us to number our days that we may apply our hearts unto
wisdom.”
Aunt Cassie wept again, though the performance was less good than on
the day before, but Olivia and John Pentland stood in silence while Horace
Pentland was buried at last in the midst of that little colony of grim and
respectable dead.
Sabine was there, too, standing at a little distance, as if she had a
contempt for all funerals. She had known Horace Pentland in life and she
had gone to see him in his long exile whenever her wanderings led her to
the south of France, less from affection than because it irritated the others in
the family. (He must have been happier in that warm, rich country than he
could ever have been in this cold, stony land.) But she had come to-day less
for sentimental reasons than because it gave her the opportunity of a
triumph over Aunt Cassie. She could watch Aunt Cassie out of her cold
green eyes while they all stood about to bury the family skeleton. Sabine,
who had not been to a funeral in the twenty-five years since her father’s
death, had climbed the stony hill to the Durham town burial-ground twice in
as many days....
The rector was speaking again....
“The Grace of our Lord Jesus Christ and the Love of God and the
Fellowship of the Holy Ghost be with us all evermore. Amen.”
The little group turned away in silence, and in silence disappeared over
the rim of the hill down the steep path. The secret burial was finished and
Horace Pentland was left alone with the Polish grave-diggers, come home
at last.
3
The peace which had taken possession of Olivia as she sat alone by the
side of her dead son, returned to her slowly with the passing of the
excitement over the funeral. Indeed, she was for once thankful for the
listless, futile enchantment which invested the quiet old world. It soothed
her at a moment when, all interest having departed from life, she wanted
merely to be left in peace. She came to see for a certainty that there was no
tragedy in her son’s death; the only tragedy had been that he had ever lived
at all such a baffled, painful, hopeless existence. And now, after so many
years of anxiety, there was peace and a relaxation that seemed strange and
in a way delicious ... moments when, lying in the chaise longue by the
window overlooking the marshes, she was enveloped by deep and healing
solitude. Even the visits of Aunt Cassie, who would have forced her way
into Olivia’s room in the interests of “duty,” made only a vague, dreamlike
impression. The old lady became more and more a droning, busy insect, the
sound of whose buzzing grew daily more distant and vague, like the sound
of a fly against a window-pane heard through veils of sleep.
From her window she sometimes had a distant view of the old man,
riding alone now, in the trap across the fields behind the old white horse,
and sometimes she caught a glimpse of his lean figure riding the savage red
mare along the lanes. He no longer went alone with the mare; he had
yielded to Higgins’ insistent warnings of her bad temper and permitted the
groom to go with him, always at his side or a little behind to guard him,
riding a polo pony with an ease and grace which made horse and man seem
a single creature ... a kind of centaur. On a horse the ugliness of the robust,
animal little man seemed to flow away. It was as if he had been born thus,
on a horse, and was awkward and ill at ease with his feet on the earth.
And Olivia knew the thought that was always in the mind of her father-
in-law as he rode across the stony, barren fields. He was thinking all the
while that all this land, all this fortune, even Aunt Cassie’s carefully tended
pile, would one day belong to a family of some other name, perhaps a name
which he had never even heard.
There were no more Pentlands. Sybil and her husband would be rich,
enormously so, with the Pentland money and Olivia’s money ... but there
would never be any more Pentlands. It had all come to an end in this ...
futility and oblivion. In another hundred years the name would exist, if it
existed at all, only as a memory, embalmed within the pages of Anson’s
book.
The new melancholy which settled over the house came in the end even
to touch the spirit of Sybil, so young and so eager for experience, like a
noxious mildew. Olivia noticed it first in a certain shadowy listlessness that
seemed to touch every action of the girl, and then in an occasional faint sigh
of weariness, and in the visits the girl paid her in her room, and in the way
she gave up willingly evenings at Brook Cottage to stay at home with her
mother. She saw that Sybil, who had always been so eager, was touched by
the sense of futility which she (Olivia) had battled for so long. And Sybil,
Sybil of them all, alone possessed the chance of being saved.
She thought, “I must not come to lean on her. I must not be the sort of
mother who spoils the life of her child.”
And when John Pentland came to sit listlessly by her side, sometimes in
silence, sometimes making empty speeches that meant nothing in an effort
to cover his despair, she saw that he, too, had come to her for the strength
which she alone could give him. Even old Mrs. Soames had failed him, for
she lay ill again and able to see him only for a few minutes each day. (It
was Sabine’s opinion, uttered during one of her morning visits, that these
strange sudden illnesses came from overdoses of drugs.)
So she came to see that she was being a coward to abandon the struggle
now, and she rose one morning almost at dawn to put on her riding-clothes
and set out with Sybil across the wet meadows to meet O’Hara. She
returned with something of her pallor gone and a manner almost of gaiety,
her spirit heightened by the air, the contact with O’Hara and the sense of
having taken up the struggle once more.
Sabine, always watchful, noticed the difference and put it down to the
presence of O’Hara alone, and in this she was not far wrong, for set down
there in Durham, he affected Olivia powerfully as one who had no past but
only a future. With him she could talk of things which lay ahead—of his
plans for the farm he had bought, of Sybil’s future, of his own reckless,
irresistible career.
O’Hara himself had come to a dangerous state of mind. He was one of

those men who seek fame and success less for the actual rewards than for
the satisfaction of the struggle, the fierce pleasure of winning with all the
chances against one. He had won successes already. He had his house, his
horses, his motor, his well-tailored clothes, and he knew the value of these
things, not only in the world of Durham, but in the slums and along the
wharves of Boston. He had no illusions about the imperfect workings of
democracy. He knew (perhaps because, having begun at the very bottom, he
had fought his way very near to the top) that the poor man expects a
politician to be something of a splendorous affair, especially when he has
begun his career as a very common and ordinary sort of poor man. O’Hara
was not playing his game foolishly or recklessly. When he visited the slums
or sat in at political meetings, he was a sort of universal common man, a
brother to all. When he addressed a large meeting or presided at an
assembly, he arrived in a glittering motor and appeared in the elegant
clothes suitable to a representative of the government, of power; and so he
reflected credit on those men who had played with him as boys along India
Wharf and satisfied the universal hunger in man for something more
splendorous than the machinery of a perfect democracy.
He understood the game perfectly and made no mistakes, for he had had
the best of all training—that of knowing all sorts of people in all sorts of
conditions. In himself, he embodied them all, if the simple and wholly
kindly and honest were omitted; for he was really not a simple man nor a
wholly honest one and he was too ruthless to be kindly. He understood
people (as Sabine had guessed), with their little prides and vanities and
failings and ambitions.
Aunt Cassie and Anson in the rigidity of their minds had been unjust in
thinking that their world was the goal of his ambitions. They had, in the
way of those who depend on their environment as a justification for their
own existence, placed upon it a value out of all proportion in the case of a
man like O’Hara. To them it was everything, the ultimate to be sought on
this earth, and so they supposed it must seem to O’Hara. It would have been
impossible for them to believe that he considered it only as a small part of
his large scheme of life and laid siege to it principally for the pleasure that
he found in the battle; for it was true that O’Hara, once he had won, would
not know what to do with the fruits of his victory.
Already he himself had begun to see this. He had begun to understand
that the victory was so easy that the battle held little savor for him.
Moments of satisfaction such as that which had overtaken him as he sat
talking to Sabine were growing more and more rare ... moments when he
would stop and think, “Here am I, Michael O’Hara, a nobody ... son of a
laborer and a housemaid, settled in the midst of such a world as Durham,
talking to such a woman as Mrs. Cane Callendar.”
No, the savor was beginning to fail, to go out of the struggle. He was
beginning to be bored, and as he grew bored he grew also restless and
unhappy.
Born in the Roman Catholic church, he was really neither a very
religious nor a very superstitious man. He was skeptic enough not to believe
all the faiths the church sought to impose upon him, yet he was not skeptic
enough to find peace of mind in an artificial will to believe. For so long a
time he had relied wholly upon himself that the idea of leaning for support,
even in lonely, restless moments, upon a God or a church, never even
occurred to him. He remained outwardly a Roman Catholic because by
denying the faith he would have incurred the enmity of the church and
many thousands of devout Irish and Italians. The problem simply did not
concern him deeply one way or the other.
And so he had come, guided for the moment by no very strong passion,
into the doldrums of confusion and boredom. Even his fellow-politicians in
Boston saw the change in him and complained that he displayed no very
great interest in the campaign to send him to Congress. He behaved at times
as if it made not the slightest difference to him whether he was elected to
Congress or not ... he, this Michael O’Hara who was so valuable to his
party, so engaging and shrewd, who could win for it almost anything he
chose.
And though he took care that no one should divine it, this strange state of
mind troubled him more deeply than any of his friends. He was assailed by
the certainty that there was something lacking from his life, something very
close to the foundations. Now that he was inactive and bored, he had begun
to think of himself for the first time. The fine, glorious burst of first youth,
when everything seemed part of a splendid game, was over and done now,
and he felt himself slipping away toward the borderland of middle-age.
Because he was a man of energy and passion, who loved life, he felt the
change with a keen sense of sadness. There was a kind of horror for him in
the idea of a lowered tempo of life—a fear that filled him at times with a
passionately satisfactory sort of Gaelic melancholy.
In such moments, he had quite honestly taken stock of all he possessed,
and found the amassed result bitterly unsatisfactory. He had a good enough
record. He was decidedly more honorable than most men in such a dirty
business as politics—indeed, far more honorable and freer from spites and
nastinesses than many of those who had come out of this very sacred
Durham world. He had made enough money in the course of his career, and
he was winning his battle in Durham. Yet at thirty-five life had begun to
slacken, to lose some of that zest which once had led him to rise every
morning bursting with animal spirits, his brain all a-glitter with fascinating
schemes.
And then, in the very midst of this perilous state of mind, he discovered
one morning that the old sensation of delight at rising had returned to him,
only it was not because his brain was filled with fascinating schemes. He
arose with an interest in life because he knew that in a little while he would
see Olivia Pentland. He arose, eager to fling himself on his horse and,
riding across the meadows, to wait by the abandoned gravel-pit until he saw
her coming over the dew-covered fields, radiant, it seemed to him, as the
morning itself. On the days when she did not come it was as if the bottom
had dropped out of his whole existence.
It was not that he was a man encountering the idea of woman for the first
time. There had been women in his life always, since the very first
bedraggled Italian girl he had met as a boy among the piles of lumber along
the wharves. There had been women always because it was impossible for a
man so vigorous and full of zest, so ruthless and so scornful, to have lived
thirty-five years without them, and because he was an attractive man, filled
when he chose to be, with guile and charm, whom women found it difficult
to resist. There had been plenty of women, kept always in the background,
treated as a necessity and prevented skilfully from interfering with the more
important business of making a career.
But with Olivia Pentland, something new and disturbing had happened
to him ... something which, in his eagerness to encompass all life and
experience, possessed an overwhelming sensuous fascination. She was not
simply another woman in a procession of considerable length. Olivia
Pentland, he found, was different from any of the others ... a woman of
maturity, poised, beautiful, charming and intelligent, and besides all these
things she possessed for him a kind of fresh and iridescent bloom, the same
freshness, only a little saddened, that touched her young daughter.
In the beginning, when they had talked together while she planned the
garden at Brook Cottage, he had found himself watching her, lost in a kind
of wonder, so that he scarcely understood what she was saying. And all the
while he kept thinking, “Here is a wonderful woman ... the most wonderful
I’ve ever seen or will ever see again ... a woman who could make life a
different affair for me, who would make of love something which people
say it is.”
She had affected him thus in a way that swept aside all the vulgar and
cynical coarseness with which a man of such experience is likely to invest
the whole idea of woman. Until now women had seemed to him made to
entertain men or to provide children for them, and now he saw that there
was, after all, something in this sentiment with which people surrounded a
love affair. For a long time he searched for a word to describe Olivia and in
the end he fell back upon the old well-worn one which she always brought
to mind. She was a “lady”—and as such she had an overwhelming effect
upon his imagination.
He had said to himself that here was a woman who could understand
him, not in the aloof, analytical fashion of a clever woman like Sabine
Callendar, but in quite another way. She was a woman to whom he could
say, “I am thus and so. My life has been of this kind. My motives are of this
sort,” and she would understand, the bad with the good. She would be the
one person in the world to whom he could pour out the whole burden of
secrets, the one woman who could ever destroy the weary sense of
loneliness which sometimes afflicted him. She made him feel that, for all
his shrewdness and hard-headed scheming, she was far wiser than he would
ever be, that in a way he was a small boy who might come to her and,
burying his head in her lap, have her stroke his thick black hair. She would
understand that there were times when a man wanted to be treated thus. In
her quiet way she was a strong woman, unselfish, too, who did not feed
upon flattery and perpetual attention, the sort of woman who is precious to
a man bent upon a career. The thought of her filled him with a poignant
feeling of sadness, but in his less romantic moments he saw, too, that she
held the power of catching him up out of his growing boredom. She would
be of great value to him.
And so Sabine had not been far wrong when she thought of him as the
small boy sitting on the curbstone who had looked up at her gravely and
said, “I’m playing.” He was at times very like such an image.
But in the end he was always brought up abruptly against the hard reality
of the fact that she was already married to a man who did not want her
himself but who would never set her free, a man who perhaps would have
sacrificed everything in the world to save a scandal in his family. And
beyond these hard, tangible difficulties he discerned, too, the whole dark
decaying web, less obvious but none the less potent, in which she had
become enmeshed.
Yet these obstacles only created a fascination to a mind so complex, so
perverse, for in the solitude of his mind and in the bitterness of the long
struggle he had known, he came to hold the whole world in contempt and
saw no reason why he should not take what he wanted from this Durham
world. Obstacles such as these provided the material for a new battle, a new
source of interest in the turbulent stream of his existence; only this time
there was a difference ... that he coveted the prize itself more than the
struggle. He wanted Olivia Pentland, strangely enough, not for a moment or
even for a month or a year, but for always.
He waited because he understood, in the shrewdness of his long
experience, that to be insistent would only startle such a woman and cause
him to lose her entirely, and because he knew of no plan of action which
could overcome the obstacles which kept them apart. He waited, as he had
done many times in his career, for circumstances to solve themselves. And
while he waited, with each time that he saw her she grew more and more
desirable, and his own invincible sense of caution became weaker and
weaker.
4
In those long days spent in her room, Olivia had come slowly to be
aware of the presence of the newcomer at Brook Cottage. It had begun on
the night of Jack’s death with the sound of his music drifting across the
marshes, and after the funeral Sabine had talked of him to Olivia with an
enthusiasm curiously foreign to her. Once or twice she had caught a glimpse
of him crossing the meadows toward O’Hara’s shining chimneys or going
down the road that led through the marshes to the sea—a tall, red-haired
young man who walked with a slight limp. Sybil, she found, was strangely
silent about him, but when she questioned the girl about her plans for the
day she found, more often than not, that they had to do with him. When she
spoke of him, Sybil had a way of blushing and saying, “He’s very nice,
Mother. I’ll bring him over when you want to see people.... I used to know
him in Paris.”
And Olivia, wisely, did not press her questions. Besides, Sabine had told
her almost all there was to know ... perhaps more than Sybil herself knew.
Sabine said, “He belongs to a rather remarkable family ... wilful,
reckless and full of spirit. His mother is probably the most remarkable of
them all. She’s a charming woman who has lived luxuriously in Paris most
of her life ... not one of the American colony. She doesn’t ape any one and
she’s incapable of pretense of any sort. She’s lived, rather alone, over there
on money ... quite a lot of money ... which seems to come out of steel-mills
in some dirty town of the Middle West. She’s one of my great friends ... a
woman of no intellect, but very beautiful and blessed with a devastating
charm. She is one of the women who was born for men.... She’s irresistible
to them, and I imagine there have been men in her life always. She was
made for men, but her taste is perfect, so her morals don’t matter.”
The woman ... indeed all Jean de Cyon’s family ... seemed to fascinate
Sabine as she sat having tea with Olivia, for she went on and on, talking far
more than usual, describing the house of Jean’s mother, her friends, the
people whom one met at her dinners, all there was to tell about her.
“She’s the sort of woman who has existed since the beginning of time.
There’s some mystery about her early life. It has something to do with
Jean’s father. I don’t think she was happy with him. He’s never mentioned.
Of course, she’s married again now to a Frenchman ... much older than
herself ... a man, very distinguished, who has been in three cabinets. That’s
where the boy gets his French name. The old man has adopted him and
treats him like his own son. De Cyon is a good name in France, one of the
best; but of course Jean hasn’t any French blood. He’s pure American, but
he’s never seen his own country until now.”
Sabine finished her tea and putting her cup back on the Regence table
(which had come from Olivia’s mother and so found its graceful way into a
house filled with stiff early American things), she added, “It’s a remarkable
family ... wild and restless. Jean had an aunt who died in the Carmelite
convent at Lisieux, and his cousin is Lilli Barr ... a really great musician.”
She looked out of the window and after a moment said in a low voice, “Lilli
Barr is the woman whom my husband married ... but she divorced him, too,
and now we are friends ... she and I.” The familiar hard, metallic laugh
returned and she added, “I imagine our experience with him made us
sympathetic.... You see, I know the family very well. It’s the sort of blood
which produces people with a genius for life ... for living in the moment.”
She did not say that Jean and his mother and the ruthless cousin Lilli
Barr fascinated her because they stood in a way for the freedom toward
which she had been struggling through all the years since she escaped from
Durham. They were free in a way from countries, from towns, from laws,
from prejudices, even in a way from nationality. She had hoped once that
Jean might interest himself in her own sullen, independent, clever Thérèse,
but in her knowledge of the world she had long ago abandoned that hope,
knowing that a boy so violent and romantic, so influenced by an upbringing
among Frenchmen, a youth so completely masculine, was certain to seek a
girl more soft and gentle and feminine than Thérèse. She knew it was
inevitable that he should fall in love with a girl like Sybil, and in a way she
was content because it fell in admirably with her own indolent plans. The
Pentlands were certain to look upon Jean de Cyon as a sort of gipsy, and
when they knew the whole truth....
The speculation fascinated her. The summer in Durham, even with the
shadow of Jack’s death flung across it, was not proving as dreadful as she
had feared; and this new development interested her as something she had
never before observed ... an idyllic love affair between two young people
who each seemed to her a perfect, charming creature.
5
It had all begun on the day nearly a year earlier when all Paris was
celebrating the anniversary of the Armistice, and in the morning Sybil had
gone with Thérèse and Sabine to lay a wreath beside the flame at the Arc de
Triomphe (for the war was one of the unaccountable things about which
Sabine chose to make a display of sentiment). And afterward she played in
the garden with the dogs which they would not let her keep at the school in
Saint-Cloud, and then she had gone into the house to find there a
fascinating and beautiful woman of perhaps fifty—a Madame de Cyon, who
had come to lunch, with her son, a young man of twenty-four, tall, straight
and slender, with red hair and dark blue eyes and a deep, pleasant voice. On
account of the day he was dressed in his cuirassier’s uniform of black and
silver, and because of an old wound he walked with a slight limp. Almost at
once (she remembered this when she thought of him) he had looked at her
in a frank, admiring way which gave her a sense of pleasurable excitement
wholly new in her experience.
Something in the sight of the uniform, or perhaps in the feel of the air,
the sound of the military music, the echoes of the Marseillaise and the
Sambre et Meuse, the sight of the soldiers in the street and the great Arc
with the flame burning there ... something in the feel of Paris, something
which she loved passionately, had taken possession of her. It was something
which, gathering in that moment, had settled upon the strange young man
who regarded her with such admiring eyes.
She knew vaguely that she must have fallen in love in the moment she
stood there in Sabine Callendar’s salon bowing to Lily de Cyon. The
experience had grown in intensity when, after lunch, she took him into the
garden to show him her dogs and watched him rubbing the ears of the
Doberman “Imp” and talking to the dog softly in a way which made her
know that he felt about animals as she did. He had been so pleasant in his
manner, so gentle in his bigness, so easy to talk to, as if they had always
been friends.
And then almost at once he had gone away to the Argentine, without
even seeing her again, on a trip to learn the business of cattle-raising
because he had the idea that one day he might settle himself as a rancher.
But he left behind him a vivid image which with the passing of time grew
more and more intense in the depths of a romantic nature which revolted at
the idea of Thérèse choosing a father scientifically for her child. It was an
image by which she had come, almost unconsciously, to measure other
men, even to such small details as the set of their shoulders and the way
they used their hands and the timbre of their voices. It was this she had
really meant when she said to her mother, “I know what sort of man I want
to marry. I know exactly.” She had meant, quite without knowing it, that it
must be a man like Jean de Cyon ... charming, romantic and a little wild.
She had not forgotten him, though there were moments at the school in
Saint-Cloud when she had believed she would never see him again—
moments when she was swept by a delicious sense of hopeless melancholy
in which she believed that her whole life had been blighted, and which led
her to make long and romantic entries in the diary that was kept hidden
beneath her mattress. And so as she grew more hopeless, the aura of
romance surrounding him took on colors deeper and more varied and
intense. She had grown so pale that Mademoiselle Vernueil took to dosing
her, and Thérèse accused her abruptly of having fallen in love, a thing she
denied vaguely and with overtones of romantic mystery.
And then with the return to Pentlands (a return advised by her mother on
account of Jack’s health) the image dimmed a little in the belief that even
by the wildest flights of imagination there was no chance of her seeing him
again. It became a hopeless passion; she prepared herself to forget him and,
in the wisdom of her young mind, grow accustomed to the idea of marrying
one of the tame young men who were so much more suitable and whom her
family had always known. She had watched her admirers carefully,
weighing them always against the image of the young man with red hair,
dressed in the black and silver of the cuirassiers, and beside that image they
had seemed to her—even the blond, good-looking Mannering boy—like
little boys, rather naughty and not half so old and wise as herself. She had
reconciled herself secretly and with gravity to the idea of making one of the
matches common in her world—a marriage determined by property and the
fact that her fiancé would be “the right sort of person.”
And so the whole affair had come to take on the color of a tragic
romance, to be guarded secretly. Perhaps when she was an old woman she
would tell the story to her grandchildren. She believed that whomever she
married, she would be thinking always of Jean de Cyon. It was one of those
half-comic illusions of youth in which there is more than a grain of
melancholy truth.
And then abruptly had come the news of his visit to Brook Cottage. She
still kept her secret, but not well enough to prevent her mother and Sabine
from suspecting it. She had betrayed herself first on the very night of Jack’s
death when she had said, with a sudden light in her eye, “It’s Jean de
Cyon.... I’d forgotten he was arriving to-night.” Olivia had noticed the light
because it was something which went on and on.
And at Brook Cottage young de Cyon, upset by the delay caused by the
funeral and the necessity of respecting the mourning at Pentlands, had
sulked and behaved in such a way that he would have been a nuisance to
any one save Sabine, who found amusement in the spectacle. Used to
rushing headlong toward anything he desired (as he had rushed into the
French army at seventeen and off to the Argentine nine months ago), he
turned ill-tempered and spent his days out of doors, rowing on the river and
bathing in the solitude of the great white beach. He quarreled with Thérèse,
whom he had known since she was a little girl, and tried to be as civil as
possible toward the amused Sabine.
She knew by now that he had not come to Durham through any great
interest in herself or Thérèse. She knew now how wise she had been (for the
purposes of her plan) to have included in her invitation to him the line ...
“Sybil Pentland lives on the next farm to us. You may remember her. She
lunched with us last Armistice Day.”
She saw that he rather fancied himself as a man of the world who was
being very clever in keeping his secret. He asked her about Sybil Pentland
in a casual way that was transparently artificial, and consulted her on the
lapse of time decently necessary before he broke in upon the mourning at
Pentlands, and had Miss Pentland shown any admiration for the young men
about Durham? If he had not been so charming and impatient he would
have bored Sabine to death.
The young man was afraid of only one thing ... that perhaps she had
changed in some way, that perhaps she was not in the reality as charming as
she had seemed to him in the long months of his absence. He was not
without experience (indeed, Sabine believed that he had gone to the
Argentine to escape from some Parisian complication) and he knew that
such calamitous disappointments could happen. Perhaps when he came to
know her better the glamour would fade. Perhaps she did not remember him
at all. But she seemed to him, after months of romantic brooding, the most
desirable woman he had ever seen.
It was a new world in which he discovered himself, in some way a newer

and more different world than the vast grass-covered plains from which he
had just come. People about Durham, he learned, had a way of saying that
Boston and Durham were like England, but this he put down quietly as a
kind of snobbery, because Boston and Durham weren’t like England at all,
so far as he could see; in spots Boston and Durham seemed old, but there
wasn’t the same richness, the same glamour about them. They should have
been romantic and yet they were not; they were more, it seemed to him, like
the illustrations in a school history. They were dry ... sec, he thought,
considering the French word better in this case on account of its sound.
And it wasn’t the likeness to England that he found interesting, but
rather the difference ... the bleak rawness of the countryside and the sight of
whole colonies of peoples as strange and foreign as the Czechs and Poles
providing a sort of alien background to the whole picture.
He had gone about the business of becoming acquainted with his own
country in a thorough, energetic fashion, and being a sensuous youth, filled
with a taste for colors and sounds and all the emanations of the spectacle of
life, he was acutely conscious of it.
To Sabine, he said, “You know the funny thing is that it seems to me like
coming home. It makes me feel that I belong in America ... not in Durham,
but in New York or some of those big roaring towns I’ve passed through.”
He spoke, naturally enough, not at all like an American but in the
clipped English fashion, rather swallowing his words, and now and then
with a faint trace of French intonation. His voice was deeper and richer than
the New England voices, with their way of calling Charles Street “Challs
Street” and sacred Harvard ... “Havaad.”
It was the spectacle of New York which had fascinated him more than
any other because it surpassed all his dreams of it and all the descriptions
people had given him of its immense force and barbaric splendor and the
incredible variety of tongues and people. New York, Sabine told him with a
consciousness of uttering treason, was America, far more than the sort of
life he would encounter in Durham.
As he talked to Sabine of New York, he would rise to that pitch of
excitement and enthusiasm which comes to people keenly alive. He even
confided in her that he had left Europe never to return there to live.
“It’s old country,” he said, “and if one has been brought up there, as I’ve
been, there’s no reason for going back there to live. In a way it’s a dead
world ... dead surely in comparison to the Americas. And it’s the future that
interests me ... not the past. I want to be where the most is going on ... in the
center of things.”
When he was not playing the piano wildly, or talking to Sabine, or
fussing about with Thérèse among the frogs and insects of the laboratory
she had rigged up on the glass-enclosed piazza, he was walking about the
garden in a state of suppressed excitement, turning over and over in his
young mind his own problem and the plans he had for adjusting himself in
this vigorous country. To discover it now, at the age of twenty-five, was an
exciting experience. He was beginning to understand those young
Americans he had encountered occasionally in Europe (like his cousin
Fergus Tolliver, who died in the war), who seemed so alive, so filled with a
reckless sense of adventure ... young men irresistible in such an old, tired
world, because Nature itself was on their side.
To ease his impatience he sought refuge in a furious physical activity,
rowing, swimming and driving with Sabine about the Durham countryside.
He could not walk far, on account of the trouble caused by his old wound,
but he got as far as O’Hara’s house, where he met the Irishman and they
became friends. O’Hara turned over to him a canoe and a rowing-scull and
told him that whenever his leg was better he might have a horse from his
stables.
One morning as he pulled his canoe up the muddy bank of the river after
his early exercise, he heard the sound of hoofs in the thick mud near at hand

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South-Western Federal Taxation 2016

Essentials of Taxation Individuals and

5. An “above the line” deduction refers to a deduction for AGI.

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66. A child who is married cannot be subject to the kiddie tax.

70. Which of the following items, if any, is deductible?

71. Which, if any, of the following is a deduction for AGI?

72. Which, if any, of the following is a deduction for AGI?

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75. During 2015, Marvin had the following transactions:

76. During 2015, Esther had the following transactions:

77. During 2015, Sarah had the following transactions:

78. In 2015, Cindy had the following transactions:

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87. A qualifying child cannot include:

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101. Emily had the following transactions during 2016:

102. Edgar had the following transactions for 2015:

103. Taylor had the following transactions for 2015:

a. What is Warren’s taxable income for 2015?

a. Can Ellen qualify for head of household filing status? Explain.

b. What is Ellen’s taxable income for 2015?

a. What is her filing status?

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a. Explain the reason for the change.

a. Is this proper procedure?

120. Under what circumstances, if any, may an ex-spouse be claimed as a dependent?

O’Hara himself had come to a dangerous state of mind. He was one of

It was a new world in which he discovered himself, in some way a newer

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