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Multiple Choice Practice Question Filling Status
Which of the following statements is true with respect to filing status in connection with an individual tax return?
a) Taxpayers who meet the requirements for qualifying widow(er) status may choose to file as head of household.
b) Taxpayers who file as head of household get the same standard deduction as single filers but are taxed at a lower rate.
c) Taxpayers who file joint returns are taxed at the same rate as individuals who file as head of household, but the standard deduction is higher.
d) Single taxpayers pay a higher tax rate than individuals who file as head of household or joint filers. They also have the lowest standard deduction of the three
Answer is d).
Taxpayers who meet the requirements for qualifying widow(er) may not file as head of household. Head of household is taxed at lower tax rate than single filers but at a higher rate than joint filers. Head of household also gets a higher standard deduction than single filers but lower than joint filers. Single taxpayers pay the highest tax rate of the three and have the lowest standard deduction.
(Source: cpareviewforfree website) |
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Tax term definition section |
Tax term definition
"Non-taxable Income"
Gifts, Bequests, and Inheritances
Section 102 of the Internal Revenue Code establishes that "Gross income does not include the value of property acquired by gift, bequest, devise, or inheritance." The Courts have established that for the transfer of an asset to qualify as gift that transfer must be made out of affection, respect, admiration, and charity or like impulse. The exclusion applies to gifts inter-vivo as well as gifts made upon the death of the donor. This exclusion does not apply to an employer's gift to employees, except for voluntary payments by an employer to an employee's surviving spouse or to other beneficiaries, presumed to be "as an act of affection or charity".
(Source: Module IV 1040 Exam Prep e-Books Series)
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