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Copyright 漏 2013 Pearson Education, Inc. publishing as Prentice Hall
Prentice Hall's Federal Taxation 2013 Individuals, 26e
(Pope)
Chapter I2 Determination of Tax
1) Gross income is income from whatever source derived less exclusions.
Answer: TRUE
Page Ref.: I:2-3
Objective: 1
2) Although exclusions are usually not reported on an individual's income tax return, interest income on
state and local government bonds must be reported on the tax return.
Answer: TRUE
Explanation: See Additional Comment, p. I2-3.
Page Ref.: I:2-3
Objective: 1
3) Generally, deductions for (not from) adjusted gross income are personal expenses specifically allowed
by tax law.
Answer: FALSE
Explanation: Personal expenses, if deductible, are generally from AGI deductions.
Page Ref.: I:2-4
Objective: 1
4) Generally, itemized deductions are personal expenses specifically allowed by the tax law.
Answer: TRUE
Page Ref.: I:2-4
Objective: 1
5) Taxpayers have the choice of claiming either the personal and dependency exemption or the standard
deduction.
Answer: FALSE
Explanation: Taxpayers claim the greater of itemized deductions or the standard deduction. In addition,
taxpayers will reduce taxable income by personal and dependency exemptions.
Page Ref.: I:2-5
Objective: 1
6) Refundable tax credits are allowed to reduce or totally eliminate a taxpayer's tax liability but may not
reduce the liability below zero.
Answer: FALSE
Explanation: Refundable tax credits may reduce the tax liability to zero and, if some credit still remains,
are refundable or paid by the government to the taxpayer.
Page Ref.: I:2-6
Objective: 1
7) Nonrefundable tax credits are allowed to reduce or totally eliminate a taxpayer's tax liability but may
not reduce the liability below zero.
Answer: TRUE
Page Ref.: I:2-6
Objective: 1