1. Look at the Form 1040 you prepared for Maria Escobedo. What is the amount on Form 1040, Line 49?

a. $ 3,800.
b. $ 760.
c. $ 3,000. 
d. $ 5,000.

2. Look at the Form 1040 you prepared for Maria Escobedo. What is the amount on Form 1040, Line 74a?

a. $ 2,200.
b. $ 1,864.
c. $ -0-. 
d. $ None of the above.

3. You cannot claim a lifetime learning credit for a qualified education expense paid with the proceeds of a loan.                

True False

4. The lifetime learning credit is based on qualified education expenses you pay for yourself, your spouse, or a dependent for whom you can can claim an exemption on your tax return. If you paid $1,500 in December 2007 for qualified tuition for the Spring 2008 semester beginning in January 2008, you may be able to use to use the $1,500 in figuring your 2007 credit.                      

True False

5. Generally an amount paid or allowed to, or for the benefit of, a student at an educational institution to aid in the pursuit of studies. The Student may be either an undergraduate or a graduate.

a. A scholarship.
b. A fellowship.
c. A grant.
d. Tuition.

6. You can exclude from your income up to _________ of qualified employer-provided educational assistance.

a. $1,500.00.
b. $2,000.00.
c. $5,250.00.
d. $6,350.00.

7. A scholarship or fellowship is tax free only if

a. You are a candidate for a degree at an eligible educational institution.
b. You use the scholarship or fellowship to pay qualified education expenses.
c. You use the scholarship or fellowship to pay for normal living expenses.
d. Both a and b are correct.

8. If your only income is a completely tax-free scholarship or fellowship,

a. you do not have to file a tax return and no reporting is necessary.
b. you are required to file a tax return to report the non-taxable amount.
c. you must report it on your return if you receive a Form W-2.
d. you must fax a note to the IRS to let them know that the scholarship is tax-free.

9. The Hope credit is a nonrefundable credit. The means that it can reduce your tax to zero, but if the credit is more than your tax the excess will not be refunded to you. You may be able to claim a Hope credit of up to $1,650 for qualified education expenses paid for each eligible student. A tax credit reduces the amount or income tax you may have to pay. Unlike a deduction, which reduces the amount of income subject to tax, a credit, such as the Hope credit,

a. is a refundable credit.
b. directly reduces taxable income.
c. directly reduces the tax itself.
d. can be refunded to you.

10. Generally, you can claim the Hope credit if the following requirement is met.

a. You pay qualified education expenses of higher education.
b. You pay the education expenses for an eligible student.
c. The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return.
d. All of the above.

11. You cannot claim the Hope credit for 2007 if

a. You pay qualified education expenses of higher education.
b. The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return.
c. Your modified adjusted gross income (MAGI) is $57,000 or more ($114,000 or more in the case of a joint return).
d. You pay the education expenses for an eligible student.

12. For purposes of the Hope credit, qualified educational expenses are

a. Insurance, and medical expenses (including student health fees).
b. tuition and certain related expenses required for or attendance at an eligible educational institution.
c. Room and board, transportation or similar personal, living, or family expenses.
d. all of the above.

13. To claim the Hope credit, the student for whom you pay qualified education expenses must be an eligible student. This is a student who

a. For at least one academic period beginning in 2007, the student was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential.
b. Had expenses that were used to figure a Hope credit in any 2 earlier tax years.
c. Has completed the first 2 years of postsecondary education (generally, the freshman and sophomore years in college) before 2007.
d. Was not free of any federal or state felony conviction for possessing or distributing a controlled substance as of the end of 2007.

14.  Larry and Lisa Sanchez are married and file a joint tax return. For 2007, they claim an exemption for their dependent daughter on their tax return. Their MAGI is $63,000. Their daughter is in her sophomore (second) year of studies at the local university. Larry and Lisa paid qualified educational expenses of $5,700 for their daughter in 2007. Larry and Lisa, their daughter, and the local university meet all of the requirements for the Hope Credit. Their tax for the year was $5, 536. 

a. Larry and Lisa can claim a $5,700 Hope credit in 2007.
b. Larry and Lisa can claim a $1,650 Hope credit in 2007.
c. Larry and Lisa can claim a $2,200 Hope credit in 2007.
d. Larry and Lisa can claim a $3,400 Hope credit in 2007.

a. You are only allowed to claim the Hope credit.
b. Can choose to claim both credits.
c. Can choose to claim either credit, but not both.
d. You are only allowed to claim the Lifetime learning credit.

16. Generally, you can claim the Lifetime Learning credit if

a. Your filing status is married filing separately.
b. You are listed as a dependent in the Exemptions section on another person's tax return.
c. You claim the Hope credit or a tuition and fees deduction for the same student in 2007.
d. The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return.

17. For lifetime education credit, if you paid qualified higher education expenses with tax free funds, you cannot claim a credit for those amounts. A tax-free educational assistance would be:

a. Scholarships.
b. Veteran's educational assistance and Pell grants.
c. Employer-provided educational assistance.
d. All of the above.

18. Edna went to school in 2007. She is single and her MAGI is $52,850. She paid $3,500 for her tuition and books. What is the amount of the hope or lifetime learning credit that she is entitled to.  Her tax is $7,455. Assuming that she qualifies for either, which one would be more beneficial to her to take?.

a. $ 291 Lifetime Learning credit.
b. $ 955 Hope credit.
c. $ 700 Lifetime Learning credit.
d. $ 1,500 Hope credit and $2,000 Lifetime Learning credit.

19. For lifetime education credit, this is an expense that would not qualify even if the amount must be paid to institution as a condition of enrollment or attendance.

a. Cost of transportation.
b. Tuition and certain related expenses required for enrollment in a course at an eligible educational institution.
c. Medical expenses (including student health fees).
d. Both a and c are correct.

20. If there are qualified education expenses for your dependent for a year, the lifetime learning credit can be claimed by

a. Your dependent can claim the lifetime credit, because she was the student.
b. You, because you paid the expenses and you are claiming the dependent's exemption.
c. either of you, but not both of you, for your dependent's expenses for the year.
d. None of you.

21.  If, after you file your 2007, tax return, you or someone else receives tax-free educational assistance for, or a refund of, an expense you used to figure a Hope credit on that return, you may have to repay all or part of the credit. You must refigure your credit for 2007 as if the assistance or refund was received in 2007. You add the repayment to your tax liability

a. By filing an amended return for the year you received the credit.
b. You send the IRS a separate check, with you SSN and print "recapture" in memo section.
c. In the year you receive the assistance or refund.
d. None of the above.

22.  Generally, personal interest you pay, other than certain mortgage interest, is not deductible on you tax return. However, if your modified adjusted gross income (MAGI) is less than $70,000 ($140,000 if filing a joint return) there is special deduction allowed for paying interest on a student loan used in higher education. This deduction can reduce the amount of your income subject to tax by up to $2,500 in 2007. The student loan interest deduction is taken as

a. a nonrefundable credit.
b. An adjustment to income.
c. An adjustment to tax.
d. A credit.

23. You cannot claim a student loan interest deduction if

a. Your filing status is married filing separately.
b. You paid interest on a qualified student loan.
c. You are legally obligated to pay interest on a qualified student loan.
d. Any of the above.

 24. Mr. Shimizu had a student loan for qualified higher education on which interest was due. The loan payments were required from July 1, 2003, until December 31, 2007.  The interest payments were $1,200 per year. How much may he deduct in arriving at adjusted gross income in 2007?

a. $ 600.
b. $ 1,000.
c. $ 1,200.
d. - 0 -

25.  During 2007, Amanda paid $2,100 interest on her qualified student loan. Only she was legally obligated to make the payments. Her parents claimed an exemption for her on their 2006 tax return assuming all other requirements are met. Who may deduct the student loan interest that Amanda paid in 2007?

a. Amanda, because she paid for it.
b. Amanda's parents because she is their dependent.
c. Either Amanda or their parents can choose who can deduct the interest.
d. Neither Amanda nor her parents can deduct the student interest.

26.  To claim a deduction for student loan interest the loan for which you paid interest is

a. A loan from a related person.
b. Only to pay tuition and other qualified higher education expenses.
c. A loan from a qualified employer plan.
d. A loan that was for your higher education expenses but for which you were not legally liable.

27. You may be able to deduct qualified education expenses paid during the year for yourself, your spouse, or a dependent. You cannot claim this deduction if your filing status is married filing separately or if another person can claim an exemption for you. The tuition and fees deduction can reduce the amount of your income subject to tax by up to ____ and this deduction can be taken as a (an) ___.

a. $ 4,000; adjustment to income.
b. $ 2,000; deduction.
c. $ 1,500; credit.
d. $ 3,500; non-refundable credit.

28.  The following would a be disallowed double benefit.

a. You deduct educational expenses that have been paid with tax-free interest on U.S. savings bonds.
b. You deduct qualified education expenses that have been paid with tax-free scholarship, grant, or employer provided educational assistance.
c. You deduct qualified education expenses for a student on your income tax return if you anyone else claims a Hope or lifetime learning credit for that same student in the same year.
d. Any of the above

29. Contributions to a Coverdell ESA are not deductible, but amounts deposited in the account grow tax free until distributed. There is no limit on the number of separate Coverdell ESAs that can be established for a designated beneficiary. However, the total contributions for the beneficiary in any year cannot be more than

a. $ 1,000.
b. $ 2,000.
c. $ 2,500.
d. $ 3,000.

30. You can take a distribution from you IRA before you reach age 59 1/2 and not have to pay the 10% additional tax if, for the year of distribution, you pay qualified education expenses for yourself, your spouse, or your your spouse's children or grandchildren. The part not subject to the additional tax is the part of the distribution that

a. is used for room and board, as determined by the eligible educational institution, that was included in the cost of attendance for a particular academic period or living arrangement of the student.
b. is used for tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution.
c. is not more than the adjusted qualified education expenses for the year.
d. All of the above.

31. Look at the Form 540 you prepared for Maria Escobedo. What is the amount on Form 540, Line 20?

a. $ 696.
b. $ 836.
c. $ -0-. 
d. None of the above.

32. Look at the Form 540 you prepared for Maria Escobedo. What is the amount on Form 540, Line 66?

a. $ 181.
b. $ -0-.
c. $ 195. 
d. None of the above.

33. For California, if you received a distribution from a Coverall ESA, report the entire amount of the distribution on line 21f of Schedule CA (540).

True False

34. California conforms to federal law regarding student loan interest deductions except for a spouse/RDP of a non-California domiciled military taxpayer residing in a community property state.                   

True False

35. During 2007, you paid $800 interest on a qualified student loan. Your 2007 MAGI is $135,000 and you are filing a joint return. For California, your student loan interest adjustment is    

a. $ 800.
b. $ -0-.
c. $ 133. 
d. None of the above.

36. During 2007, you paid $2,750 interest on a qualified student loan. Your 2007 MAGI is $135,000 and you are filing a joint return. For California, your student loan interest adjustment is

a. $ 800.
b. $ 2,083.
c. $ 250. 
d. -0-.