In Terms of the Tax Formula Applicable to Individual Taxpayers,which,if

question 28

Multiple Choice

In terms of the tax formula applicable to individual taxpayers,which,if any,of the following statements is correct?

• A) The formula does not apply if a taxpayer elects to claim the standard deduction.
• 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) In arriving at taxable income, a taxpayer must choose between the standard deduction and deductions from AGI.
• E) None of the above.

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Definitions:

Installment Method

is an accounting technique used to recognize revenue and expenses over time as payments are made or received, rather than at the time of transaction.

Basis

The amount of an investment in property for tax purposes; used to calculate gain or loss on a sale or other disposition of the property.

Gain Recognized

The profit realized from the sale or exchange of an asset, which must be reported for tax purposes.

Involuntary Conversion

Involuntary conversion is the process whereby property is destroyed, stolen, condemned, or disposed of under the threat of condemnation, and the owner receives compensation or insurance recovery.