ACCT M50 PRINCIPLES OF INCOME TAXATION PRACTICE EXAM | FREE SOLVED ANSWERS
Provisional income is calculated by starting with Adjusted Gross Income (AGI) before Social Security benefits and adding back specific items. One of these items is:
Provisional income is calculated by starting with Adjusted Gross Income (AGI) before Social Security benefits and adding back specific items. One of these items is:
Multiple Choice
a. Qualified dividends
b. Deducted interest on educational loans.
c. Capital gains.
d. Wages
Correct Answer: b. Deducted Interest on Educational Loans
Explanation:
a. Qualified dividends → already included in AGI, not added back.
b. Deducted interest on educational loans → this is one of the adjustments to income that lowers AGI, but when figuring provisional income, the IRS does add it back to avoid “double dipping.”
c. Capital gains → already in AGI, not added back.
d. Wages → already in AGI, not added back.
So, the right choice is b. Deducted interest on educational loans.
ACCT M50 PRINCIPLES OF INCOME TAXATION PRACTICE EXAM FREE SOLVED ANSWERS