What's New

American opportunity credit

1.  This new education tax credit (a modification of the Hope credit) is available for 2009 and 2010 with the maximum credit per student of $2,500.

A.  True

B.  False

Hope and lifetime learning credits
2. If you are married and filing a joint return, the amount of your Hope or lifetime learning credit for 2009 is gradually reduced (phased out) if your modified adjusted gross income (MAGI) is between:

A. $94,000 and $114,000
B. $96,000 and $116,000

C. $100,000 and $120,000

D. None of the above

Student loan interest deduction

3.  If you are married and file a joint return, for 2009 the amount of your student loan interest deduction is gradually reduced if your modified gross income (MAGI) is between $120,000 and $150,000.

A. True

B.  False

Education Savings Bond Program
4. Beginning in 2009, the amount of your interest exclusion will be phased out (gradually reduced) if your filing status is married filing jointly or qualifying widow(er) and your modified adjusted gross income (MAGI) is between:

A.  $98,400 and $128,400

B.  $100,650 and $130,650

C.  $104,900 and $134,900

D.  None of the above

Business deduction for work-related education

5. If you drive your car to and from school and qualify to deduct transportation expenses, the amount you can deduct for miles driven during 2009 is 55 cents per mile.

A. True
B. False

Reminders

Estimated Tax

6. If you have taxable income from any of your education benefits and the payer does not withhold enough income tax, you are not required to make estimated tax payments.

A. True
B. False

Introduction
7. You generally can claim more than one type of tax benefit for the same qualifying education expense.

A. True
B. False

Scholarships, Fellowships, Grants, and Tuition Reductions

Reminder

Individual retirement arrangements (IRAs)

8.  A taxable scholarship or fellowship shown in box 1 of Form W-2, Wage and Tax Statement is not eligible compensation to qualify for setting up and making contributions to an IRA.

A.  True

B.  False

Tax-Free Scholarships and Fellowships

9.  A scholarship or fellowship is tax free only if you are a candidate for a degree at an eligible educational institution, and you use the scholarship or fellowship to pay qualified education expenses.

A.  True

B.  False

Qualifed education expenses

10.  For purposes of tax-free scholarships and fellowships, qualified education expenses include:

A.  Room and Board

B.  Tuition and fees

C.  All of the above

D.  None of the above

Athletic Scholarships

11.  Athletic scholarships do not qualify for tax-free treatment even if they meet the other requirments for tax free scholarships and fellowships.

A.  True

B.  False

Taxable Scholarships and Fellowships

Amounts used to pay for expenses that do not qualify

12.  A scholarship amount used to pay any expense that does not qualify is taxable, unless the expense is a fee that must be paid to the institution as a condition of enrollment or attendance.

A.  True

B.  False

Payment for services

13.  You do not have to include in income the part of any scholarship or fellowship that represents payment for teaching, research, or other services if you received the amount under The National Health Service Corps Scholarship Program or Armed Forces Health Professions Scholarship and Financial Assistance Program.

A.  True

B.  False

Reporting Scholarships and Fellowships

14.  If your only income is a completely tax-free scholarship or fellowship, you must file a tax return and report the scholarship or fellowship income.

A.  True

B.  False

Payment to Service Academy Cadets

15.  An appointment to the United States military academy is a scholarship or fellowship and payment you receive as a cadet or midshipman at an armed services academy may qualify for tax-free treatment.

A.  True

B.  False

Qualified Tuition Reduction

Education below the graduate level

16.  Qualified tuition reductions for education below the graduate level (including primary and secondary school) are tax free if provided to qualified individuals who are treated as employees.

A.  True

B.  False

American Opportunity Credit

Introduction

17.  For 2009, there are three tax credits available to help you offset the costs of higher education by reducing the amount of your income tax which are the American opportunity credit, the Hope credit, and the lifetime learning credit.

A.  True

B.  False

Differences between the American opportunity, Hope, and lifetime learning credits

18.  You can claim the American opportunity credit based on the same student's expenses for more than 4 tax years, which includes any tax years you claimed the Hope credit for that student.

A.  True

B.  False

Limit on modified adjusted gross income (MAGI)

19.  The limit on MAGI to qualify for the American opportunity credit is $180,000 is married filing jointly.

A.  True

B.  False

Number of years credit available

20.  The American opportunity credit is available only for 4 tax years per eligible student (including any year(s) the Hope credit was claimed.

A.  True

B.  False

Who Cannot Claim the Credit

21.  You can claim the American opportunity credit if you are listed as a dependent in the Exemptions section on another person's tax return.

A.  True

B.  False

What Expenses Qualify

22.  The American opportunity credit is allowed for qualified education expenses paid in 2009 for an academic period beginning in 2009 or the first three months of 2010.

A.  True

B.  False

Paid with borrowed funds

23.  You can not claim an American opportunity credit for qualified education expenses paid with the proceeds of a loan.

A.  True

B.  False

Qualified Education Expenses

Eligible educational institution

24. An eligible educational institution includes accredited public, nonprofit, and proprietary pre-school, middle school and high schools that are eligible to participate in a student aid program administered by the Department of Education.

A. True
B. False

Related Expenses
25. Student-activity fees and fees for course-related books, supplies and equipment are included in qualified tuition and related expenses only if the fees must be paid to the institution as a condition of enrollment or attendance.

A. True

B. False

Adjustments To Qualified Expenses

Tax-free educational assistance
26. You must reduce the qualified education expenses for an American opportunity credit by the following:

A. The tax-free parts of scholarships and fellowships
B. Amounts paid with student's earnings
C. Employer-provided educational assistance
D. A and C

Expenses that Do Not Qualify
27. Qualified tuition and related expenses for the American opportunity credit do not include:

A. Insurance
B. Medical expenses (including student health fees)
C. Room and board
D. All of the above

Sports, games, hobbies, and noncredit courses

28. Mike's degree program includes courses of instruction or other education that involves sports, games and hobbies. These courses would not be included as qualified tuition and related expenses for the American opportunity credit.

A. True
B. False

Who is an Eligible Student?

29. Mary completed her sophomore year of college (first two years) before 2009 and incurred qualified tuition and related expenses in 2009. Mary would be an eligible student for purposes of the American opportunity credit.

A. True
B. False

30. George has been enrolled in college for four prior years, during those years George claimed the Hope credit. George is not an eligible student for the American opportunity credit.

A. True
B. False

Who Can Claim a Dependent's Expenses?
31. If there are higher education costs for your dependent for a year, both you and your dependent can claim an American opportunity credit for that dependent's expenses for that year.

A. True
B. False

Expenses paid by others
32. In 2009, Lou Ann makes a payment directly to an eligible educational institution for her grandson Wells qualified education expenses.  For the purpose of claiming the American opportunity credit, Wells is treated as receiving the money as a gift from his grandmother and, in turn, paying his qualified educational expenses.

A. True
B. False

Figuring the Credit
33. The maximum amount of the American opportunity credit you can claim for the first $2,000 of qualified education expenses in 2009 per eligible student is:

A. $1,200
B. $1,800
C. $2,000
D. $2,500

34. The maximum amount of American opportunity credit you can claim in 2009 is $2,500 times the number of eligible students assuming you paid at least $4,000 of qualified educational expenses for each and you are not limited by your modified adjusted gross income ("MAGI").

A. True
B. False

Effect the Amount of Your Income on the Amount of Your Credit
35. You cannot claim the American opportunity credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return).

A. True
B. False

36.  Jane and Gary are filing a joint return and their MAGI is $165,000.  In 2009, they paid $5,000 of qualified education expenses.  The amount of their phased out (reduced) American opportunity credit is:

A.  $2,500

B.  $2,000

C.  $1,875

D.  None of the above

Hope Credit

What's New

37.  If you are married and filing a joint return, you cannot claim a Hope credit for 2009 if your modified adjusted gross income (MAGI) is $120,000 or more.

A.  True

B.  False

What is the tax benefit of the Hope credit?
38. You may be able to claim a Hope credit (direct reduction of taxes) for qualified tuition and related expenses paid for each eligible student up to a per student maximum of:

A. $1,500
B. $1,800
C. $2,000
D. $2,500

39.The Hope credit you are allowed may be limited by:

A.    The amount of your income
B.     The amount of your tax
C.     Both A and B
D.    None of the above

Can you claim both education credits this year
40. If you elect to take the Hope credit for a child on your 2009 tax return, you can also claim the lifetime learning credit for that same child and year.

A. True
B. False

Differences between the American opportunity, Hope and lifetime learning credits
41. There is no limit on the number of years for which you can claim a ______________ credit based upon the same student's expenses.

A.    Hope
B.     Lifetime learning

C.  American opportunity

D.  Both A and B

E.  None of the above

Who Can Claim the Credit?
42. Generally, you can claim the Hope credit if you pay qualified education expenses of higher education for:

A.    Yourself
B.     Your spouse
C.     A dependant for whom you claim an exemption on your tax return
D.    All of the above

Who Cannot Claim the Credit

43.  You cannot claim the Hope credit if you are listed as a dependant in the Exemptions section of another person's tax return (such as your parents')

A.  True

B.  False

What Expenses Qualify
44. If you prepaid qualified tuition and related expenses in 2009 for an academic period that begins in the first three months of 2010, you can not use the prepaid amount in figuring your 2009 Hope credit.

A. True
B. False

Payments with borrowed funds
45. If you claim a Hope credit for qualified tuition and related expenses paid with the proceeds of a loan, you can only use the expenses to figure the Hope credit for the year in which the loan is repaid.

A. True
B. False

Qualified Education Expenses

Eligible educational institution
46. An eligible educational institution includes accredited public, nonprofit, and proprietary pre-school, middle school and high schools that are eligible to participate in a student aid program administered by the Department of Education.

A. True
B. False

Related Expenses
47. Student-activity fees and fees for course-related books, supplies and equipment are included in qualified tuition and related expenses only if the fees must be paid to the institution as a condition of enrollment or attendance.

A. True

B. False

Adjustments To Qualified Expenses

Tax-free educational assistance
48. You must reduce the qualified education expenses for a Hope credit by the following:

A. Scholarships
B. Amounts paid with student's earnings
C. Employer-provided educational assistance
D. A and C

Expenses that Do Not Qualify
49. Qualified tuition and related expenses for the Hope credit do not include:

A. Insurance
B. Student health fees
C. Room and board
D. All of the above

Sports, games, hobbies, and noncredit courses

50. Mike's degree program includes courses of instruction or other education that involves sports, games and hobbies. These courses would not be included as qualified tuition and related expenses for the Hope credit.

A. True
B. False

Who is an Eligible Student?

51. Mary completed her sophomore year of college (first two years) before 2009 and incurred qualified tuition and related expenses in 2009. Mary would be an eligible student for purposes of the Hope credit.

A. True
B. False

52. George has been enrolled in college for two years without achieving two years of academic credit. During both years George claimed the Hope credit. George can no longer be an eligible student for the Hope credit.

A. True
B. False

Who Can Claim a Dependent's Expenses?
53. If there are higher education costs for your dependent for a year, both you and your dependent can claim a Hope credit for that dependent's expenses for that year.

A. True
B. False

Expenses paid by others
54. Lou Ann makes a payment directly to an eligible educational institution for her grandson Dale's qualified tuition and related expenses. Dale's parents exclusively claim an exemption for him on their tax return. Dale's parents may use the expenses paid by Lou Ann to claim a Hope credit.

A. True
B. False

Figuring the Credit
55. The maximum amount of the Hope credit you can claim in 2009 per eligible student is:

A. $1,200
B. $1,800
C. $2,000
D. $2,500

56. To claim the maximum Hope credit, you must pay a minimum of $2,400 of qualified expenses per eligible student.

A. True
B. False

Effect the Amount of Your Income on the Amount of Your Credit?
57. You cannot claim the Hope credit if your modified adjusted gross income is $60,000 or more ($120,000 or more if you file a joint return).

A. True
B. False

58. Beth and Mike have modified adjusted gross income of $101,000 with $1,800 of tentative Hope credit. Their allowable Hope credit is:

A. $1,350
B. $1,200
C. $1,800
D. $1,710

Lifetime Learning Credit

What's New

59. Beginning in 2009, the amount of your lifetime learning credit is gradually reduced if your modified gross income (MAGI) is between $50,000 and $60,000 ($100,000 and $120,000 if you file a joint return).

A. True
B. False

What is the tax benefit of the lifetime learning credit?

60.  You may be able to claim a lifetime learning credit of up to $2,000 for qualified education expenses paid for all students enrolled in eligible education institutions..

A. True
B. False

61. There is a two year limit on the number of years you can claim a lifetime learning credit for each student.

A. True
B. False

Can you claim both education credits this year?
62. If you elect to take the lifetime learning credit for a child on your tax return, you cannot, for that same child, also claim the Hope credit for that year.

A. True
B. False

Table 4-1 Overview of the Lifetime Learning Credit
63. The lifetime learning credit requires that a student be pursuing a degree or other recognized educational credential.

A. True
B. False

64. The lifetime learning credit and the Hope scholarship credit both require that the student be enrolled at least half time for at least one academic period beginning during the year.

A. True
B. False

65. A person with a felony drug conviction can be an eligible student for:

A. Lifetime learning credit
B. Hope scholarship credit
C. Both A and B
D. Neither A or B

Can You Claim the Lifetime Learning Credit?

Who Cannot Claim the Credit
66. You cannot claim the lifetime learning credit for 2009 if:

A. Your modified adjusted gross income is $60,000 or more ($120,000 or more in the case of a joint return)
B. It is the student's third year of post secondary education
C. Both A and B
D. None of the above.

Qualified Education Expenses

Eligible educational institution
67. An eligible educational institution for purposes of the lifetime learning credit is the same as for the Hope credit.

A. True
B. False

No Double Benefit Allowed
68. You can deduct higher education expenses on your income tax return (as for example, a business expense) and also claim a lifetime learning credit based on those same expenses.

A. True
B. False

Who Is an Eligible Student?
69. For purposes of the lifetime learning credit, an eligible student is a student who is enrolled in one or more courses at an eligible institution.

A. True
B. False

Who Can Claim a Dependant's Expenses?
70. If you do not claim an exemption on your tax return for a dependent who is an eligible student, both you and the student can claim the lifetime credit based upon the student's expenses.

A. True
B. False

Expenses paid by dependent
71. If you claim an exemption on your tax return for an eligible student who is your dependent, any expenses paid by the student are treated as if you paid them when figuring the amount of your lifetime learning credit.

A. True
B. False

Figuring the Credit
72. Blake and Sheri are married and file a joint tax return. For 2009, their modified adjusted gross income is $60,000. Sheri is attending an eligible educational institution. Sheri paid $3,000 for her fall 2009 semester. Blake and Sheri can claim a lifetime learning credit on their 2009 joint tax return in the amount of:

A. $3,000
B. $600
C. $2,000
D. $1,500

Effect of the Amount of Your Income on the Amount of Your Credit
73. The information is the same as above, except that Blake and Sheri have a modified adjusted gross income of $110,000 and paid $6,600 of qualified education expenses. How much is their allowable lifetime learning credit.

A. $3,000
B. $660
C. $6,600
D. $1,000

When Must the Credit Be Repaid (Recaptured)
74. If, after you file your tax return, you or someone else receives tax-free educational assistance for, or a refund of, an expense you used to figure a lifetime learning credit on that return, you may have to repay all or part of the credit.

A. True
B. False

Student Loan Interest Deduction

Introduction

75. If you paid interest on a student loan, assuming you meet other qualifications you may be able to deduct interest you paid in 2009 up to:

A. $1,000
B. $2,000
C. $2,500
D. $3,000

76.You must itemize deductions on Schedule A (Form 1040) to take a deduction for student loan interest.

A. True
B. False

Qualified Student Loan

Reasonable period of time

77. Qualified education expenses are treated as paid or incurred within a reasonable period of time before or after you take out the loan that is part of a federal postsecondary education loan program, unless not paid with the proceeds of that type of loan.

A. True
B. False

Eligible Student
78. An eligible student for student loan interest deduction purposes does not have to be enrolled at least half time if enrolled in one or more courses at an eligible educational institution.

A. True
B. False

Qualified Education Expenses

Adjustments to Qualified Education Expenses
79. You must reduce your qualified education expenses by the total amount paid for them with nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance.

A. True
B. False

Include As Interest
80. Loan origination fees, which represent the costs of getting the loan (other than service fees) can be student loan interest.

A. True
B. False

When Must Interest Be Paid

81.  You can deduct only the interest paid during the first 60 months you were required to make interest payments on your student loan.

A.  True

B.  False

Can You Claim the Deduction
82. Generally, you can claim the student loan interest deduction if your filing status is married filing seperately, no one else is claiming an exemption for you on his or her tax return and you paid interest on a qualified student loan.

A. True
B. False

Who Can Claim a Dependant's Expenses

Figuring the DeducctionHow Much Can You Deduct?
83. Your student loan interest deduction in 2009 before any phase out reduction, can not exceed the interest you paid in 2009 or:

A. $1,000
B. $2,000
C. $2,500
D. $3,000

Effect of the Amount of Your Income on the Amount of Your Deduction
84. If you are married and filing jointly, your student loan interest deduction in 2009 is eliminated if your modified adjusted gross income is equal to or greater than:

A. $50,000
B. $65,000
C. $150,000
D. $145,000

Phaseout
85. During 2009 you paid $800 interest on a qualified student loan. Your modified adjusted gross income is $145,000 and you are filing a joint return. The amount of student loan interest you can deduct is:

A. $400
B. $667
C. $133
D. $800

86. Same facts as above except that you paid $2,750 in interest. The amount of student loan interest you can deduct is:

A. $2,500
B. $2,750
C. $2,083

D. $417

Student Loan Cancellations and

Repayment Assistance
87. If your student loan is canceled (forgiven), you must always include the amount that was forgiven in your gross income for tax purposes.

A. True
B. False

Qualifying Loans

Qualified lenders
88. A qualified lender for purposes of tax-free treatment of cancelled student loans include:

A. The government
B. Tax exempt public benefit corporation that has assumed control of a state hospital
C. A and B
D. None of the above

Tuition and Fees Deduction

What's New

89. The tuition and fees deduction can reduce the amount of your income subject to tax by up to $4,000 for qualified tuition and related expenses paid during the year if you meet requirements..

A. True

B. False

Can You Claim the Deduction

90. You can take the tuition and fees deduction if another person is entitled to claim an exemption for you as a dependant on his or her tax return, if the other person does not actually claim the exemption.

A. True

B. False

91. You can take the tuition and fees deduction if your modified adjusted gross income on a joint return exceeds $160,000.

A. True

B. False

Qualified Education Expenses

92. The tuition and fees deduction is only applicable for tuition and fees at a college, university, vocational school or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education.

A. True

B. False

Figuring the Deduction

93.  The maximum tuition and fees deduction in 2009 is $4,000, $2,000, or $0, depending on the amount of your modified adjusted gross income (MAGI).

A.  True

B.  False

Coverdell Education Savings Account (ESA)

Introduction

94. There is a limit on the number of separate Coverdell ESAs that can be established for a designated beneficiary.

A. True
B. False

95.  Total contributions for the beneficiary of a Coverdell ESA in any year cannot be more than _____________ in 2009.

A. $500
B. $1,000
C. $1,500
D. $2,000

What is the tax benefit of the Coverdell ESA
96. Contributions to a Coverdell ESA are tax deductible and grow tax free until withdrawn.

A. True
B. False

97. If withdrawals for a year from a Coverdell ESA are not more than the designated beneficiary's qualified education expenses at an eligible educational institution, the beneficiary will not owe tax on the withdrawals.

A. True
B. False

What is a Coverdell ESA?
98. The trustee or custodian of a Coverdell ESA can only be a bank or an entity approved by the IRS.

A. True
B. False

99. Money in a Coverdell ESA can be invested in life insurance contracts.

A. True
B. False

100. Money in a Coverdell ESA can be combined with other property in a common trust fund or common investment fund.

A. True
B. False

101. The balance in a Coverdell ESA must be withdrawn the earlier of 30 days of the beneficiary's death or:

A. Age 18
B. Age 21
C. Age 30
D. Age 59 ½

Qualified education expenses
102. Eligible educational institutions for Coverdell ESA tax-free withdrawals can include both postsecondary schools and elementary and secondary schools.

A. True
B. False

Qualified Elementary and Secondary Education Expenses

103. The cost of room and board that is not required or provided by an eligible elementary or secondary school in connection with attendance or enrollment at the school is not a qualified education expense for the purpose of Coverdell ESAs.

A. True
B. False

Contributions

104. Contributions to a Coverdell ESA can not be made by the designated beneficiary but rather must be any other individual meeting the modified adjusted gross income (MAGI) requirement..

A. True
B. False

105. If you are married and filing a joint return in 2009, you cannot contribute to a Coverdell ESA if your modified adjusted gross income ("MAGI") is $220,000 or more.

A. True
B. False

106. Corporations can contribute to a Coverdell ESA, but must meet the requirement that the organization's income be below a certain level.

A. True
B. False

107. You can continue to make contributions to a Coverdell ESA for a special needs beneficiary after his or her 18th birthday.

A. True
B. False

108. The final date on which you can make contributions to a Coverdell ESA for any year is December 31, of that year.

A. True
B. False

109. Contributions can be made without penalty, to both a Coverdell ESA and a QTP in the same year for the same beneficiary.

A. True
B. False

Contribution Limits

Limit for each designated beneficiary
110. The total of all contributions to all Coverdell ESAs set up for the benefit of any one designated beneficiary in 2009 is limited to:

A. $500
B. $1,000
C. $2,000
D. $3,000

Limit for each contributor
111. Generally, you can contribute up to $2,000 for each designated beneficiary for 2009, regardless of the number of Coverdell ESAs set up for the beneficiary.

A. True
B. False

Reduced limit
112. If your modified adjusted gross income (MAGI) in 2009 is $110,000 or more ($220,000 or more if filing a joint return) you cannot contribute to anyone's Coverdell ESA.

A. True

B. False

113. Contributions to a Coverdell ESA are tax deductible.

A. True
B. False

114. Contributions other than cash can be made to a Coverdell ESA.

A. True
B. False

Additional Tax on Excess Contributions
115. The beneficiary must pay a 6% excise tax each year on excess contributions that are in a Coverdell ESA at the end of the year.

A. True

B. False

Exception

116. The excise tax does not apply if excess contributions made during 2009 (and any earnings on them) are distributed before the first day of the sixth month of the following year (June 1, 2010 for a calendar year taxpayer).

A. True

B. False

Rollovers and Other Transfers

Rollovers
117. Any amount withdrawn from a Coverdell ESA and rolled over to another Coverdell ESA of the same beneficiary or a member of the beneficiary's family who is under 30 years old is not taxable.

A. True
B. False

118. An amount is not considered rolled over if it is paid to another Coverdell ESA within 60 days after the date of the withdrawal.

A. True
B. False

119. More than one rollover per Coverdell ESA is allowed during the 12-month period ending on the date of the payment or withdrawal.

A. True
B. False

Changing Designated Beneficiary
120. If the designated beneficiary of a Coverdell ESA is changed to a member of the beneficiary's family who is under 30 years old, the change is a taxable transfer.

A. True
B. False

Transfer Because of Divorce

121. If a spouse or former spouse receives a Coverdell ESA under a divorce or separation instrument, it is not a taxable transfer.

A. True
B. False

Distributions
122. The designated beneficiary of a Coverdell ESA can take withdrawals either taxable or nontaxable at any time.

A. True
B. False

Taxable Distributions
123. Generally, a portion of the withdrawals is taxable to the beneficiary if the withdrawals are more than the beneficiary's qualified education expenses for the year.

A. True
B. False

Figuring the Taxable Portion of a Distribution
124. The taxable portion of a withdrawal from a Coverdell ESA includes both the original contribution basis and earnings on the contribution while in the account, that exceed qualified education expenses for the withdrawal period.

A. True
B. False

125. You receive a $850 distribution from your Coverdell ESA to which $1,500 had been contributed before 2009. There were no contributions in 2009.  This is your first distribution from the account, so your basis in tha account on December 31, 2008 was $1,500.  The value (balance) of your account on December 31, 2009 was $950.  You had $700 of adjusted qualified education expenses (AQEE) for the year.  The taxable portion of your distribution is:

A. $700
B. $600
C. $25
D. $950

E. $1500

Coordination with Hope and Lifetime learning credits
126. You can not claim the Hope or lifetime learning credit in the same year you take a tax-free distribution from a Coverdell ESA, even though the distribution from the Coverdell ESA is not used for the same expenses for which the credit is claimed.

A. True
B. False

Losses on Coverdell ESA Investments

127. You can take the loss on your investment in a Coverdell ESA on your income tax return only when all amounts from that account have been distributed and the total distributions are less than your unrecovered basis.

A.  True

B.  False

Additional Tax on Taxable Distributions
128. Generally, if you receive a taxable distribution, you also must pay a 10% additional tax on the amount included in income.

A. True
B. False

Exceptions
129. The 10% additional tax does not apply to a return of an excess 2009 contribution (and any earnings on it) made before June 1, 2010.

A. True
B. False

When Assets Must Be Distributed
130. Any assets remaining in a Coverdell ESA must be distributed when:

A. The designated beneficiary reaches age 30

B. The designated beneficiary dies before reaching age 30 (and not transferred to a surviving spouse or family member)
C. Both A and B
D. None of the above

How to Figure Taxable Earnings
131. The earnings that accumulate tax free in a Coverdell ESA and not used for qualified education expenses are excluded from taxable income when withdrawn.

A. True
B. False

Qualified Tuition Program (QTP)

What's New

Withdrawal of economic stimulus payment from a qualified tuition program

132.  If your economic stimulus payment was directly deposited to your QTP and you withdraw the payment by the later of June 1, 2010, or due date of your return, the amount withdrawn will not be taxed and no additional tax or penalty will apply.

A.  True

B.  False

Introduction

What is the tax benefit of a QTP

133.  Even if a QTP is used to finance a student's education, the student or the student's partents still may be eligible to claim either a Hope credit or the lifetime learning credit.

A.  True

B.  False

What Is a Qualified Tuition Program

134. A qualified tuition program (also known as a 529 plan or program) is a program set up to allow you to either prepay, or contribute to an account established for paying a student's qualified higher education expenses at an eligible institution.

A. True
B. False

How Much Can You Contribute?
135. Contributions to a QTP on behalf of any beneficiary can exceed the amount necessary to provide for the qualified higher education expenses of the beneficiary.

A. True
B. False

136. You can make contributions to Coverdell ESAs and QTPs in the same year for the same designated beneficiary.

A. True
B. False

Are Distributions Taxable?
137. The designated beneficiary generally does not have to include in income any earnings distributed from a QTP established and maintained by a state (or an agency or instrumentality of the state) if the total distribution is less than or equal to adjusted qualified higher education expenses.

A. True
B. False

Coordination With Hope and Lifetime Learning Credits
138. If a QTP is used to finance a student's higher education, the student or the student's parents may not claim either the Hope credit or the lifetime learning credit.

A. True
B. False

Rollovers and Other Transfers

Rollovers
139. An amount in a QTP can be transferred tax free to the QTP of another beneficiary only if:

A. The transfer is completed within 60 days of the distribution
B. The other beneficiary is a family member
C. Both A and B

Members of the beneficiary's family
140. If the beneficiary does not use amounts in the QTP, the amounts can be transferred tax free to the beneficiary's:

A. Stepfather or stepmother
B. Grandson or granddaughter
C. Brother or sister of mother or father
D. A and B
E. All of the above

Early Distributions From IRAs
141. Withdrawals from your traditional IRA or Roth IRA that are used to pay qualified higher education expenses are subject to the 10% additional tax on early withdrawals if the withdrawal occurs before you reach age 59 ½.

A. True
B. False

Who is Eligible
142. You can make a withdrawal from your traditional or Roth IRA before you reach age 59 ½ and not have to pay the 10% additional tax if, for the year of the withdrawal, you pay qualified higher education expenses for:

A. Yourself
B. Your spouse
C. You or your spouse's children or grandchildren
D. A and B
E. All of the above

Figuring the Amount Not Subject to the 10% Tax
143. When determining the amount of the withdrawal that is not subject to the 10% additional tax, total qualified higher educational expenses are reduced by:

A. Distributions from a Coverdell ESA
B. Expenses paid with an individuals wages
C. Expenses paid with an inheritance given to either the student or the individual making the withdrawal
D. A and B
E. All of the above

Education Savings Bond Program

What's New

144.  For 2009, the amount of your interest exclusion will be phased out (gradually reduced) if your filing status is married filing jointly or qualifying widow(er) and your MAGI is between $104,900 and $134,900.

A.  True

B.  False

Introduction
145. When you cash in qualified U.S. savings bonds under and education savings bond program, you may be able to exclude interest from income.

A. True
B. False

Who Can Cash In Bonds Tax Free
146. If your modified adjusted gross income in 2009 is greater than $84,950 ($134,900 if filing a joint return), you may be able to cash in qualified U.S. savings bonds without having to include in your income some or all of the interest earned on the bonds.

A. True
B. False

Figuring the Tax-Free Amount
147. In January 2009, Gary and Jane, a married couple, cashed a qualified series EE U.S. savings bond they bought in November 1995. They received proceeds of $9,000 representing principal of $6,000 and interest of $3,000. In 2009, they paid $7,650 of their daughter's college tuition. They are not claiming a Hope or Lifetime Learning credit for those expenses, and their daughter does not have any tax-free educcational assistance. Their modified adjusted gross income for 2009 was $80,000. The amount of interest they must pay tax on is:

A. $2,550
B. $450

C. $0
D. $3,000

Effect of the Amount of Your Income on the Amount of Your Exclusions
148. You can not exclude any of the interest if your modified gross income is equal to or greater than the upper limit in 2009 of $134,900 if married and filing jointly.

A. True
B. False

Employer-Provided Educational Assistance

Introduction
149. You can use the tax-free education expenses paid for by your employer as the basis for the Hope credit and the lifetime learning credit.

A. True
B. False

150. The tax-free status of up to $5,250 of employer-provided educational assistance benefits for undergraduate-level courses also applies to graduate-level courses.

A. True
B. False

Working condition fringe benefit
151. If your employer pays more than $5,250 of education benefits for you during the year and it is a working condition fringe benefit, your employer does not have to include it in your wages.

A. True
B. False

Business Deduction for Work-Related Education

Introduction

152.  To claim a deduction for work-related education expenses you must:

A.  Be working

B.  Intemize your deductions on Schedule A if your are an employee

C.  File Schedule C or F if you are self-employed

D.  Have expenses for education that meeet the requirements.

E.  All of the above

Qualifying Work-Related Education

153.  You can deduct the costs of qualifying work-related education as a business expense only if it is:

A.  Required by your employer or the law to keep your present salary, status, or job and serve a bona fide business purpose

B.  Maintains or improves skills needed in your present work

C.  Not needed to meet minimum educational requirements of your present trade or business

D.  Will not qualify you for a new trade or business

E.  All of the above

Bar or CPA Review Course

154.  Review courses to prepare for the bar examination or the certified public accountant examination are qualifying work-related education.

A.  True

B.  False

What Expenses Can Be Deducted

Transportation

155.  If your education qualifies, you can deduct local transportation costs of going directly from work to school.

A  True

B.  False

Travel Expenses

156.  Travel expenses for qualifying work-related education are treated differently than travel expenses for other employee business purposes.

A.  True

B.  False

Course Evaluation
157. Indicate your professional designation.

A. CPA
B. Enrolled Agent
C. Tax Preparer
D. CMA
E. Other___________________

158. Indicate years professional experience in the course subject matter.

A. Less than 5
B. 5 to 10 years
C. 11 to 15 years
D. 16 to 20 years
E. 21 and over

159. Did the program meet your learning objectives?

A. Yes
B. No

160. Did the program materials contribute to the achievement of your learning objectives?

A. Yes
B. No

161. Did you find the program content relevant and timely?

A. Yes
B. No

162. Was the difficulty of the questions:

A. About right
B. Too easy
C. Too difficult

163. Was the indicated prerequisites (if any) for the program appropriate?

A. Yes
B. No

164. Do you plan to use additional courses from CPE Accounting & Tax Institute.

A. Yes
B. No