What's New

Hope and lifetime learning credits
1. If you are married and filing a joint return, the amount of your Hope or lifetime learning credit for 2006 is gradually reduced (phased out) if your modified adjusted gross income (MAGI) is between:

A. $90,000 and $110,000
B. $87,000 and $107,000

C. $83,000 and $103,000

D. None of the above

Tuition and fees deduction

2.  The tuition and fees deduction which was scheduled to expire at the end of 2005, has been extended through 2007.

A. True

B.  False

Education Savings Bond Program
3. Beginning in 2006, 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.  $87,000 and $107,000

B.  $94,700 and $124,700

C.  $91,850 and $121,850

D.  None of the above

Business deduction for work-related education

4. Beginning in 2006, if you drive your car to and from school and qualify to deduct transportation expenses, the amount you can deduct for miles driven during 2006 is 44 1/2 cents per mile.

A. True
B. False

Reminders

Estimated Tax

5. 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
6. 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)

7.  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

8.  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

9.  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

10.  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

11.  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

12.  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

13.  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

14.  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

15.  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

Hope Credit

What's New

16.  If you are married and filing a joint return, you cannot claim a Hope credit for 2006 if your modified adjusted gross income (MAGI) is $110,000 or more.

A.  True

B.  False

What is the tax benefit of the Hope credit?
17. 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. $1,650
C. $2,000
D. $2,500

18.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
19. If you elect to take the Hope credit for a child on your 2006 tax return, you can also claim the lifetime learning credit for that same child and year.

A. True
B. False

Differences between the Hope and lifetime learning credits
20. 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.  Both A and B

D.  None of the above

Who Can Claim the Credit?
21. 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

22.  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
23. If you prepaid qualified tuition and related expenses in 2006 for an academic period that begins in the first three months of 2007, you can not use the prepaid amount in figuring your 2006 Hope credit.

A. True
B. False

Payments with borrowed funds
24. 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
25. 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
26. 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
27. 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
28. 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

29. 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?

30. Mary completed her sophomore year of college (first two years) before 2006 and incurred qualified tuition and related expenses in 2006. Mary would be an eligible student for purposes of the Hope credit.

A. True
B. False

31. 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?
32. 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
33. 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
34. The maximum amount of the Hope credit you can claim in 2006 per eligible student is:

A. $1,000
B. $1,200
C. $1,650
D. $2,000

35. To claim the maximum Hope credit, you must pay a minimum of $2,200 of qualified expenses per eligible student.

A. True
B. False

Effect the Amount of Your Income on the Amount of Your Credit?
36. You cannot claim the Hope credit if your modified adjusted gross income is $55,000 or more ($110,000 or more if you file a joint return).

A. True
B. False

37. Beth and Mike have modified adjusted gross income of $90,000 with $1,500 of tentative Hope credit. Their allowable Hope credit is:

A. $1,350
B. $750
C. $1,275
D. $1,500

Lifetime Learning Credit

What's New

38. Beginning in 2006, the amount of your lifetime learning credit is gradually reduced if your modified gross income (MAGI) is between $45,000 and $55,000 ($90,000 and $110,000 if you file a joint return).

A. True
B. False

What is the tax benefit of the lifetime learning credit?

39.  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

40. 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?
41. If you elect to take the lifetime learning credit for a child on your 2005 tax return, you cannot, for that same child, also claim the Hope credit for 2005.

A. True
B. False

Table 3-1 Comparison of Education Credits
42. The lifetime learning credit requires that a student be pursuing a degree or other recognized educational credential.

A. True
B. False

43. 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

44. 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
45. You cannot claim the lifetime learning credit if:

A. Your modified adjusted gross income is $55,000 or more ($110,000 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
46. 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
47. You can deduct higher education expenses on your income tax return and also claim a lifetime learning credit based on those same expenses.

A. True
B. False

Who Is an Eligible Student?
48. 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?
49. 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
50. 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
51. Blake and Sheri are married and file a joint tax return. For 2006, their modified adjusted gross income is $60,000. Sheri is attending an eligible educational institution. Sheri paid $3,000 for her fall 2006 semester. Blake and Sheri can claim a lifetime learning credit on their 2006 joint tax return in the amount of:

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

Effect of the Amount of Your Income on the Amount of Your Credit
52. The information is the same as above, except that Blake and Sheri have a modified adjusted gross income of $95,000. How much is their allowable lifetime learning credit.

A. $3,000
B. $600
C. $450
D. $1,000

When Must the Credit Be Repaid (Recaptured)
53. If, after you file your 2006 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

54. If you paid interest on a student loan in 2006, you may be able to deduct interest you paid up to:

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

55.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

56. 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
57. 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
58. 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
59. 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

60.  In 2005, 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
61. 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?
62. Your student loan interest deduction in 2006 before any phase out reduction, can not exceed the interest you paid in 2006 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
63. If you are married and filing jointly, your student loan interest deduction is eliminated if your modified adjusted gross income is equal to or greater than:

A. $50,000
B. $65,000
C. $135,000
D. $100,000

Phaseout
64. During 2006 you paid $400 interest on a qualified student loan. Your modified adjusted gross income is $120,000 and you are filing a joint return. The amount of student loan interest you can deduct is:

A. $400
B. $200
C. $268
D. $0

65. Same facts as above except that you paid $3,000 in interest. The amount of student loan interest you can deduct is:

A. $2,500
B. $2,010
C. $1,250

D. $3,000

Student Loan Cancellations and

Repayment Assistance
66. 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
67. 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

68. Beginning in 2006, 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

69. 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

70. 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

71. 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

72.  The maximum tuition and fees deduction in 2006 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

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

A. True
B. False

74.  Total contributions for the beneficiary of a Coverdell ESA in any year cannot be more than _____________ in 2006.

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

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

A. True
B. False

76. 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?
77. The trustee or custodian of a Coverdell ESA can only be a bank or an entity approved by the IRS.

A. True
B. False

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

A. True
B. False

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

A. True
B. False

80. 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
81. 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

82. 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

83. 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

84. If you are married and filing a joint return in 2006, you cannot contribute to a Coverdell ESA if your modified adjusted gross income ("MAGI") is $220,000 or more.

A. True
B. False

85. 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

86. 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

87. 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

88. 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
89. The total of all contributions to all Coverdell ESAs set up for the benefit of any one designated beneficiary in 2006 is limited to:

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

Limit for each contributor
90. Generally, you can contribute up to $2,000 for each designated beneficiary for 2006, regardless of the number of Coverdell ESAs set up for the beneficiary.

A. True
B. False

Reduced limit
91. If your modified adjusted gross income (MAGI) in 2006 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

92. Contributions to a Coverdell ESA are tax deductible.

A. True
B. False

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

A. True
B. False

Additional Tax on Excess Contributions
94. 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

95. The excise tax does not apply if excess contributions made during 2006 (and any earnings on them) are distributed before the first day of the sixth month of the following year (June 1, 2007 for a calendar year taxpayer).

A. True

B. False

Rollovers and Other Transfers

Rollovers
96. 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

97. 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

98. 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
99. 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

100. 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
101. The designated beneficiary of a Coverdell ESA can take withdrawals either taxable or nontaxable at any time.

A. True
B. False

Taxable Distributions
102. 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
103. 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

104. You receive a $700 distribution from your Coverdell ESA to which $800 had been contributed before 2006. There were no contributions in 2006.  This is your first distribution from the account, so your basis in tha account on December 31, 2005 was $800.  The value (balance) of your account on December 31, 2006 was $300.  You had $550 of adjusted qualified education expenses (AQEE) for the year.  The taxable portion of your distribution is:

A. $700
B. $200
C. $30
D. $140

E. $150

Coordination with Hope and Lifetime learning credits
105. 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

106. 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
107. 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
108. The 10% additional tax does not apply to a return of an excess 2006 contribution (and any earnings on it) made before June 1, 2007.

A. True
B. False

When Assets Must Be Distributed
109. 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
110. 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

111.  Beginning in 2006, you must always include in income a distribution from a QTP established an maintained by an eligible educational institution.

A.  True

B.  False

Introduction

What is the tax benefit of a QTP

112.  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

113. 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?
114. 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

115. In 2006, 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?
116. 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
117. 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
118. 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
119. 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
120. 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
121. 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
122. 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

123.  For 2006, 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 $94,700 and $124,700.

A.  True

B.  False

Introduction
124. 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
125. If your modified adjusted gross income in 2006 is greater than $78,100 ($124,700 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
126. In January 2006, Bob and Jane, a married couple, cashed a qualified series EE U.S. savings bond they bought in November 1995. They received proceeds of $7,000 representing principal of $5,000 and interest of $2,000. In 2006, they paid $6,000 of their daughter's college tuition. They are not claiming an education credit for that amount, and they do not have a Coverdell ESA. Their modified adjusted gross income for 2006 was $80,000. The amount of interest they must pay tax on is:

A. $2,000
B. $286
C. $0
D. $1,714

Effect of the Amount of Your Income on the Amount of Your Exclusions
127. The information is the same as above except that Bob and Jane have modified adjusted gross income for 2006 of $104,000. The amount of interest they can exclude in 2006 is:

A. $1,714
B. $929
C. $1,183
D. $0

Employer-Provided Educational Assistance

Introduction
128. 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

129. 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 after January 1, 2002.

A. True
B. False

Working condition fringe benefit
130. 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

131.  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

132.  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

133.  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

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

A  True

B.  False

Travel Expenses

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

A.  True

B.  False

Course Evaluation
136. Indicate your professional designation.

A. CPA
B. Public Accountant
C. Enrolled Agent
D. CMA
E. Other___________________

137. 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

138. Did the program meet your learning objectives?

A. Yes
B. No

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

A. Yes
B. No

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

A. Yes
B. No

141. Was the difficulty of the questions:

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

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

A. Yes
B. No

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

A. Yes
B. No