Deck 11: Income Taxation of Individuals

Question 1

Real property taxes are deductible because they are an ad valorem tax.

Answer 1

True

Question 2

Any homeowner who received a first-time homebuyer credit must repay the entire credit if the home is sold prior to completing three full years of ownership.

Answer 2

True

Question 3

A 2 percent reduction in Social Security taxes for employers in 2011 replaces the making work pay credit.

Answer 3

False

Question 4

Are there any itemized deductions that are not limited in some way by the taxpayer's AGI?

Question 5

What is the benefit to the taxpayer of having the option of adding an amount to the standard deduction rather than including it as part of his or her itemized deductions?

Question 6

What were the differences between the first-time homebuyer credit for a home bought in June of 2008 and April of 2010?

Question 7

Briefly describe the residential credits available for improvements to the energy efficiency of a taxpayer's primary residence.

Question 8

Sonja is a talented 18 year-old dancer and has earned quite a bit of money over the last six years that her parents invested for her. During 2011, however, she earned only $5,000 from dancing but $1,900 in interest. If her parents claim her as a dependent, what is her income tax liability in the current year?

Question 9

a. Carl and Carla are a very wealthy retired couple in their late sixties and file a joint tax return. During 2011 they had AGI of $980,000. Their only itemized deduction was a $20,000 charitable contribution because they had sold their homes last year and spent all 2011 traveling around the world. What is their taxable income for 2011 and their income tax? How would your answers change if they claimed the standard deduction instead of itemizing?

Question 10

Margo is single and has twin sons who are freshmen in college and a daughter who is a junior during 2011. Margo also attends the local college and took one graduate course each semester.. She pays $4,000 tuition and fees for each of the three children and $1,900 in tuition and fees for her courses. What are her allowable education credits if her AGI is $56,000?

Question 11

Sherry works as a waitress. During the year she earned $26,500 in wages and tips. She paid $3,200 for childcare for her dependent son. What is her credit for childcare?

Question 12

Buffy and Biff are veterinarians. They have two dependent children ages 9 and 10 and they pay $7,200 for child care while they work. In 2011, they have net income from their practice of $170,000. They each put $4,000 into their regular IRAs (these IRAs are their only retirement plans). Their itemized deductions are $28,000. What is their net tax liability after all allowable credits if they file jointly?

Question 13

Cora, who is single, has $58,000 of salary income, $2,300 in dividends, and $3,800 in interest income. She has $13,200 of itemized deductions. Determine her tax liability for 2011.

Question 14

Tim purchased a home for $68,000 on July 10, 2008. His sister, Candace purchased a home for $91,000 on December 5, 2009 and his mother, Maeve, purchased a home on April 02, 2010 for $102,000. Tim, Candace, and Maeve all qualify as first-time homebuyers; neither Tim nor Candace had ever owned a home before but Maeve sold her previous home and qualified under the long-time resident provision.
a. Determine their first-time homebuyer credits.
b. If Candace would like to sell her home but wants to avoid any recapture of her homebuyer credit, how long must she wait before selling her home?

Question 15

Designate by an R is an item is a deduction FOR AGI or an M is an item is a deduction FROM AGI.

-Alimony paid

A)item is a deduction FOR AGI(R)
B)item is a deduction FROM AGI(M)

Question 16

Designate by an R is an item is a deduction FOR AGI or an M is an item is a deduction FROM AGI.

-Personal exemption

A)item is a deduction FOR AGI(R)
B)item is a deduction FROM AGI(M)

Question 17

Designate by an R is an item is a deduction FOR AGI or an M is an item is a deduction FROM AGI.

-Health savings account contribution

A)item is a deduction FOR AGI(R)
B)item is a deduction FROM AGI(M)

Question 18

Designate by an R is an item is a deduction FOR AGI or an M is an item is a deduction FROM AGI.

-IRA contribution

A)item is a deduction FOR AGI(R)
B)item is a deduction FROM AGI(M)

Question 19

Designate by an R is an item is a deduction FOR AGI or an M is an item is a deduction FROM AGI.

-Charitable contribution

A)item is a deduction FOR AGI(R)
B)item is a deduction FROM AGI(M)

Question 20

Designate by an R is an item is a deduction FOR AGI or an M is an item is a deduction FROM AGI.

-Personal property taxes

A)item is a deduction FOR AGI(R)
B)item is a deduction FROM AGI(M)

Question 21

Designate by an R is an item is a deduction FOR AGI or an M is an item is a deduction FROM AGI.

-Self-employed health insurance deduction

A)item is a deduction FOR AGI(R)
B)item is a deduction FROM AGI(M)

Question 22

Designate by an R is an item is a deduction FOR AGI or an M is an item is a deduction FROM AGI.

-Student loan interest

A)item is a deduction FOR AGI(R)
B)item is a deduction FROM AGI(M)

Question 23

Designate by an R is an item is a deduction FOR AGI or an M is an item is a deduction FROM AGI.

-Job hunting expenses

A)item is a deduction FOR AGI(R)
B)item is a deduction FROM AGI(M)

Question 24

Designate by an R is an item is a deduction FOR AGI or an M is an item is a deduction FROM AGI.

-State income taxes paid

A)item is a deduction FOR AGI(R)
B)item is a deduction FROM AGI(M)

Question 25

Designate by an R is an item is a deduction FOR AGI or an M is an item is a deduction FROM AGI.

-Penalty on early withdrawal of savings

A)item is a deduction FOR AGI(R)
B)item is a deduction FROM AGI(M)

Question 26

Designate by an R is an item is a deduction FOR AGI or an M is an item is a deduction FROM AGI.

-Tax preparation expense

A)item is a deduction FOR AGI(R)
B)item is a deduction FROM AGI(M)

Question 27

Designate by an R is an item is a deduction FOR AGI or an M is an item is a deduction FROM AGI.

-Theft loss

A)item is a deduction FOR AGI(R)
B)item is a deduction FROM AGI(M)

Question 28

Designate by an R is an item is a deduction FOR AGI or an M is an item is a deduction FROM AGI.

-Moving expenses

A)item is a deduction FOR AGI(R)
B)item is a deduction FROM AGI(M)

Question 29

Designate by an R is an item is a deduction FOR AGI or an M is an item is a deduction FROM AGI.

-Employee portion of health insurance premium

A)item is a deduction FOR AGI(R)
B)item is a deduction FROM AGI(M)

Question 30

A single taxpayer, studying for his master's degree, has an AGI of $55,000:

A) He may deduct $2,500 of student loan interest and claim a lifetime credit of $1,600 for $8,000 college tuition in 2011.
B) He may deduct $2,500 of student loan interest but must begin to phase out his $1,600 lifetime credit for college tuition.
C) He must begin to phase out part of his deductions for both student loan interest and his college tuition.
D) He gets no deduction for student loan interest and must reduce his deduction for college tuition.

Question 31

Carl, age 42, is married and has three children. In preparing to go to his accountant, he determines that he has $62,300 of salary income and $250 in dividends. He contributes $4,000 to a Roth IRA and has $6,800 of itemized deductions. His wife has no income. What is the taxable income on their 2011 joint return?

A) $51,750
B) $47,750
C) $33,250
D) $32,450

Question 32

Charlotte, Ray, Susan, and Corinne provide 80 percent of their mother's support. Charlotte provides 10 percent, Ray 10 percent, Susan 45 percent, and Corinne 15 percent. Which of these persons could claim their mother as a dependent under a multiple support agreement?

A) Charlotte, Ray, Susan, or Corinne
B) Charlotte, Susan or Corinne
C) Susan or Corinne
D) Susan only

Question 33

Colin (age 40) is single and itemizes his deductions. His AGI is $100,000. Colin provided the following information about his cash expenditures for 2011:
$$\begin{array} { l r } \text { Interest on loan to purchase corporate securities } & \$ 900 \\\text { Interest on American Express card } & 1,200 \\\text { Points to refinance his home at the end of December } & 2,600 \\\text { Mortgage interest payments } & 11,800 \\\text { Real estate taxes } & 2,100 \\\text { State income taxes withheld on salary } & 5,400 \\\text { Additional state income tax estimated payment } & 1,200 \\\text { Contribution to Republican Party } & 2,000 \\\text { Contribution to United Way } & 500\end{array}$$

-If Colin failed to itemize, what would be his total deduction from AGI in 2011:

A) $3,700
B) $5,800
C) $8,500
D) $9,500

Question 34

Colin (age 40) is single and itemizes his deductions. His AGI is $100,000. Colin provided the following information about his cash expenditures for 2011:
$$\begin{array} { l r } \text { Interest on loan to purchase corporate securities } & \$ 900 \\\text { Interest on American Express card } & 1,200 \\\text { Points to refinance his home at the end of December } & 2,600 \\\text { Mortgage interest payments } & 11,800 \\\text { Real estate taxes } & 2,100 \\\text { State income taxes withheld on salary } & 5,400 \\\text { Additional state income tax estimated payment } & 1,200 \\\text { Contribution to Republican Party } & 2,000 \\\text { Contribution to United Way } & 500\end{array}$$

-What is Colin's deduction for taxes?

A) $8,700
B) $7,500
C) $5,400
D) $2,100

Question 35

Vera and Jake, a married couple with AGI of $321,000 for 2011, have $20,000 of mortgage interest, $8,000 of unreimbursed medical expenses, $4,000 of property taxes, and $9,000 of charitable contributions. How much may they claim for itemized deductions in 2011?

A) $41,000
B) $37 ,000
C) $33,000
D) $32,000

Question 36

Susan is single but has the son of her brother living with her as her dependent. If her AGI is $27,000, what is her tax liability before any allowable tax credits?

A) $1,100
B) $1,110
C) $1,215
D) $1,330

Question 37

Holly and Ken are married and have three children living at home: Ken, Jr., age 21, goes to college full-time and earned $7,000 from his part-time job; Sara is 19 and earned $19,000 as a secretary; Claudia is 15 and is in high school. Claudia made $42,000 as a model this year, all of which was put into a trust account except for her manager's f1ee. Ken made $65,000 in 2011 as an engineer and Holly earned $7,000 as a substitute teacher. If they have $18,000 of itemized deductions, what is Holly and Ken's tax liability on their joint return in 2011?

A) $4,550
B) $5,030
C) $5,620
D) $6,240

Question 38

Stephanie and Cal have three dependent children in college. Sally is a freshman and Teri is a sophomore at a small private college in their town where their expenses are $6,500 per year for each student; Lexi is in her third year of medical school in Wisconsin and her related expenses are $12,500 per year. What is the maximum credit allowed Stephanie and Cal on their joint tax return if their AGI is $112,000 in 2011?

A) $5,000
B) $6,000
C) $7,000
D) $7,500

Question 39

Marcia and Tim, a married couple, file a joint return in 2011. Marci went back to college this year as a full-time graduate student. What is the maximum reduction they can achieve in their taxes for the $6,800 in tuition that Marcia pays if their AGI is $110,000?

A) $1,650
B) $1,360
C) $1,200
D) $816

Question 40

Courtney and Lisa (both age 30), a married couple who file a joint return, take the standard deduction. They reported combined salary and wages of $33,000. Courtney made a $4,000 contribution to his traditional IRA. What is their tax liability after credits?

A) $1,000
B) $500
C) $330
D) 0

Question 41

Cliff is married and files a joint return. His return shows AGI of $268,000 and a net tax liability of $51,375 on taxable income of $224,000. He has $30,000 of preference items and $21,000 of net positive adjustments (including adjustments for itemized deductions and exemptions). What is his AMTI exemption amount?

A) $74,450
B) $45,000
C) $43,200
D) $31,250

Question 42

Cliff is married and files a joint return. His return shows AGI of $268,000 and a net tax liability of $51,375 on taxable income of $224,000. He has $30,000 of preference items and $21,000 of net positive adjustments (including adjustments for itemized deductions and exemptions).

-Refer to the information in the preceding problem. What is Cliff's AMT assuming his allowable exemption amount is $40,000?

A) 0
B) $10,925
C) $17,599
D) $27,600

Question 43

Tina is single and has AGI of $71,000. If she has a $4,300 deduction for medical expenses for regular tax purposes, what is her medical deduction for AMTI?

A) $9,625
B) $4,300
C) $3,870
D) $2,525

Question 44

The 2011 standard deduction for a married taxpayer, age 68, who files a separate return is:

A) $5,800
B) $6,950
C) $7,100
D) $12,750

Question 45

Patricia's AGI was $80,000 in both 2010 and 2011. She made cash contributions to public charities of $43,000 in 2010 and $45,000 in 2011. Patricia's charitable contribution carryover to 2012 is:

A) $4,000
B) $5,000
C) $8,000
D) $44,000

Question 46

What is Beth's maximum allowable deduction for the following contributions to qualified public charities during the current year if her adjusted gross income is $90,000?
$\begin{array}{llr}\text { Stock Contributions }&\text { Basis } & \text { Fair Market Value }\\\text { Markum stock acquired in } 1997 & \$ 8,000 & \$ 16,000 \\\text { Dotcom stock acquired in } 1999 & \$ 7,000 & \$ 14,000 \\\text { Ford stock acquired in } 2001 & \$ 1,500 & \$ 3,000\end{array}$

A) $45,000
B) $33,000
C) $27,000
D) $16,500