Question 1

Barbara was injured in an automobile accident.She has threatened to file a suit against the other party involved in the accident and has proposed the following settlement:
  The defendant's insurance company is reluctant to pay punitive damages.Also,the company disputes the amount of her loss of wages amount.Instead,the company offers to pay her $300,000 for damages to her arm and $30,000 medical expenses.Assuming Barbara is in the 35% marginal tax bracket,will her after-tax proceeds from accepting the offer be equal to what she considers to be her actual damages (listed above)?

Accepted Answer

The answer of Barbara was injured in an automobile accident.She...

Question 2

Georgia had AGI of $100,000 in 2013.She donated Heron Corporation stock with a basis of $8,500 to a qualified charitable organization on July 5,2013.

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The answer of Georgia had AGI of $100,000 in 2013.She...

Question 3

During the current year,Doris received a large gift from her parents and a sizeable inheritance from an uncle.She also paid premiums on an insurance policy on her life.Doris is confused because she cannot find any place on Form 1040 to report these items.Explain.

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The answer of During the current year,Doris received a large...

Question 4

In meeting the criteria of a qualifying child for dependency exemption purposes,when if ever,might the child's income become relevant?

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The answer of In meeting the criteria of a qualifying...

Question 5

In order to claim a dependency exemption for other than a qualifying child,a taxpayer must meet the support test.Generally,this is done by furnishing more than 50% of a dependent's support.What exceptions exist,if any,where the support furnished need not be more than 50%?

Accepted Answer

The answer of In order to claim a dependency exemption...

Question 6

In 2006,Ross,who is single,purchased a personal residence for $170,000 and took out a mortgage of $100,000 on the property.In May of the current year,when the residence had a fair market value of $220,000 and Ross owed $70,000 on the mortgage,he took out a home equity loan for $110,000.He used the funds to purchase a BMW for himself and a Lexus SUV for his wife.For both vehicles,100% of the use is for personal activities.What is the maximum amount on which Ross can deduct home equity interest?

Accepted Answer

The answer of In 2006,Ross,who is single,purchased a personal residence...

Question 7

Marilyn,age 38,is employed as an architect.For calendar year 2013,she had AGI of $204,000 and paid the following medical expenses:
  Peter and Esther would qualify as Marilyn's dependents except that they file a joint return.Marilyn's medical insurance policy does not cover them.Marilyn filed a claim for reimbursement of $6,000 of her own expenses with her insurance company in December 2013 and received the reimbursement in January 2014.What is Marilyn's maximum allowable medical expense deduction for 2013?

Accepted Answer

The answer of Marilyn,age 38,is employed as an architect.For calendar...

Question 8

The Dargers have itemized deductions that exceed the standard deduction.However,when they file their joint return,they choose the standard deduction option.

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The answer of The Dargers have itemized deductions that exceed...

Question 9

Ashley earns a salary of $55,000,has capital gains of $3,000,and interest income of $5,000 in 2013.Her husband died in 2012.Ashley has a dependent son,Tyrone,who is age 8.Her itemized deductions are $9,000.

Accepted Answer

The answer of Ashley earns a salary of $55,000,has capital...

Question 10

Adjusted gross income (AGI)sets the ceiling or the floor for certain deductions.Explain and illustrate what this statement means.

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The answer of Adjusted gross income (AGI)sets the ceiling or...

Question 11

The Deweys are expecting to save on their taxes for 2013.Not only have both incurred large medical expenses,but both reached age 65.During the year,they also recognized a $30,000 loss on some land they sold which was purchased as an investment several years ago.Are the Deweys under a mistaken understanding regarding their tax position? Explain.

Accepted Answer

The answer of The Deweys are expecting to save on...

Question 12

Mel is not quite sure whether an expenditure he made is a deduction for AGI or a deduction from AGI.Since he plans to choose the standard deduction option for the year,does the distinction matter? Explain.

Accepted Answer

The answer of Mel is not quite sure whether an...

Question 13

Mr.Lee is a citizen and resident of Hong Kong,while Mr.Anderson is a citizen and resident of the U.S.In the taxation of income,Hong Kong uses a territorial approach,while the U.S.follows the global system.In terms of effect,explain what this means to Mr.Lee and Mr.Anderson.

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The answer of Mr.Lee is a citizen and resident of...

Question 14

Pedro is married to Consuela,who lives with him.Both are U.S.citizens and residents of Nebraska.Pedro furnishes all of the support of his parents,who are citizens and residents of Mexico.He also furnishes all of the support of Consuela's parents,who are citizens and residents of El Salvador.Consuela has no gross income for the year.If Pedro files as a married person filing separately,how many personal and dependency exemptions can he claim on his return?

Accepted Answer

The answer of Pedro is married to Consuela,who lives with...

Question 15

Bradley has two college-age children,Clint,a freshman at State University,and Abigail,a junior at Northwest University.Both Clint and Abigail are full-time students.Clint's expenses during the 2013 fall semester are as follows: $2,400 tuition,$250 books and course materials,and $1,600 room and board.Abigail's expenses for the 2013 calendar year are as follows: $10,200 tuition,$1,200 books and course materials,and $3,600 room and board.Tuition and the applicable room and board costs are paid at the beginning of each semester.Bradley is married,files a joint tax return,claims both children as dependents,and has a combined AGI with his wife of $114,000 for 2013.Determine Bradley's available education tax credit for 2013.

Accepted Answer

The answer of Bradley has two college-age children,Clint,a freshman at...

Question 16

Paul and Patty Black (both are age 66)are married and together have AGI of $140,000 in 2013.They have two dependents and file a joint return.During the year,they paid $8,000 for medical insurance,$15,000 in doctor bills and hospital expenses,and $1,000 for prescribed medicine and drugs.

Accepted Answer

The answer of Paul and Patty Black (both are age...

Question 17

Ellen,age 39 and single,furnishes more than 50% of the support of her parents,who do not live with her.Ellen practices as a self-employed interior decorator and has gross income in 2013 of $120,000.Her deductions are as follows: $30,000 business and $8,100 itemized.

Accepted Answer

The answer of Ellen,age 39 and single,furnishes more than 50%...

Question 18

In resolving qualified child status for dependency exemption purposes,why are tiebreaker rules necessary? Can these rules be waived?

Accepted Answer

The answer of In resolving qualified child status for dependency...

Question 19

Linda,who has AGI of $120,000 in 2013,contributes stock in Mauve Corporation (a publicly traded corporation)to the Salvation Army,a qualified charitable organization.The stock is worth $65,000,and Linda acquired it as an investment four years ago at a cost of $50,000.

Accepted Answer

The answer of Linda,who has AGI of $120,000 in 2013,contributes...

Question 20

When filing their Federal income tax returns,the Youngs always claimed the standard deduction.After they purchased a home,however,they started to itemize their deductions from AGI.

Accepted Answer

The answer of When filing their Federal income tax returns,the...

Quiz 16: Introduction to the Taxation of Individuals