Question 1

Oscar and Diane separated in June of this year although they continue to live in the same town. They have twin sons, Blake and Cliff, who remain in the family home with Diane. Oscar's income this year was $45,000 while Diane worked only part- time and made $15,000. Oscar also gambles heavily but told Diane that he had no winnings this year. What tax issues should they consider?

Accepted Answer

The answer of Oscar and Diane separated in June of...

Question 2

In the Exempt Model, the earnings are excluded from explicit taxation.

Accepted Answer

In the Exempt Model, earnings are excluded from explicit taxation.

Question 3

Assuming a calendar tax year and the conventional 15th of the month due date, all of the following business entities must file their 2018 tax returns by the March 15, 2019 except

Accepted Answer

C corporations have a tax return due date of April 15th for calendar year taxpayers, unlike partnerships and S corporations, which are due on March 15th.

Question 4

Tax returns from individual and C corporate taxpayers are due on the 15th day of the third month following the close of the tax year.

Accepted Answer

The answer of Tax returns from individual and C corporate...

Question 5

Discuss why Congress passed the innocent spouse provision and detail the requirements to be met in order to qualify as an innocent spouse and be relieved of liability for tax on unreported income.

Accepted Answer

The answer of Discuss why Congress passed the innocent spouse...

Question 6

A taxpayer in the 25% marginal tax bracket invests $1,000 of after- tax dollars at 10% interest before taxes. At the end of year one, the taxpayer will have accumulated after- tax dollars of $1,075.

Accepted Answer

The taxpayer will have accumulated after-tax dollars of $1,100, not $1,075. The interest earned is $100, and the taxpayer will pay $25 in taxes on this interest, leaving them with $1,100 after taxes.

Question 7

Discuss reasons why a married couple may choose not to file a joint return.

Accepted Answer

The answer of Discuss reasons why a married couple may...

Question 8

In order to shift the taxation of dividend income from a parent to a child

Accepted Answer

The taxation of dividend income can only be shifted to the child if the child is the owner of the stock. Simply directing payment or depositing dividends into the child's account does not transfer ownership or tax liability.

Question 9

Savings accounts and money market funds are examples of investments taxed under the Current Model.

Accepted Answer

Savings accounts and money market funds are generally considered to be taxable investments, which fall under the Current Model of taxation.

Question 10

Lester, a widower qualifying as a surviving spouse, has $209,000 of salary, five personal and dependency exemptions and itemizes deductions. Lester must use which form to report his taxable income?

Accepted Answer

Form 1040 is used by individuals with higher income levels, itemized deductions, and multiple exemptions, which applies to Lester's situation.

Question 11

In the Pension Model, the initial investment is deductible or excludible from gross income, and investment earnings are taxed currently.

Accepted Answer

The answer of In the Pension Model, the initial investment...

Question 12

Tax returns from individual taxpayers and partnerships are due on the 15th day of the fourth month following the close of the tax year.

Accepted Answer

The answer of Tax returns from individual taxpayers and partnerships...

Question 13

A taxpayer can receive innocent spouse relief if

Accepted Answer

Innocent spouse relief requires that all conditions are met: the tax understatement is due to the other spouse's errors, the innocent spouse was unaware of the understatement, and it would be unfair to hold them liable.

Question 14

Form 4868, a six- month extension of time to file, allows a taxpayer to

Accepted Answer

Form 4868 allows taxpayers to extend the filing date of their tax return, but any estimated taxes owed must still be paid by the original due date to avoid penalties and interest.

Question 15

In the Deferred Model, investment earnings are taxed at the end of the investment period.

Accepted Answer

In the Deferred Model, taxes on investment earnings are postponed until the investor withdraws the earnings, typically at the end of the investment period.

Question 16

Married couples will normally file jointly. Identify a situation where a married couple may prefer to file separately.

Accepted Answer

Married couples may choose to file separately if they are separated and contemplating divorce, to avoid joint liability for taxes, or if one spouse has substantial medical expenses that could be deducted more easily on a separate return.

Question 17

The requirement to file a tax return is based on the individual's adjusted gross income.

Accepted Answer

The answer of The requirement to file a tax return...

Question 18

Alexis and Terry have been married five years and file joint tax returns. Alexis began embezzling funds from her employer during the third year of their marriage. Last year, Alexis suddenly left the country and Terry does not know where she is. In the current year, Terry learned that the IRS had assessed him $27,000 in unpaid taxes due to Alexis's embezzlement. What tax issue(s) are present in Terry's situation? What questions would you ask Terry to determine his appropriate response to the IRS?

Accepted Answer

The answer of Alexis and Terry have been married five...

Question 19

A single taxpayer earns a salary of $6,000. If he is taxed with a 10% flat rate, he has $5,400 of after- tax dollars available to invest.

Accepted Answer

$6,000 x 0.10 (10% tax rate) = $600 in taxes
$6,000 - $600 = $5,400 after-tax dollars available to invest.

Question 20

In the Current Model, investment earnings are taxed as they are earned.

Accepted Answer

According to the current tax model, investment earnings such as dividends, interests, and capital gains are taxed in the year they are earned.

Quiz 16: Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals