Question 1

Determine Mr. Smith's 2015 filing status in each of the following independent cases.
a. Mr. Smith and Mrs. Smith were legally divorced on December 1. Mr. Smith has not remarried and has no dependent children.
b. Mr. Smith and the first Mrs. Smith were legally divorced on February 10. Mr. Smith remarried the second Mrs. Smith on December 5. He has no dependent children.
c. Mrs. Smith dies on June 22. Mr. Smith has not remarried and has no dependent children.
d. Mrs. Smith died on November 1, 2013. Mr. Smith has not remarried and maintains a home for one dependent child.
e. Mrs. Smith died on April 3, 2014. Mr. Smith has not remarried and has no dependent children.
f. Mr. and Mrs. Smith were legally divorced on September 10, 2012. Mr. Smith has not remarried and maintains a home for his two dependent children.

Accepted Answer

The answer of Determine Mr. Smith's 2015 filing status in...

Question 2

Mr. and Mrs. Reece couldn't complete their 2015 Form 1040 before April 15, 2016. They estimate that they will have a $700 balance of tax due with the return. Which of the following statement is true?

Accepted Answer

The Reeces can file an extension request by April 15 to extend the filing date for six months without penalty. However, they must pay the $700 estimated balance of tax due with the extension request. If they fail to file their return by the extended due date, they may incur penalties.

Question 3

Alice Grim, a single taxpayer, has $219,000 taxable income, which includes a $20,000 capital gain taxed at 15%. Her alternative minimum taxable income in excess of her exemption amount is $237,400. Compute Alice's regular tax, AMT, and total tax.

Accepted Answer

The answer of Alice Grim, a single taxpayer, has $219,000...

Question 4

Which of the following statements concerning extensions of time to file an individual tax return is true?

Accepted Answer

While an extension of time to file allows a taxpayer to delay filing their tax return, it does not extend the time for payment of tax. Any tax owed must still be paid by the original due date (usually April 15th) to avoid penalties and interest. Options B, C, and D are incorrect because an extension of time to file is for six months, taxpayers are not required to provide a reasonable explanation for requesting an extension, and the IRS typically grants extension requests without requiring an explanation.

Question 5

Eileen, a single individual, had $125,000 taxable income. Compute her income tax assuming that:
a. Taxable income includes no capital gains.
b. Taxable income includes $14,000 capital gain eligible for the 15% preferential rate.

Accepted Answer

The answer of Eileen, a single individual, had $125,000 taxable...

Question 6

Mr. and Mrs. Bennett file a joint tax return. Determine if each of the following unmarried individuals is either a qualifying child or a qualifying relative for whom the couple can claim an exemption.
a. Son Alex, age 22, lives in his parents' home and works fulltime as a tax accountant. Alex is self-supporting except for the fact that he does not pay rent to his parents.
b. Daughter Samantha, age 20, is a full-time college student. Samantha lives in a dormitory during the school year, but her parents' home is her permanent residence and they provide 100% of her financial support.
c. Mr. Bennett's brother Max is 42 years old and mentally handicapped. Max lives in a privately operated group home, and Mr. and Mrs. Bennett provide 100% of his financial support. Max has no gross income.
d. Mrs. Bennett's mother, Vera, age 67, lives in a retirement community. Mr. and Mrs. Bennett provide about 75% of her financial support. Vera earned $5,000 this year as a part-time receptionist.

Accepted Answer

The answer of Mr. and Mrs. Bennett file a joint...

Question 7

Ms. Kilo's regular income tax before credits on her Form 1040 is $45,890, and she has a $5,700 minimum tax credit from a previous year. Which of the following statements is true?

Accepted Answer

The answer of Ms. Kilo's regular income tax before credits...

Question 8

Which of the following statements concerning extensions of time to file an individual tax return is false?

Accepted Answer

An extension request must be filed before the due date of the return, which is typically April 15 for calendar-year individuals.

Question 9

Last year, Mr. Corbett's AGI was $141,000, and his total tax liability was $33,650. This year, his total tax liability is $35,290. Compute the minimum amount of current year tax that Mr. Corbett had to prepay (withholding and estimated payments) to avoid an underpayment penalty.

Accepted Answer

The answer of Last year, Mr. Corbett's AGI was $141,000,...

Question 10

Which of the following statements regarding tax payments is true?

Accepted Answer

Sole proprietors are required to make quarterly estimated payments of both income tax and self-employment tax. This is because sole proprietors are responsible for paying both the employer and employee portion of Social Security and Medicare taxes, which is the self-employment tax. Additionally, they are also responsible for paying income tax on their business profits. Failure to make quarterly estimated payments may result in penalties and interest.

Question 11

Which of the following statements concerning the exemption phaseout is true?

Accepted Answer

The exemption phaseout reduces the amount that taxpayers can claim as a personal exemption on their tax returns. It can reduce a taxpayer's exemption amount to zero, meaning they can't claim any exemptions for themselves, their spouse, or their dependents. The phaseout applies to all taxpayers, not just those with a 39.6% marginal income tax rate, and it applies whether taxpayers use the standard deduction or itemize their deductions.

Question 12

Last year, Mr. Tyker's AGI was $182,800, and his total tax liability was $51,650. This year, his total tax liability is $65,440. Compute the minimum amount of current year tax that Mr. Tyker had to prepay (withholding and estimated payments) to avoid an underpayment penalty.

Accepted Answer

To avoid an underpayment penalty, taxpayers must either pay 100% of their previous year's tax liability or 90% of their current year's tax liability. In this case, 100% of Mr. Tyker's previous year's tax liability is $51,650. Therefore, he must have pre-paid at least $51,650 to avoid an underpayment penalty. However, his total tax liability this year is $65,440, meaning he had to prepay an additional $13,790 ($65,440 - $51,650). The minimum amount he had to prepay to avoid an underpayment penalty is 90% of his current year's tax liability, which is $58,896 ($65,440 x 0.9). Since he had to prepay at least $51,650 and the only answer option greater than $51,650 is $58,896, the correct answer is C.

Question 13

Which of the following statements concerning the overall limitation on itemized deductions is true?

Accepted Answer

The answer of Which of the following statements concerning the...

Quiz 14: The Individual Tax Formula