Question 1

COMPREHENSIVE TAX CALCULATION PROBLEM.Girardo and Gloria are married with 3 children,ages 14,11,and 8.Gloria is a senior vice-president for a security firm and Girardo is a househusband who spends 15 hours a week doing volunteer work for local organizations.Girardo inherited $800,000 from his grandfather in 1999.He spends 10 hours a week managing the rental property they purchased with part of the inheritance and the family's stock portfolio.Prior to becoming a househusband,Girardo was an award winning high school accounting teacher.In February of 2016,Girardo is approached by the high school principal about returning to his former position.Girardo would receive an annual salary of $50,000.He is a little hesitant about accepting the offer,because he enjoys his volunteer work.Girardo's accountant has provided him with the following projection of their 2016 tax liability:  
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Girardo's projection from his accountant does not include his salary from teaching.Assume that Girardo's pro-rata salary for the year will be $30,000.Calculate Girardo and Gloria's tax liability,if Girardo decides to return to teaching.Also determine the marginal and effective tax rates on Girardo's salary.

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Question 2

Explain the non-support test and the principle residence test to be a qualifying child.

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Question 3

Canfield is single,70 years old,and has no dependents.Canfield will not have to file a tax return in 2016 if:
I.his gross income does not exceed $11,900.
II.his only income is $4,000 of self-employment income.
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Accepted Answer

According to the IRS, if Canfield's gross income does not exceed $11,900, he will not have to file a tax return in 2016. Option II is incorrect because even though self-employment income of $4,000 is below the standard deduction amount, it still needs to be reported and potentially subject to self-employment taxes.

Question 4

Byron,54,is a single,self-employed,carpenter.During 2016,he earns gross revenues of $60,000 and incurs $6,000 of business expenses.His itemized deductions for the year are $8,000.Determine Byron's taxable income and his total tax liability.

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Question 5

Eileen pays $14,000 of interest related to her purchase of investments.During the current year,Eileen's adjusted gross income is $80,000,which includes investment related income of $19,000.Her other investment expenses are $9,000.Determine whether the interest is deductible,how it would be deducted on the taxpayer's return (if there are alternatives possible,discuss the conditions which would determine the treatment)and any limitations that might be placed on the deduction.

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Question 6

In each of the following independent cases determine Mei-ling's filing status.
a.Mei-ling's husband died in 2015. She maintains a household for her unmarried son during 2016, who did not qualify as her dependent.
b.Mei-ling is unmarried and lives in an apartment. Mei-ling's parents do not live with her. She is not able to claim them as dependents for 2016.

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Question 7

Describe the rules that apply to individual taxpayers for determining the deductibility of each of the following types of interest.Include in your discussion whether the interest is deducted for or from AGI,and any limitations that apply.
a.Interest associated with trade or business activities
b.Interest associated with investment activities
c.Interest associated with constructing or purchasing a taxpayer's residence
d.Interest associated with personal purchases and activities

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Question 8

Discuss why the distinction between deductions for adjusted gross income and deductions from adjusted gross income is important for individual taxpayers.

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Question 9

Match each statement with the correct term below.
-Filing status

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Question 10

During the year,Arlene donates stock she had purchased in 2005 for $30,000 to a qualified public charitable organization.The fair market value of the stock at the time of the donation is $40,000.Her adjusted gross income for the year is $80,000.If the stock donation is her only charitable contribution,what is Arlene's charitable contribution deduction? What should she consider in determining the amount of the deduction?

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Question 11

Mr.and Mrs.Bachman,both age 65,file a joint return.In 2016 they have wages of $30,000,dividends of $6,200,municipal bond interest of $3,000 and received $10,300 for the sale of stock that cost $4,000 in 1992.They made a $3,000 contribution to their Roth IRA,paid $4,100 in deductible mortgage interest and real estate taxes and made a $2,500 charitable contribution.What is their gross income,adjusted gross income,and taxable income?

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The answer of Mr.and Mrs.Bachman,both age 65,file a joint return.In...

Question 12

Match each statement with the correct term below.
-Head of household

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Question 13

For each of the following situations,determine whether or not the item is deductible,how it would be deducted on the taxpayer's return (if there are alternatives possible,discuss the conditions which would determine the treatment)and any limitations which might be placed on the deduction.
a.Rickie, who is 35, pays $1,800 for dental work during the current year.
b.Jamie incurs $1,400 of employee business expenses during the current year. Her employer reimburses all of the expenses.

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Question 14

Explain the support test and the gross income test to be a qualifying relative.

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Question 15

In each of the following independent cases determine the total number of personal and dependency exemptions Ivan may claim.Assume that Ivan is single,32 years old and any dependency test not mentioned has been met.
a.Ivan provides 80% support of his nephew (age 17), who lives with him. During the year, the nephew has gross income of $4,800 and is a full time student.
b.Ivan and his two brothers each provide 20% of the support of their mother. The mother derives the remainder of her support from Social Security benefits of $9,300.
c.Ivan provides 60% support of his mother, age 69. His mother received dividend income of $3,350 and Social Security benefits of $8,500.

Accepted Answer

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Question 16

COMPREHENSIVE TAX RETURN PROBLEM.Your cousin,Antonia,who is 30 years old,single and a restaurant manager,heard that you have enrolled in the Masters of Taxation program at State University.She has asked you for help in preparing her 2016 tax return and provides you with the following information:  
Note:
[1] Antonia kept the award from the United Way.
[2] Benefits paid by the employer.
[3] Antonia borrowed $12,000 and used the proceeds to purchase a new car.
[4] The original cost of the clothes were $480 and the current FMV is $200
[5] Of the $888 in expenses,$180 are for meals and entertainment.
Compute Antonia's: adjusted gross income,taxable income,and tax liability.

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Question 17

For each of the following situations,determine the amount of the allowable deduction.Be sure to show any necessary calculations and provide explanations of how you determined the deductible amount.

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Question 18

Match each statement with the correct term below.
-Married,filing separately

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Question 19

Alli is 23 years old,a full time student,and a dependent of her parents.She earns $2,000 from her job as a waitress and receives $3,000 of interest on a savings account established by her grandparents.
a.What is Alli's taxable income?
b.What is Alli's tax liability on the taxable income (assume that her parent's taxable income is $200,000)?

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Question 20

Chad pays $2,000 of interest on $20,000 of debt incurred for the purchase of municipal bonds and corporate bonds.Chad receives $800 of interest on the municipal bonds and $800 of interest on the corporate bonds.What is his allowable deduction on the $2,000 of interest? Explain your answer and show all calculations.

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Quiz 8: Taxation of Individuals

Explain the non-support test and the principle residence test to be a qualifying child.

Canfield is single,70 years old,and has no dependents.Canfield will not have to file a tax return in 2016 if: I.his gross income does not exceed $11,900. II.his only income is $4,000 of self-employment income. ​

Byron,54,is a single,self-employed,carpenter.During 2016,he earns gross revenues of $60,000 and incurs $6,000 of business expenses.His itemized deductions for the year are $8,000.Determine Byron's taxable income and his total tax liability.

Discuss why the distinction between deductions for adjusted gross income and deductions from adjusted gross income is important for individual taxpayers.

Match each statement with the correct term below. -Filing status

Match each statement with the correct term below. -Head of household

Explain the support test and the gross income test to be a qualifying relative.

For each of the following situations,determine the amount of the allowable deduction.Be sure to show any necessary calculations and provide explanations of how you determined the deductible amount.

Match each statement with the correct term below. -Married,filing separately

Canfield is single,70 years old,and has no dependents.Canfield will not have to file a tax return in 2016 if: I.his gross income does not exceed $11,900. II.his only income is $4,000 of self-employment income.