Question 1

Ray is starting a new business and trying to decide between a C corporation,S corporation and partnership.Which of the following statements regarding his decision is correct?
A)An S corporation owner must pay income taxes only on the salary received.
B)A partner in a partnership is taxed on his or her share of partnership income.
C)A shareholder in a C corporation is taxed on his or her share of corporate income.
D)S corporations pay taxes on their current year income.

Accepted Answer

B)The partnership form is a flow-through entity.

Question 2

For each of the following taxpayers indicate the applicable filing status,the number of personal and dependency exemptions available,and the number of children who qualify for the child credit.
a.Jeffrey is a widower,age 71,who receives a pension of $10,000,nontaxable social security benefits of $12,000,and interest of $2,000.He has no dependents.
b.Selma is a single,full-time college student,age 20,who earned $6,800 working part-time.She has $1,700 of interest income and received $1,000 support from her parents.
c.Olivia is married,but her husband left her three years ago and she has not seen or heard from him since.She supports herself and her six-year-old daughter.She paid all the household expenses.Her income consists of salary of $18,500 and interest of $800.
d.Ruben is a single,full-time college student,age 20,who earned $6,800 working part-time.He has $250 of interest income and received $10,000 support from his parents.
e.Cathy is divorced and received $12,000 alimony from her former husband and earned $35,000 working as an administrative assistant.She also received $2,500 of child support for her daughter who lives with her.Cathy filed the appropriate IRS form and gave up the dependency exemption to her former husband.

Accepted Answer

The answer of For each of the following taxpayers indicate...

Question 3

Adam attended college for much of 2017,during which time he was supported by his parents.Erin married Adam in December 2017.They live in a common law state.Adam graduated and will commence work in January 2018.Erin worked during 2017 and earned $20,000.Adam's only income was interest of $1,100.Adam's parents are in the 28% tax bracket.Thus,claiming Adam as a dependent would save them $1,134 ($4,050 × .28).
a.What is Erin and Adam's tax liability if they file a joint return?
b.What is Erin and Adam's total tax liability if they file separate returns and Adam's parents claim him as a dependent?

Accepted Answer

The answer of Adam attended college for much of 2017,during...

Question 4

Maxine,who is 76 years old and single,is appropriately claimed as a dependent on her daughter Beth's tax return.During 2017 she received $500 interest on a savings account.She had a part time job that earned $3,000.Her total itemized deductions were $1,300.
Required: Compute Maxine's taxable income for 2017.Show all calculations.

Accepted Answer

The answer of Maxine,who is 76 years old and single,is...

Question 5

A corporation has revenue of $350,000 and deductible business expenses of $240,000.What is the federal income tax,before credits?
A)$16,500
B)$22,500
C)$26,150
D)$42,900

Accepted Answer

C)Taxable income is $110,000 ($350,000 - $240,000).The tax liability is $22,250 plus $3,900 [.39 × 10,000] = $26,150.

Question 6

Gina Lewis,age 12,is claimed as a dependent on her parent's return.She is their only child.She earned $2,300 from a summer job.She also earned interest of $2,750.Her parents' marginal tax rate is 28 percent.
Required:
a.Compute the amount of Gina's tax liability for 2017.
b.Can Gina's parents take a child tax credit for her?

Accepted Answer

The answer of Gina Lewis,age 12,is claimed as a dependent...

Question 7

The only business entity that pays federal income taxes is the C corporation.

Accepted Answer

S corporations and partnerships are both flow-through entities.Sole proprietors report the sole proprietorship income directly on their individual income tax return.

Question 8

Keith,age 17,is a dependent of his parents.During 2017,he received $3,000 of dividend income.The parent's marginal rate is 28% and Keith's rate is 10%.Keith's tax is
A)$292.50.
B)$130
C)$357.
D)None of the above.

Accepted Answer

B)
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 11ea7cb8_54b2_c55a_928c_4f8db5c05e2a_TB1258_00

Question 9

Satish,age 11,is a dependent of his parents.His only source of income in 2017 is $3,000 of interest income on bonds given him by his grandparents.Satish's marginal rate is 10%,and his parent's marginal rate is 28%.Satish's tax is
A)$357.
B)$195.
C)$546.
D)$300.

Accepted Answer

A)
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Question 10

What options are available for reporting and paying tax on the unearned income of a child under age 24?

Accepted Answer

The answer of What options are available for reporting and...

Question 11

Paige is starting Paige's Poodle Parlor and is considering alternative organizational forms.She anticipates the business will earn $100,000 from operating before compensating her for her services and before charitable contributions.Page,who is single,has $6,000 of income from other sources and other itemized deductions of $12,000.Her compensation for services will be $50,000.Charitable contributions to be made by the business are expected to be $5,000.Other distributions (dividends)to her from the business are expected to be $14,000.
Required: Compare her current income tax assuming she operates the business as a proprietorship,an S corporation,and a C corporation.Ignore payroll and other taxes.

Accepted Answer

The answer of Paige is starting Paige's Poodle Parlor and...

Question 12

The following information for 2017 relates to Emma Grace,a single taxpayer,age 18:
  a.Compute Emma Grace's taxable income assuming she is self-supporting.
b.Compute Emma Grace's taxable income assuming she is a dependent of her parents.

Accepted Answer

The answer of The following information for 2017 relates to...

Question 13

Vincent,age 12,is a dependent of his parents.During 2017,Vincent's earned income from wages is $2,600 and Vincent received $3,000 of interest income.The parent's marginal rate is 28% and Vincent's marginal rate is 10%.Vincent's tax is
A)$265.
B)$742.
C)$412.
D)None of the above.

Accepted Answer

C)
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Question 14

A $10,000 gain earned on stock held 13 months is taxed in a more favorable manner than a $10,000 gain earned on stock held 11 months.

Accepted Answer

Lower tax rates apply to long-term capital gains.

Question 15

The annual tax reporting form filed with the IRS by C corporations is the Schedule C.

Accepted Answer

C corporations file Form 1120.Sole proprietors report business income on Schedule C which is included with individual's Form 1040.

Question 16

Indicate for each of the following the most favorable filing status for the 2017 tax year.
a.Kenny died on March 2,2016.Marge,his wife,and Bart,their son,survive.Marge filed a joint return in 2016.Bart,age 18 in 2017,is a part-time college student and continues to live at home with his mother.He works part-time,earning $6,200.What is Marge's filing status in 2017?
b.Alan Spaulding is single and provides over 50% support of his niece Alicia who lives with him all year long.Alan maintains the household and claims Alicia as a dependent.Alicia makes $3,600 at a part-time job.She is a full-time student,age 18.What is Alan's filing status?
c.Lily,who was divorced on July 27,2017,provides 100% of the support for her parents who live in a nursing home in Kansas and have no income.What is Lily's filing status?
d.Holly was abandoned by her husband Fletcher in September of the current year.She has not seen or communicated with him since then.What is Holly's filing status?
e.Rick,whose wife died in December 2014,filed a joint tax return for 2014.He did not remarry,but has continued to maintain his home in which his two dependent children live.What is Rick's filing status for 2017?

Accepted Answer

The answer of Indicate for each of the following the...

Question 17

Artco Inc.is a C corporation.This year it earned $50,000 of taxable income and paid a $10,000 distribution (dividend)to Lily,its sole shareholder.Lily has a marginal tax rate of 25%.Due to the corporation's results and the distribution paid,the IRS will receive total taxes of
A)$9,000.
B)$12,500.
C)$14,000.
D)$10,000.

Accepted Answer

A)
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Question 18

Silver Inc.is an S corporation.This year it earned $50,000 of taxable income and paid a $10,000 distribution to Daisy,its sole shareholder.Daisy has a marginal tax rate of 25%.Due to the corporation's results and the distribution paid,the IRS will receive total taxes of
A)$9,000.
B)$12,500.
C)$14,000.
D)$10,000.

Accepted Answer

B)
 11ea7cb8_54b3_88b3_928c_838603ef3fb6_TB1258_00

Question 19

A building used in a business is sold after five years of use for a gain.The gain will be treated as a long-term capital gain.

Accepted Answer

Depreciable business property is excluded from the definition of a capital asset.

Question 20

Mary Ann pays the costs for her Aunt Hazel to live in a nursing home.Aunt Hazel receives Social Security benefits of $7,000 a year which are turned over to the nursing home.Mary Ann pays the remaining cost of $33,000.Hazel has no other income.Mary Ann visits Hazel twice a week and meets with doctors and nurses regarding Hazel's medical care.What tax issues should Mary Ann consider?

Accepted Answer

The answer of Mary Ann pays the costs for her...

Quiz 18: Determination of Tax

Ray is starting a new business and trying to decide between a C corporation,S corporation and partnership.Which of the following statements regarding his decision is correct?

A corporation has revenue of $350,000 and deductible business expenses of $240,000.What is the federal income tax,before credits?

The only business entity that pays federal income taxes is the C corporation.

Keith,age 17,is a dependent of his parents.During 2017,he received $3,000 of dividend income.The parent's marginal rate is 28% and Keith's rate is 10%.Keith's tax is

Satish,age 11,is a dependent of his parents.His only source of income in 2017 is $3,000 of interest income on bonds given him by his grandparents.Satish's marginal rate is 10%,and his parent's marginal rate is 28%.Satish's tax is

What options are available for reporting and paying tax on the unearned income of a child under age 24?

The following information for 2017 relates to Emma Grace,a single taxpayer,age 18: a.Compute Emma Grace's taxable income assuming she is self-supporting. b.Compute Emma Grace's taxable income assuming she is a dependent of her parents.

Vincent,age 12,is a dependent of his parents.During 2017,Vincent's earned income from wages is $2,600 and Vincent received $3,000 of interest income.The parent's marginal rate is 28% and Vincent's marginal rate is 10%.Vincent's tax is

A $10,000 gain earned on stock held 13 months is taxed in a more favorable manner than a $10,000 gain earned on stock held 11 months.

The annual tax reporting form filed with the IRS by C corporations is the Schedule C.

Artco Inc.is a C corporation.This year it earned $50,000 of taxable income and paid a $10,000 distribution (dividend) to Lily,its sole shareholder.Lily has a marginal tax rate of 25%.Due to the corporation's results and the distribution paid,the IRS will receive total taxes of

Silver Inc.is an S corporation.This year it earned $50,000 of taxable income and paid a $10,000 distribution to Daisy,its sole shareholder.Daisy has a marginal tax rate of 25%.Due to the corporation's results and the distribution paid,the IRS will receive total taxes of

A building used in a business is sold after five years of use for a gain.The gain will be treated as a long-term capital gain.