Question 1

Keith,age 17,is a dependent of his parents.During 2014,he received $3,000 of dividend income.The parent's marginal rate is 28% and Keith's rate is 10%.Keith's tax is

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The answer of Keith,age 17,is a dependent of his parents.During...

Question 2

Dave,age 59 and divorced,is the sole support of his mother age 83,who is a resident of a local nursing home for the entire year.Dave's mother had no income for the year.Dave's filing status and exemptions claimed are

Accepted Answer

To qualify as head of household, Dave must meet the following criteria:
- He is unmarried or considered unmarried on the last day of the tax year (which he is, since he is divorced).
- He paid more than half the cost of keeping up a home for the entire year.
- A qualifying person lived with him in the home for more than half the year (which his mother did, as a resident of a nursing home counts as living with him).

Since Dave is the sole support of his mother and she had no income for the year, she qualifies as his dependent. Therefore, he can claim her as a dependent and take an additional exemption for her.

Therefore, the best choice for Dave's filing status and exemptions claimed is C) head of household and two exemptions.

Question 3

Vincent,age 12,is a dependent of his parents.During 2014,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

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The answer of Vincent,age 12,is a dependent of his parents.During...

Question 4

Liz and Bert divorce and Liz receives custody of their child.Bert is ordered by the court to pay child support of $10,000 per year,and Liz agrees in writing to allow Bert to claim the dependency exemption for the child.If Liz maintains the home in which she and her child live,her filing status and exemptions claimed will be

Accepted Answer

Liz maintains the home in which she and her child live, therefore she may qualify for head of household filing status. In addition, she can claim one exemption for herself. Since Bert has agreed to allow her to claim the dependency exemption for the child, she cannot claim an additional exemption for the child. Therefore, her filing status and exemptions claimed will be head of household and one exemption.

Question 5

The filing status in which the rates increase most rapidly is

Accepted Answer

For the tax year 2020, the tax rate for married individuals filing separately increases rapidly and sharply starting at an income of $320,000, whereas the other filing statuses have more gradual rate increases. Therefore, option C, married filing separately, is the correct answer.

Question 6

In October 2013,Joy and Paul separated and have not lived with each other since,but they are still legally married.They do not file a joint return. Joy supports their children after the separation and pays the cost of maintaining their home.Joy's filing status in 2013 and 2014 is,respectively,

Accepted Answer

Since Joy and Paul are still legally married but do not live with each other, they must either file as married filing separately or head of household. As Joy is the sole provider for their children, she can file as head of household in 2014. Therefore, Joy's filing status in 2013 is married filing separately and her filing status in 2014 is head of household.

Question 7

Michelle,age 20,is a full-time college student with earned income from wages of $5,200 and interest income of $700.Michelle's parents provide more than half of Michelle's support.Michelle's taxable income is

Accepted Answer

Michelle's taxable income is calculated as follows:

Total earned income + Total unearned income - Standard deduction ($12,200 for 2019) - Personal exemption ($0 in 2019) = Taxable income

$5,200 + $700 - $12,200 - $0 = $-6,300

Since Michelle's taxable income is negative, she does not owe any taxes. Therefore, her taxable income is $0, which is option C.

Question 8

A married taxpayer may file as head of household under the abandoned spouse provisions if all of the following are met except

Accepted Answer

The option that is not correct is D. There is no requirement for the taxpayer to have been married for at least two years to qualify for the abandoned spouse provisions. The correct requirements are A, B, and C.

Question 9

Frank,age 17,received $4,000 of dividends and $1,500 from a part-time job.Frank is a dependent of his parents who are in the 28% percent bracket.Frank's taxable income is

Accepted Answer

Since Frank is a dependent of his parents, his standard deduction is $1,100 for 2021.

His taxable income can be calculated as follows:

Dividends: $4,000 
Part-time job: $1,500

Total income: $5,500

Minus standard deduction: -$1,100

Taxable income: $4,400

Since Frank's taxable income falls in the 10% tax bracket for 2021, his tax liability would be:

10% of ($4,400 - $0) = $440

However, since Frank's parents are in the 28% tax bracket, they may be able to claim the qualified dividend and capital gain tax worksheet and use their own tax rate to calculate Frank's tax liability on the $4,000 of dividends.

Assuming their tax rate is indeed 28%, Frank's tax liability on the dividends would be:

28% of $4,000 = $1,120

Therefore, Frank's total tax liability would be:

$440 (from his own income) + $1,120 (from his dividends) = $1,560

So, even though Frank's taxable income is technically $4,400, his total tax liability is $1,560, which is less than his total income of $5,500.

Thus, the correct answer is D) $3,650.

Question 10

Edward,a widower whose wife died in 2011,maintains a household for himself and his daughter who qualifies as his dependent.Edward's most favorable filing status for 2014 is

Accepted Answer

Edward is not eligible for the filing statuses of single or married filing jointly because he is not single and he is not married. He may be eligible for the surviving spouse filing status, but this is limited to two years after the year of his wife's death, so it would not apply to his 2014 tax return. Therefore, the most favorable filing status for Edward for 2014 would be head of household, as he is maintaining a household for his dependent daughter.

Question 11

Which of the following dependent relatives does not have to live in the same household as the taxpayer who is claiming head of household filing status?

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The answer of Which of the following dependent relatives does...

Question 12

In order to qualify to file as surviving spouse,all of the following criteria must be met by the widow or widower except

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The answer of In order to qualify to file as...

Question 13

If an individual with a marginal tax rate of 15% has a long-term capital gain,it is taxed at

Accepted Answer

A)Taxpayers with a marginal tax rate of 15% or lower will have a 0% tax rate on long-term capital gains.

Question 14

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?

Accepted Answer

A partnership would be the best option for Ray because the partners are taxed on their share of partnership income, which avoids double taxation. Additionally, partnerships offer flexibility in management and are relatively easy and inexpensive to set up compared to corporations. Choice A is incorrect because S corporation owners must pay income tax on both salary and their share of the corporation's profits. Choice C is incorrect because in a C corporation, shareholders are subject to double taxation, meaning the corporation is taxed on its profits and then shareholders are taxed on any dividends they receive. Choice D is incorrect because S corporations do not pay income taxes, but rather the income is allocated to shareholders and they pay taxes on their share.

Question 15

To qualify as an abandoned spouse,the taxpayer is not required to

Accepted Answer

The answer of To qualify as an abandoned spouse,the taxpayer...

Question 16

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

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 17

Sally divorced her husband three years ago and has not remarried. Since the divorce she has maintained her home in which she and her now sixteen-year-old daughter reside.The daughter is a qualified child.Sally signed the dependency exemption over to her ex-spouse.What is Sally's filing status for the current year and how many exemptions may she claim?

Accepted Answer

Sally can file as head of household since she maintained a home for herself and her qualified child for over half the year and she paid more than half of the household expenses. She can claim one exemption for her qualified child.

Question 18

Elise,age 20,is a full-time college student with earned income from wages of $4,400 and interest income of $500.Elise's parents provide more than half of her support.Elise's taxable income is

Accepted Answer

The answer of Elise,age 20,is a full-time college student with...

Question 19

Satish,age 11,is a dependent of his parents. His only source of income for the year 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

Accepted Answer

Satish's interest income is subject to the "kiddie tax" rules, which means that part of his income is taxed at his parent's higher rate. The first $1,150 is tax-free, the next $1,150 is taxed at Satish's rate (10%), and the remaining $700 is taxed at his parent's rate (28%). Therefore, the tax is $115 (10% of $1,150) + $196 (28% of $700) = $311. However, the closest option is $380, which suggests a possible rounding or simplification in the problem.

Question 20

The oldest age at which the "Kiddie Tax" could apply to a dependent child is

Accepted Answer

The answer of The oldest age at which the "Kiddie...

Quiz 4: I: Determination of Tax