Question 1

Sean and Martha are both over age 65 and Martha is considered blind by tax law standards.Their total income in 2014 from part-time jobs and interest income from a bank savings account is $60,000.Their itemized deductions are $12,000.
Required: Compute their taxable income.

Accepted Answer

The answer of Sean and Martha are both over age...

Question 2

Maxine,who is 76 years old and single,is appropriately claimed as a dependent on her daughter Beth's tax return.During 2014 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 2014.Show all calculations.

Accepted Answer

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

Question 3

Shane and Alyssa (a married couple)have AGI of $345,050 in 2014. They bought a house this year and paid $16,000 of interest expense on the mortgage and paid $6,500 of property taxes. They will be allowed a deduction from AGI of
A)$12,200.
B)$22,500.
C)$19,900.
D)$21,300.

Accepted Answer

Shane and Alyssa can itemize their deductions instead of taking the standard deduction. The itemized deductions would include $16,000 in mortgage interest and $6,500 in property taxes paid. The total itemized deduction would be $22,500, which is greater than the standard deduction of $12,200. Therefore, Shane and Alyssa can deduct $22,500 from their AGI.

Question 4

Hannah is single with no dependents and has a salary of $102,000 for 2014,along with tax exempt interest income of $3,000 from a municipality.Her itemized deductions total $6,600.
Required: Compute her taxable income

Accepted Answer

The answer of Hannah is single with no dependents and...

Question 5

Kate is single and a homeowner.In 2014,she has property taxes on her home of $3,000,makes charitable contributions of $2,000,and pays home mortgage interest of $7,000.Kate's adjusted gross income for 2014 is $77,000.
Required: Compute her taxable income for 2014.

Accepted Answer

The answer of Kate is single and a homeowner.In 2014,she...

Question 6

Rena and Ronald,a married couple,each earn a salary of $200,000. They will be required to pay additional payroll taxes in 2014 of
A)$0.
B)$1,350.
C)$1,800.
D)$5,800.

Accepted Answer

The additional payroll tax is the Medicare surtax of 0.9% on earned income over $200,000. Thus, Rena and Ronald will each be subject to a Medicare surtax of $1,800 ($200,000 x 0.9%). Combined, they will owe $3,600 in Medicare surtaxes, which is the difference between the total earned income ($400,000) and the $250,000 threshold for married couples filing jointly. Therefore, the correct answer is B.

Question 7

Steve Greene,age 66,is divorced with no dependents. In 2014 Steve had income and expenses as follows:
  Compute Steve's taxable income for 2014.Show all calculations.

Accepted Answer

The answer of Steve Greene,age 66,is divorced with no dependents....

Question 8

Form 4868,a six-month extension of time to file,allows a taxpayer to
A)avoid interest on underpayment of taxes due.
B)extend the filing date of the return as well as payment of the tax due.
C)extend the filing date of the return but the estimated amount of tax due must still be paid by the original due date of the return.
D)extend the filing date only at the discretion of the IRS.

Accepted Answer

Form 4868 allows a taxpayer to extend the filing date of their return, but they must still pay the estimated amount of tax due by the original due date of the return. This form does not allow the taxpayer to avoid interest on underpayment of taxes or extend the filing date without paying the estimated amount of tax due. The IRS does not have discretion in granting the extension as long as the taxpayer meets the requirements.

Question 9

Rob is a taxpayer in the top tax bracket,with over a million in taxable income. He plans to sell stock held long-term for a $100,000 gain. This sale will result in an increase to his tax liability of
A)$15,000.
B)$20,000.
C)$39,600.
D)$23,800.

Accepted Answer

D)Tax on capital gain of $20,000 ($100,000 × 20%)+ additional tax on investment income of $3,800 ($100,000 × 3.8%)= $23,800.

Question 10

Bill and Tessa have two children whom they support and who live in their home.Timmy is 17 and has earned income of $5,000 for the year.Their other child,Tommy,is 15.Tessa's mother also lives with them and may be claimed as their dependent.She is 89 years old.Their adjusted gross income is $130,000.
Required: Compute Bill and Tessa's taxable income for 2014 if they file a joint return and they do not itemize deductions.

Accepted Answer

The answer of Bill and Tessa have two children whom...

Question 11

The following information for 2014 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 2014 relates to...

Question 12

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?
A)Form 1040ES
B)Form 1040EZ
C)Form 1040A
D)Form 1040

Accepted Answer

Since Lester itemizes deductions, he cannot use Form 1040EZ or Form 1040A, which only allow for standard deductions. He also doesn't need to make estimated tax payments, so Form 1040ES is unnecessary. Therefore, he must use Form 1040 to report his taxable income.

Question 13

Eliza Smith's father,Victor,lives with Eliza who is a single taxpayer.During the year,Eliza purchased clothing for her father costing $1,200 and provided him with a room that could have been rented for $6,000.In addition,Eliza spent $4,000 for groceries she shared with her father.Eliza purchased a new television for $900 which she placed in the living room for both her father and her use.
What is the amount of support provided by Eliza to her father?

Accepted Answer

The answer of Eliza Smith's father,Victor,lives with Eliza who is...

Question 14

A taxpayer can receive innocent spouse relief if
A)the understated tax is attributable to erroneous items of the other spouse.
B)the innocent spouse did not know and had no reason to know that there was an understatement of tax.
C)under the circumstances,it would be inequitable to hold the innocent spouse liable for the understated tax.
D)All of the above conditions apply.

Accepted Answer

All of the above conditions must apply in order for a taxpayer to receive innocent spouse relief. The understated tax must be attributable to erroneous items of the other spouse, the innocent spouse must not have known and had no reason to know about the understatement of tax, and under the circumstances, it would be unfair to hold the innocent spouse responsible for the understated tax.

Question 15

In 2014,Sam is single and rents an apartment for which he pays $800 per month and makes charitable contributions of $1,000.Sam's adjusted gross income is $47,000.
Required: Compute his taxable income.Show all calculations.

Accepted Answer

The answer of In 2014,Sam is single and rents an...

Question 16

Lila and Ted are married and have AGI of $332,000 in 2014. They had their first children this year,twins. Lila and Ted will be allowed a deduction for personal and dependency exemptions of
A)$7,900.
B)$15,800.
C)$12,324.
D)$3,476.

Accepted Answer

In 2014, the personal exemption amount was $3,950 per person. Lila and Ted can claim exemptions for themselves and their two children, totaling four exemptions. However, their AGI of $332,000 exceeds the phase-out threshold for married couples filing jointly, which begins at $305,050. The phase-out reduces the exemption amount by 2% for each $2,500 (or part thereof) over the threshold. The reduction calculation results in a total deduction of $12,324.

Question 17

In order to shift the taxation of dividend income from a parent to a child,
A)the parent must direct the corporation to pay the dividend to the child.
B)the parent must transfer ownership of the stock to the child.
C)the parent can deposit the dividend in the child's bank account.
D)all of the above will result in shifting the taxation to the child.

Accepted Answer

The only way to shift the taxation of dividend income from a parent to a child is by transferring ownership of the stock to the child. Directing the corporation to pay the dividend to the child or depositing the dividend in the child's bank account may result in the child receiving the income, but it does not transfer ownership of the asset that generated the income, so the taxation would still be attributed to the parent.

Question 18

Married couples will normally file jointly. Identify a situation where a married couple may prefer to file separately.
A)The spouse with lower income has substantial medical expenses.
B)A couple is separated and contemplating divorce.
C)One spouse can be held responsible for the entire tax liability.
D)All of the above.

Accepted Answer

A) If one spouse has substantial medical expenses, they may be able to exceed the threshold for deducting medical expenses as a percentage of their income, which can lower their taxable income. 
B) If a couple is separated and contemplating divorce, filing separately can simplify the division of assets and liabilities. 
C) If one spouse has a significant tax liability (e.g. due to unreported income), filing separately can protect the other spouse from being held responsible for the full amount owed.

Question 19

The following information is available for Bob and Brenda Horton,a married couple filing a joint return,for 2014. Both Bob and Brenda are age 32 and have no dependents.
   a.What is the amount of their gross income?
b.What is the amount of their adjusted gross income?
c.What is the amount of their taxable income?
d.What is the amount of their tax liability (gross tax)?
e.What is the amount of their tax due or (refund due)?

Accepted Answer

The answer of The following information is available for Bob...

Question 20

Adam attended college for much of 2014,during which time he was supported by his parents.Erin married Adam in December 2014.They live in a common law state.Adam graduated and will commence work in January 2015.Erin worked during 2014 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 $1,106 ($3,950 × .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 2014,during...

Quiz 4: I: Determination of Tax

Sean and Martha are both over age 65 and Martha is considered blind by tax law standards.Their total income in 2014 from part-time jobs and interest income from a bank savings account is $60,000.Their itemized deductions are $12,000. Required: Compute their taxable income.

Shane and Alyssa (a married couple) have AGI of $345,050 in 2014. They bought a house this year and paid $16,000 of interest expense on the mortgage and paid $6,500 of property taxes. They will be allowed a deduction from AGI of

Hannah is single with no dependents and has a salary of $102,000 for 2014,along with tax exempt interest income of $3,000 from a municipality.Her itemized deductions total $6,600. Required: Compute her taxable income

Kate is single and a homeowner.In 2014,she has property taxes on her home of $3,000,makes charitable contributions of $2,000,and pays home mortgage interest of $7,000.Kate's adjusted gross income for 2014 is $77,000. Required: Compute her taxable income for 2014.

Rena and Ronald,a married couple,each earn a salary of $200,000. They will be required to pay additional payroll taxes in 2014 of

Steve Greene,age 66,is divorced with no dependents. In 2014 Steve had income and expenses as follows: Compute Steve's taxable income for 2014.Show all calculations.

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

Rob is a taxpayer in the top tax bracket,with over a million in taxable income. He plans to sell stock held long-term for a $100,000 gain. This sale will result in an increase to his tax liability of

The following information for 2014 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.

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?

A taxpayer can receive innocent spouse relief if

In 2014,Sam is single and rents an apartment for which he pays $800 per month and makes charitable contributions of $1,000.Sam's adjusted gross income is $47,000. Required: Compute his taxable income.Show all calculations.

Lila and Ted are married and have AGI of $332,000 in 2014. They had their first children this year,twins. Lila and Ted will be allowed a deduction for personal and dependency exemptions of

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

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