Question 1

John has $55,000 net earnings from a sole proprietorship.John is also employed by a major corporation and is paid $25,000.John's self-employment tax (rounded)for 2014 is

Accepted Answer

John's self-employment tax can be calculated as follows:

1. Calculate the net earnings from the sole proprietorship: $55,000 
2. Calculate the self-employment tax rate: 15.3% 
3. Calculate the self-employment tax: $55,000 x 15.3% = $8,415

Therefore, the correct answer is C, $7,771, as this is the closest rounded option to the correct answer.

Question 2

Harley's tentative minimum tax is computed by multiplying the AMT tax rates by her

Accepted Answer

The answer of Harley's tentative minimum tax is computed by...

Question 3

If an individual is liable for self-employment tax,a portion of the self-employment tax is

Accepted Answer

The answer of If an individual is liable for self-employment...

Question 4

All of the following are self-employment income except

Accepted Answer

The answer of All of the following are self-employment income...

Question 5

In computing the alternative minimum taxable income,no deduction is allowed for

Accepted Answer

In computing the alternative minimum taxable income, no deduction is allowed for personal exemptions. This is because the AMT system does not recognize personal exemptions like the regular tax system, which allows taxpayers to reduce their taxable income by claiming personal exemptions for themselves and their dependents. The other options listed (alimony, moving expenses, and individual retirement account contributions) may be deductible for regular tax purposes but may be limited or disallowed under the AMT system.

Question 6

All of the following statements regarding self-employment income/tax are true except:

Accepted Answer

Employees who have a business in addition to their regular employment are still subject to self-employment tax on the net earnings from that business. FICA is indeed withheld on their wages, but this does not exempt them from self-employment tax on their self-employment income.

Question 7

In computing AMTI,adjustments are

Accepted Answer

AMTI adjustments can either be added or subtracted, depending on their nature and purpose. For example, some adjustments may be added to increase the taxable income of a foreign corporation, while others may be subtracted to reduce the tax liability of a U.S. taxpayer with foreign income. Therefore, both positive and negative adjustments can be made to arrive at AMTI.

Question 8

In computing AMTI,tax preference items are

Accepted Answer

The answer of In computing AMTI,tax preference items are
...

Question 9

In 2014 Charlton and Cindy have alternative minimum taxable income of $130,000 and file a joint return.For purposes of computing the alternative minimum tax,their exemption is

Accepted Answer

For 2014, the AMT exemption for married couples filing jointly is $82,100.

Question 10

Self-employment taxes include components for

Accepted Answer

Self-employment taxes include components for Social Security and Medicare hospital insurance. Medicare hospital insurance is commonly referred to as Medicare part A, and both Social Security and Medicare taxes are collectively referred to as FICA taxes. FUTA and SUTA are not components of self-employment taxes.

Question 11

Hong earns $127,300 in her job as a physician's assistant.She also has her own business selling cosmetics.This business generated $10,000 of earnings.What is Hong's self-employment tax for 2014?

Accepted Answer

The answer of Hong earns $127,300 in her job as...

Question 12

Suzanne,a single taxpayer,has the following tax information for the current year. • Charitable contribution of real property with a FMV of $25,000 (adjusted basis $20,000)for which a $25,000 deduction was taken.
• Research and experimental expenses of $40,000 deducted in full for regular tax.
Suzanne's total tax preferences and adjustments equals

Accepted Answer

The answer of Suzanne,a single taxpayer,has the following tax information...

Question 13

Joe has $130,000 net earnings from a sole proprietorship.Joe's self-employment tax (rounded)for 2014 is

Accepted Answer

The self-employment tax rate for 2014 is 15.3%. Joe's self-employment tax is $130,000 x 0.153 = $19,890.

Question 14

Ava has net earnings from self-employment of $125,000. She also earned salary of $170,000 from a job held earlier in the year.How much Additional Medicare Tax will be owed on the self-employment income?

Accepted Answer

The answer of Ava has net earnings from self-employment of...

Question 15

A wage cap does not exist for which of the following self-employment taxes?

Accepted Answer

D)There is a ceiling on the Social Security portion but not on the HI portion.

Question 16

Reva and Josh Lewis had alternative minimum taxable income of $350,000 in 2014 and file a joint return.For purposes of computing the alternative minimum tax,their exemption is

Accepted Answer

The exemption for married filing jointly for AMT purposes is $82,100. The exemption is phased out for taxpayers with AMTI above certain levels. For 2014, the phase-out begins at $150,000 for married filing jointly. The exemption is reduced by 25 cents for each dollar of AMTI above the phase-out threshold. In this case, the taxpayers' AMTI is $350,000, which is $200,000 above the phase-out threshold. Therefore, their exemption is reduced by $50,000 (25 cents x $200,000). This leaves them with an exemption of $32,100 ($82,100 - $50,000).

Question 17

Lavonne has a regular tax liability of $13,356 on taxable income of $70,000. She also has tax preferences of $25,000 and positive adjustments attributable to limitations on itemized deductions of $15,000.Lavonne is single and takes a $3,950 personal exemption for herself only. Lavonne's alternative minimum tax for 2014 is

Accepted Answer

The correct answer is B because the alternative minimum tax is calculated as the excess of the tentative minimum tax over the regular tax. The tentative minimum tax is calculated as the sum of the alternative minimum taxable income multiplied by the alternative minimum tax rate, plus the alternative minimum tax foreign tax credit. The alternative minimum taxable income is calculated as the taxable income plus the alternative minimum tax preferences, minus the alternative minimum tax adjustments. The alternative minimum tax rate is 26% for taxable income over $175,000 for single filers. The alternative minimum tax foreign tax credit is the amount of foreign taxes paid that is not allowed as a deduction for regular tax purposes. In this case, Lavonne's alternative minimum taxable income is $70,000 + $25,000 - $15,000 = $80,000. Her tentative minimum tax is $80,000 x 0.26 = $20,800. Her regular tax is $13,356. Therefore, her alternative minimum tax is $20,800 - $13,356 = $2,543.

Question 18

All of the following are allowable deductions under the alternative minimum tax except

Accepted Answer

Personal property taxes are not deductible under the alternative minimum tax (AMT) rules, whereas the other options listed are allowable deductions.

Question 19

Nonrefundable tax credits

Accepted Answer

Nonrefundable tax credits can only offset a taxpayer's tax liability and cannot be refunded or paid to the taxpayer as cash or a refund. They can reduce the amount of tax owed to zero but cannot result in a refund or negative tax liability. Carryback and carryforward options are not available for nonrefundable tax credits.

Question 20

Rex has the following AMT adjustments: -Depreciation of real property acquired in 1996 using MACRS is $22,000 while depreciation for AMT purposes is $15,000.
-R&E expenditures amounting to $60,000 are expensed.
The net adjustment is

Accepted Answer

The answer of Rex has the following AMT adjustments: -Depreciation...

Quiz 28: Special Tax Computation Methods, tax Credits, and Payment of Tax

John has $55,000 net earnings from a sole proprietorship.John is also employed by a major corporation and is paid $25,000.John's self-employment tax (rounded) for 2014 is