Exam 2: Determination of Tax

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

Ryan and Edith file a joint return showing $130,000 of AGI.They have three dependent children ages 7,9,and 13.What is the amount of their child credit?

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

A married couple need not live together to file a joint return.

Sean and Martha are both over age 65 and Martha is considered blind by tax law standards.Their total income in 2016 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.

Tom and Alice were married on December 31 of last year.What is their filing status for last year?

Taxpayers have the choice of claiming either the personal and dependency exemption or itemized deductions.

Paul and Hannah,who are married and file a joint return,are in the process of adopting a child who is born in December 2016.The child,a son,comes to live with them a week after his birth on December 12.The adoption is not finalized until February of 2017.What tax issues are present in this situation?

All of the following items are included in gross income except

Nonresident aliens are allowed a full standard deduction.

When a spouse dies,the surviving spouse for the year of death

All of the following items are deductions for adjusted gross income except

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 2016 taxable income is

For purposes of the dependency exemption,a qualifying child may not provide more than one-half of his or her own support during the year.

The term "gross income" means the total of all income from any source,but after reduction for exclusions.

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

You may choose married filing jointly as your filing status if you are married and both you and your spouse agree to file a joint return.Which of the following facts would prevent you from being considered married for filing purposes?

Anita,who is divorced,maintains a home in which she and her 16 year old daughter live.Anita provides the majority of the support for her daughter and for a son,age 23,who is enrolled part-time at the university and lives in the dorm.The son also works in the campus bookstore and earns spending money of $4,500.How many personal and dependency exemptions may Anita claim?

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 2016 taxable income is