Exam 2: Determination of Tax

Refundable tax credits are allowed to reduce or totally eliminate a taxpayer's tax liability but any credits in excess of the tax liability are lost.

Kelsey is a cash-basis,calendar-year taxpayer.Her salary is $30,000,and she is single.She plans to purchase a residence in 2017.She anticipates her property taxes and interest will total $8,000 in 2017.Each year,Kelsey contributes approximately $1,500 to charity.Her other itemized deductions total $2,000.For purposes of this problem,assume 2016 tax rates,exemptions,and standard deductions are the same as 2017. a.What will her gross tax be in 2016 and 2017 if she contributes $1,500 to charity in each year? b.What will her gross tax be in 2016 and 2017 if she contributes $3,000 to charity in 2016 but makes no contribution in 2017? c.What will her gross tax be in 2016 and 2017 if she makes no contribution in 2016 but contributes $3,000 to charity in 2017? d.Why does alternative "c" yield the lowest tax?

In 2016,Brett and Lashana (both 50 years old)file a joint tax return claiming as a dependent their son who is blind.Their standard deduction is

A widow or widower may file a joint tax return and claim an exemption for the deceased spouse in the year of the spouse's death as long as the surviving spouse does not remarry before the end of the year.

Maxine,who is 76 years old and single,is appropriately claimed as a dependent on her daughter Beth's tax return.During 2016 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 2015.Show all calculations.

Foreign exchange student Yung lives with Harold and Betty while he studies in the US.He moved into their home January 5,2016 and has resided with them for the remainder of the year.Yung does not pay anything for his room and board.Harold and Betty provide all of Yung's meals.Yung receives a scholarship to pay for his tuition,books and fees.He works on campus,earning $4,000 a year.What tax issues should Harold and Betty consider?

Taxable income for an individual is defined as

If an individual with a marginal tax rate of 25% has a long-term capital gain,it is taxed at

The regular standard deduction is available to which one of the following taxpayers?

For purposes of the dependency exemption,a qualifying child must be under age 19,a full-time student under age 24,or a permanently and totally disabled child.

Generally,itemized deductions are personal expenses specifically allowed by the tax law.

Nonrefundable tax credits are allowed to reduce or totally eliminate a taxpayer's tax liability but any credits in excess of the tax liability are lost.

Vincent,age 12,is a dependent of his parents.During 2016,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

Steve Greene,age 66,is divorced with no dependents.In 2016 Steve had income and expenses as follows: Compute Steve's taxable income for 2016.Show all calculations.

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

For 2016,unearned income in excess of $2,100 of a child under age 18 is generally taxed at the parents' rate.

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

Kelly is age 23 and a full-time student with interest and dividend income of $2,600 in the current year.The total cost of her support for the year is $19,000.She is not subject to the kiddie tax.

The child credit is for taxpayers with dependent children under the age of

Mr.and Mrs.Kusra are in the top tax bracket.They have just had a baby.The Kusras plan to gift a corporate bond they currently own to the baby.The bond pays $2,100 of interest income per year.The Kusra family overall will save taxes if the bond is transferred to the child.