Exam 2: Determination of Tax

Paul and Sally file a joint return showing $87,000 of AGI (with no exclusions under Secs. 911, 931, and 933). They have three dependent children ages 6, 8, and 13. What is the amount of their child credit?

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

The requirement to file a tax return is based on the individual's adjusted gross income.

An individual who is claimed as a dependent by another person is not entitled to a personal exemption on his or her own return.

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.

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

Nonresident aliens are allowed a full standard deduction.

Cheryl is claimed as a dependent on her parents' tax return. She had a part-time job during 2014 and earned $4,900 during the year, in addition to $600 of interest income. What is her standard deduction?

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.

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

For each of the following taxpayers indicate the applicable filing status, the number of personal and dependency exemptions available, and the number of children who qualify for the child credit. a. Jeffrey is a widower, age 71, who receives a pension of $10,000, nontaxable social security benefits of $12,000, and interest of $2,000. He has no dependents. b. Selma is a single, full-time college student, age 20, who earned $6,800 working part-time. She has $1,700 of interest income and received $1,000 support from her parents. c. Olivia is married, but her husband left her three years ago and she has not seen or heard from him since. She supports herself and her six-year-old daughter. She paid all the household expenses. Her income consists of salary of $18,500 and interest of $800. d. Ruben is a single, full-time college student, age 20, who earned $6,800 working part-time. He has $250 of interest income and received $10,000 support from his parents. e. Cathy is divorced and received $12,000 alimony from her former husband and earned $35,000 working as an administrative assistant. She also received $2,500 of child support for her daughter who lives with her. According to a written agreement, she gave up the dependency exemption to her former husband.

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

Taxpayers have the choice of claiming either the personal and dependency exemption or the standard deduction.

Generally, in the case of a divorced couple, the parent who has physical custody of a child for the greater part of the year is entitled to the dependency exemption.

Amanda has two dependent children, ages 10 and 12. She earned $15,000 from her waitress job. How much of her child credit is refundable?

Tony supports the following individuals during the current year: Miranda, his former mother-in-law who lives in her own home and has no gross income; his cousin, Jeff, age 23, who is a full-time student, earns $7,000 during the year, and lives with Tony all year long; and Matt, age 22, who is Tony's brother, is a full-time student living on campus and earns $8,000 during the year. How many dependency exemptions may Tony claim?

Nate and Nikki have three dependent children ages 12, 15, and 17. Their modified AGI is $120,000. What is the amount of the child credit to which they are entitled?

Gross income is income from whatever source derived less exclusions.

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

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