Exam 2: Determination of Tax

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.

An unmarried taxpayer may file as head of household if he maintains a home for his qualifying child.

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.

Keith, age 17, is a dependent of his parents. During 2014, he received $3,000 of dividend income. The parent's marginal rate is 28% and Keith's rate is 10%. Keith's tax is

Husband and wife, who live in a common law state, are eligible to file a joint return for 2014, but elect to file separately. They do not have dependents. Wife has adjusted gross income of $25,000 and has $2,200 of expenditures which qualify as itemized deductions. She is entitled to one exemption. Husband deducts itemized deductions of $11,200. What is the taxable income for the wife?

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

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.

Sarah, who is single, maintains a home in which she, her 15-year old brother, and her 21-year-old niece live. Sarah provides the majority of the support for her brother, her niece, and her cousin, age 18, who is enrolled full-time at the university and lives in an apartment. While the niece and cousin have no income, her brother has a part-time job and earns $4,000 per year. How many personal and dependency exemptions may Sarah claim?

Suri, age 8, is a dependent of her parents and has unearned income of $6,000. She must file her own tax return.

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

A qualifying child of the taxpayer must meet the gross income test.

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

Paul and Hannah, who are married and file a joint return, are in the process of adopting a child who is born in December 2014. 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 2015. What tax issues are present in this situation?

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)?

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

The standard deduction is the maximum amount of itemized deductions which may be claimed by a taxpayer, and is based on an individual's filing status, age, and vision.

Ray is starting a new business and trying to decide between a C corporation, S corporation and partnership. Which of the following statements regarding his decision is correct?

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.

Brett, a single taxpayer with no dependents, earns salary of $500,000 and dividend income of $50,000. Itemized deductions for home mortgage interest, property taxes and charitable contributions total $35,000. Calculate Brett's total federal income taxes for 2014.

Taxable income for an individual is defined as