Exam 17: Determination of Tax

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

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

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 2016 if they file a joint return and they do not itemize deductions.

John supports Kevin, his cousin, who lived with him throughout 2016. John also supports three other individuals who do not live with him: Donna, who is John's mother Melissa, who John's stepsister Morris, who is Kevin's brother Assume that Donna, Melissa, Morris and Kevin each earn less than $4,050. How many personal and dependency exemptions may John claim?

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

Tax returns from individual and C corporate taxpayers are due on the 15th day of the third month following the close of the tax year.

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

The oldest age at which the "Kiddie Tax" could apply to a dependent child is

Lester, a widower qualifying as a surviving spouse, has $209,000 of salary, five personal and dependency exemptions and itemizes deductions. Lester must use which form to report his taxable income?

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.

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

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?

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.

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?

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?

An individual may not qualify for the dependency exemption as a qualifying child but may still qualify as a dependent.

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.

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?

The following information for 2015 relates to Emma Grace, a single taxpayer, age 18: Salary \ 6,500 Interest income 1,200 Itemized deductions 500 a. Compute Emma Grace's taxable income assuming she is self-supporting. b. Compute Emma Grace's taxable income assuming she is a dependent of her parents.

If an individual with a marginal tax rate of 39.6% has a long-term capital gain, it is taxed at