Exam 18: Determination of Tax

Kate is single and a homeowner.In 2017,she has property taxes on her home of $3,000,makes charitable contributions of $2,000,and pays home mortgage interest of $7,000.Kate's adjusted gross income for 2017 is $77,000. Required: Compute her taxable income for 2017.

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.

All of the following items are generally excluded from income except

Ben,age 67,and Karla,age 58,have two children who live with them and for whom they provide total support.Their daughter is 21 years old,blind,is not a full-time student and has no income.Her twin brother is 21 years old,has good sight,is a full-time student and has income of $4,500.Ben and Karla can claim how many personal and dependency exemptions on their tax return?

Satish,age 11,is a dependent of his parents.His only source of income in 2017 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

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.

Which of the following credits is considered a refundable credit?

The annual tax reporting form filed with the IRS by C corporations is the Schedule C.

In October 2017,Joy and Paul separated and have not lived with each other since,but they are still legally married.They do not file a joint return.Joy supports their children after the separation and pays the cost of maintaining their home.Joy's filing status in 2017 and 2018 is,respectively

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?

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?

Liz and Bert divorce and Liz receives custody of their child.Bert is ordered by the court to pay child support of $10,000 per year,and Liz files the appropriate IRS form to allow Bert to claim the dependency exemption for the child.If Liz maintains the home in which she and her child live,her filing status and exemptions claimed will be

In 2017,the standard deduction for a married taxpayer filing a joint return and who is 67 years old with a spouse who is 65 years old is

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 2017 taxable income is

David's father is retired and receives $14,000 per year in Social Security benefits.David's father saves $4,000 of the benefits and spends the remaining $10,000 for his support.How much support must David provide for his father to meet the dependent support requirement?

One requirement for claiming a dependent as a qualifying relative is that the taxpayer provides more than 50 percent of the dependent's support (assuming it is not a multiple support agreement situation).

Indicate for each of the following the most favorable filing status for the 2017 tax year. a.Kenny died on March 2,2016.Marge,his wife,and Bart,their son,survive.Marge filed a joint return in 2016.Bart,age 18 in 2017,is a part-time college student and continues to live at home with his mother.He works part-time,earning $6,200.What is Marge's filing status in 2017? b.Alan Spaulding is single and provides over 50% support of his niece Alicia who lives with him all year long.Alan maintains the household and claims Alicia as a dependent.Alicia makes $3,600 at a part-time job.She is a full-time student,age 18.What is Alan's filing status? c.Lily,who was divorced on July 27,2017,provides 100% of the support for her parents who live in a nursing home in Kansas and have no income.What is Lily's filing status? d.Holly was abandoned by her husband Fletcher in September of the current year.She has not seen or communicated with him since then.What is Holly's filing status? e.Rick,whose wife died in December 2014,filed a joint tax return for 2014.He did not remarry,but has continued to maintain his home in which his two dependent children live.What is Rick's filing status for 2017?

Rena and Ronald,a married couple,each earn a salary of $200,000.They will be required to pay additional payroll taxes in 2017 of

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.

Kelsey is a cash-basis,calendar-year taxpayer.Her salary is $30,000,and she is single.She plans to purchase a residence in 2018.She anticipates her property taxes and interest will total $8,000 in 2018.Each year,Kelsey contributes approximately $1,500 to charity.Her other itemized deductions total $2,000.For purposes of this problem,assume the 2017 standard deduction amount remains in effect for 2018. a.What will be her deductions from AGI in 2017 and 2018 if she contributes $1,500 to charity in each year? b.What will her gross tax be in 2017 and 2018 if she contributes $3,000 to charity in 2017 but makes no contribution in 2018? c.What will her gross tax be in 2017 and 2018 if she makes no contribution in 2017 but contributes $3,000 to charity in 2018? d.Why does option C yield the largest deductions over time?