Exam 18: Determination of Tax

Steve and Jennifer are in the 33% tax bracket for ordinary income and the 15% bracket for capital gains.They have owned several blocks of stock for many years.They are considering the sale of two blocks of stock.The sale of one would produce a gain of $12,000 while the sale of the other would produce a loss of $18,000.For purposes of this problem,ignore personal exemptions,itemized deductions,phase-outs and additional investment taxes.They have no other gains and losses this year. a.How much tax will they save if they sell the block of stock that produces a loss? b.How much additional tax will they pay if they sell the block of stock that produces a gain? c.What will be the impact on their taxes if they sell both blocks of stock?

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

When two or more people qualify to claim the same person as a dependent,a taxpayer who is entitled to the exemption through the qualified child rules has priority over a taxpayer who meets the requirements for other relatives.

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

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?

The person claiming a dependency exemption under a multiple support declaration must provide more than 25% of the dependent's support.

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 tax liability for 2017.

For purposes of the dependency exemption,a qualifying child may not provide more than one-half of his or her own support during the year.

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

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

Hannah is single with no dependents and has a salary of $102,000 for 2017,along with tax exempt interest income of $3,000 from a municipality.Her itemized deductions total $6,600. Required: Compute her taxable income.

Nonresident aliens are allowed a full standard deduction.