Exam 3: Computing the Tax

Homer (age 68) and his wife Jean (age 70) file a joint return.They furnish all of the support of Luther (Homer's 90-year old father),who lives with them.In 2015,they received $6,000 of interest income on city of Chicago bonds and interest income on corporate bonds of $48,000.Compute Homer and Jean's taxable income for 2015.

Free

(Essay)

4.8/5

(29)

Question 1

Correct Answer:

Verified

$20,900.Their gross income is $48,000 since the $6,000 interest on municipal bonds is an exclusion.They are entitled to a basic standard deduction of $12,600 and additional standard deductions of $1,250 each for being age 65 or older.They can claim a dependency exemption for Luther and two personal exemptions for themselves.Thus,$48,000 - $12,600 - $2,500 (2 × $1,250) - $12,000 (3 × $4,000) = $20,900.

When married persons file a joint return,joint and several liability results.What does this mean?

Free

(Essay)

4.9/5

(37)

Question 2

Correct Answer:

Verified

Joint and several liability means that either spouse is fully liable for any income tax due for the year.Thus,if more tax is due,the IRS can pursue either spouse for the deficiency.

Using borrowed funds from a mortgage on her home,Leah provides 52% of her own support,while her sons furnished the rest.Leah can be claimed as a dependent under a multiple support agreement.

Free

(True/False)

4.8/5

(37)

Question 3

Correct Answer:

Verified

False

Evan and Eileen Carter are husband and wife and file a joint return for 2015.Both are under 65 years of age.They provide more than half of the support of their daughter,Pamela (age 25),who is a full-time medical student.Pamela receives a $5,000 scholarship covering her tuition at college.They furnish all of the support of Belinda (Evan's grandmother),who is age 80 and lives in a nursing home.They also support Peggy (age 66),who is a friend of the family and lives with them.How many dependency exemptions may the Carters claim?

(Multiple Choice)

4.9/5

(34)

Question 4

Match the statements that relate to each other.Note: Choice l.may be used more than once. a.Available to a 70-year-old father claimed as a dependent by his son.b.Equal to tax liability divided by taxable income.c.The highest income tax rate applicable to a taxpayer.d.Not eligible for the standard deduction.e.No one qualified taxpayer meets the support test.f.Taxpayer's ex-husband does not qualify.g.A dependent child (age 18) who has only unearned income.h.Highest applicable rate is 39.6%.i.Applicable rate could be as low as 0%.j.Maximum rate is 28%.k.Income from foreign sources is not subject to tax.l.No correct match provided. -Marginal income tax rate

(Short Answer)

4.7/5

(31)

Question 5

For dependents who have income,special filing requirements apply.

(True/False)

4.9/5

(34)

Question 6

Frank sold his personal use automobile for a loss of $9,000.He also sold a personal coin collection for a gain of $10,000.As a result of these sales,$10,000 is subject to income tax.

(True/False)

4.9/5

(37)

Question 7

In terms of income tax consequences,abandoned spouses are treated the same way as married persons filing separate returns.

(True/False)

4.8/5

(36)

Question 8

The Martins have a teenage son who has become an accomplished bagpiper.With proper promotion and scheduling,the son has good income potential by charging for his services at special events (particularly funerals).However,the Martins are fearful that the income could generate a kiddie tax and cause them the loss of a dependency exemption deduction.Are the Martins' concerns justified? Explain.

(Essay)

4.8/5

(48)

Question 9

Match the statements that relate to each other.Note: Choice l.may be used more than once. a.Not available to 65-year old taxpayer who itemizes.b.Exception for U.S.citizenship or residency test (for dependency exemption purposes).c.Largest basic standard deduction available to a dependent who has no earned income.d.Considered for dependency exemption purposes.e.Qualifies for head of household filing status.f.A child (age 15) who is a dependent and has only earned income.g.Considered in applying gross income test (for dependency exemption purposes).h.Not considered in applying the gross income test (for dependency exemption purposes).i.Unmarried taxpayer who can use the same tax rates as married persons filing jointly.j.Exception to the support test (for dependency exemption purposes).k.A child (age 16) who is a dependent and has only unearned income of $4,500.l.No correct match provided. -Resident of Canada or Mexico

(Short Answer)

4.9/5

(38)

Question 10

Regarding dependency exemptions, classify each statement in one of the four categories: a.Could be a qualifying child.b.Could be a qualifying relative.c.Could be either a qualifying child or a qualifying relative.d.Could be neither a qualifying child nor a qualifying relative. -A cousin who does not live with taxpayer.

(Short Answer)

4.9/5

(37)

Question 11

Warren,age 17,is claimed as a dependent by his father.In 2015,Warren has dividend income of $1,500 and earns $400 from a part-time job. a.What is Warren's taxable income for 2015? b.Suppose Warren earned $1,200 (not $400) from the part-time job.What is Warren's taxable income for 2015?

(Essay)

4.9/5

(33)

Question 12

A taxpayer who itemizes must use Form 1040,and cannot use Form 1040EZ or Form 1040A.

(True/False)

4.8/5

(38)

Question 13

Mr.Lee is a citizen and resident of Hong Kong,while Mr.Anderson is a citizen and resident of the U.S.In the taxation of income,Hong Kong uses a territorial approach,while the U.S.follows the global system.In terms of effect,explain what this means to Mr.Lee and Mr.Anderson.

(Essay)

4.7/5

(43)

Question 14

The kiddie tax does not apply to a child whose earned income is more than one-half of his or her support.

(True/False)

4.9/5

(41)

Question 15

Match the statements that relate to each other.Note: Choice l.may be used more than once. a.Not available to 65-year old taxpayer who itemizes.b.Exception for U.S.citizenship or residency test (for dependency exemption purposes).c.Largest basic standard deduction available to a dependent who has no earned income.d.Considered for dependency exemption purposes.e.Qualifies for head of household filing status.f.A child (age 15) who is a dependent and has only earned income.g.Considered in applying gross income test (for dependency exemption purposes).h.Not considered in applying the gross income test (for dependency exemption purposes).i.Unmarried taxpayer who can use the same tax rates as married persons filing jointly.j.Exception to the support test (for dependency exemption purposes).k.A child (age 16) who is a dependent and has only unearned income of $4,500.l.No correct match provided. -Scholarship funds for tuition

(Short Answer)

4.9/5

(47)

Question 16

For 2015,Tom has taxable income of $48,005.When he uses the Tax Tables,Tom finds that his tax liability is higher than under the Tax Rate Schedules. a. Why is there a difference? b.Can Tom use the Tax Rate Schedules?

(Essay)

4.9/5

(36)

Question 17

Edgar had the following transactions for 2015: Salary $ 80,000 Alimony paid (4,000) Recovery from car accident- Personal injury damages $40,000 Punitive damages 70,000 110,000 Gift from parents 20,000 Property sales- Loss on sale of boat (used for pleasure and owned 4 years) ($4,000) Gain on sale of ADM stock (held for 10 months as an investment) 4,000 (-0-) What is Edgar's AGI for 2015?

(Essay)

4.8/5

(41)

Question 18

The Deweys are expecting to save on their taxes for 2015.Not only have both incurred large medical expenses,but both reached age 65.During the year,they also recognized a $30,000 loss on some land they sold which was purchased as an investment several years ago.Are the Deweys under a mistaken understanding regarding their tax position? Explain.

(Essay)

4.9/5

(37)

Question 19

For the year a spouse dies,the surviving spouse is considered married for the entire year for income tax purposes.

(True/False)

4.8/5

(39)

Question 20

Showing 1 - 20 of 188

When married persons file a joint return,joint and several liability results.What does this mean?

Using borrowed funds from a mortgage on her home,Leah provides 52% of her own support,while her sons furnished the rest.Leah can be claimed as a dependent under a multiple support agreement.

For dependents who have income,special filing requirements apply.

Frank sold his personal use automobile for a loss of $9,000.He also sold a personal coin collection for a gain of $10,000.As a result of these sales,$10,000 is subject to income tax.

In terms of income tax consequences,abandoned spouses are treated the same way as married persons filing separate returns.

Warren,age 17,is claimed as a dependent by his father.In 2015,Warren has dividend income of $1,500 and earns $400 from a part-time job. a.What is Warren's taxable income for 2015? b.Suppose Warren earned $1,200 (not $400) from the part-time job.What is Warren's taxable income for 2015?

A taxpayer who itemizes must use Form 1040,and cannot use Form 1040EZ or Form 1040A.

Mr.Lee is a citizen and resident of Hong Kong,while Mr.Anderson is a citizen and resident of the U.S.In the taxation of income,Hong Kong uses a territorial approach,while the U.S.follows the global system.In terms of effect,explain what this means to Mr.Lee and Mr.Anderson.

The kiddie tax does not apply to a child whose earned income is more than one-half of his or her support.

For 2015,Tom has taxable income of $48,005.When he uses the Tax Tables,Tom finds that his tax liability is higher than under the Tax Rate Schedules. a. Why is there a difference? b.Can Tom use the Tax Rate Schedules?

For the year a spouse dies,the surviving spouse is considered married for the entire year for income tax purposes.

An Introduction to Taxation and Understanding the Tax Law

Working With the Tax Law

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, cost Recovery, amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxabl

Property Transactions: Capital Gains and Losses, section 1231 and Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

Exam 3: Computing the Tax

When married persons file a joint return,joint and several liability results.What does this mean?

Using borrowed funds from a mortgage on her home,Leah provides 52% of her own support,while her sons furnished the rest.Leah can be claimed as a dependent under a multiple support agreement.

For dependents who have income,special filing requirements apply.

Frank sold his personal use automobile for a loss of $9,000.He also sold a personal coin collection for a gain of $10,000.As a result of these sales,$10,000 is subject to income tax.

In terms of income tax consequences,abandoned spouses are treated the same way as married persons filing separate returns.

Warren,age 17,is claimed as a dependent by his father.In 2015,Warren has dividend income of $1,500 and earns $400 from a part-time job. a.What is Warren's taxable income for 2015? b.Suppose Warren earned $1,200 (not $400) from the part-time job.What is Warren's taxable income for 2015?

A taxpayer who itemizes must use Form 1040,and cannot use Form 1040EZ or Form 1040A.

Mr.Lee is a citizen and resident of Hong Kong,while Mr.Anderson is a citizen and resident of the U.S.In the taxation of income,Hong Kong uses a territorial approach,while the U.S.follows the global system.In terms of effect,explain what this means to Mr.Lee and Mr.Anderson.

The kiddie tax does not apply to a child whose earned income is more than one-half of his or her support.

For 2015,Tom has taxable income of $48,005.When he uses the Tax Tables,Tom finds that his tax liability is higher than under the Tax Rate Schedules. a.​ Why is there a difference? b.Can Tom use the Tax Rate Schedules?

For the year a spouse dies,the surviving spouse is considered married for the entire year for income tax purposes.

An Introduction to Taxation and Understanding the Tax Law

Working With the Tax Law

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, cost Recovery, amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxabl

Property Transactions: Capital Gains and Losses, section 1231 and Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

For 2015,Tom has taxable income of $48,005.When he uses the Tax Tables,Tom finds that his tax liability is higher than under the Tax Rate Schedules. a. Why is there a difference? b.Can Tom use the Tax Rate Schedules?