Tax Chapter 2

Lewis, who is single, is claimed as a dependent by his parents. He received $2,000 during the year in dividends, which was his only income. What is his standard deduction for 2019? A) $1,100 B) $2,000 C) $2,350 D) $12,200

A) $1,100 For a dependent, the standard deduction is the greater of earned income plus $350 or $1,100. Dividends are unearned income.

In 2019, Brett and Lashana (both 50 years old) file a joint tax return claiming as a dependent their son who is blind. Their standard deduction is A) $24,400. B) $25,700. C) $26,050. D) $13,850.

A) $24,400. Blindness of a dependent does not increase the standard deduction of the taxpayers.

Annisa, who is 28 and single, has adjusted gross income of $55,000, itemized deductions of $5,000 and a lifetime learning credit of $1,000. In 2019, Annisa will have taxable income of A) $42,800. B) $49,000. C) $50,000. D) $41,800.

A) $42,800 Adjusted gross income $55,000 Minus: Standard deduction ( 12,200) Taxable income $42,800

Anita, who is divorced, maintains a home in which she and her 16-year-old daughter live. Anita provides the majority of the support for her daughter and for a son, age 23, who is enrolled part-time at the university and lives in the dorm. The son also works in the campus bookstore and earns spending money of $4,500. Which of the following statements is correct regarding the number of dependents Anita can claim? A) Anita can claim her daughter, but not her son, as a dependent. B) Anita can claim her son, but not her daughter, as a dependent. C) Both the son and daughter qualify as Anita's dependents. D) Neither the daughter nor the son qualify as Anita's dependent.

A) Anita can claim her daughter, but not her son, as a dependent.

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 $4,800. Which of the following statements is correct regarding Ben and Karla's ability to claim the twins as dependents? A) The couple can claim both twins as dependents. B) The couple cannot claim either twin as a dependent. C) The couple can only claim the daughter as a dependent. D) The couple can only claim the son as a dependent.

A) The couple can claim both twins as dependents.

The following information is available for Bob and Brenda Horton, a married couple filing a joint return, for 2019. Both Bob and Brenda are age 32 and have no dependents. Salaries $200,000 Interest income 12,000 Deductible IRA contributions 11,000 Itemized deductions 25,600 Withholding 31,000 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), rounded to the nearest dollar? e. What is the amount of their tax due or (refund due)?

Answer: Hortons Salary $200,000 Interest 12,000 Gross Income $212,000 a. Minus: IRA Contributions 11,000 Adjusted gross income $201,000 b. Minus: Itemized deductions ( 25,600) Taxable Income $175,400 c. Tax liability (using Rate Schedule) * $30,445 d. Minus: Withholding - 31,000 Tax due (refund) ( $ 555) e. *$28,765 + [.24 (175,400 - 168,400)]

Husband and wife, who live in a common law state, are eligible to file a joint return for 2019, but elect to file separately. Wife has adjusted gross income of $25,000 and has $2,200 of expenditures which qualify as itemized deductions. Husband deducts itemized deductions of $14,200. What is the taxable income for the wife? A) $12,600 B) $22,800 C) $25,000 D) None of the above

B) $22,800 If one spouse on married filing separately returns itemizes deductions, the other spouse must also do so. Income of wife $25,000 Minus: Itemized deductions ( 2,200) Taxable Income $22,800

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 $4,500 per year. How many dependents may Sarah claim?

B) 2

Which of the following credits is considered a refundable credit? A) credit for elderly and disabled B) earned income credit C) adoption expense credit D) lifetime learning credit

B) earned income credit

All of the following items are generally excluded from income except A) child support payments. B) interest on corporate bonds. C) interest on state and local government bonds. D) life insurance proceeds paid by reason of death.

B) interest on corporate bonds.

All of the following items are deductions for adjusted gross income except A) interest on student loans. B) unreimbursed employee business expenses. C) qualifying contributions to individual retirement accounts. D) one-half of self-employment taxes on year's earnings.

B) unreimbursed employee business expenses.

Deborah is claimed as a dependent by her parents. She had a part-time acting job during 2019 and earned $13,000 during the year, which was her only income. What is her standard deduction? A) $13,000 B) $1,100 C) $12,200 D) $13,350

C) $12,200

On June 1, 2019, Ellen turned 65. Ellen has been a widow for five years and has no dependents. Her standard deduction is A) $25,700. B) $24,400. C) $13,850. D) $12,200.

C) $13,850. $12,200 + $1,650 = $13,850

In 2019, 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 A) $25,700. B) $27,700. C) $27,000. D) $24,400.

C) $27,000. ($27,000 = $24,400 + $1,300 + $1,300)

Cheryl is claimed as a dependent by her parents. She had a part-time job during 2019 and earned $4,900 during the year, in addition to $600 of interest income. What is her standard deduction? A) $1,100 B) $4,900 C) $5,250 D) $12,200

C) $5,250

Julia provides more than 50 percent of the support for three individuals: Theresa, an unrelated child who lives with Julia all year long; Margaret, Julia's cousin, who lives in another city; and Emma, Julia's daughter, who lives in her own home. Each of the potential dependents earned less than $4,200. How many dependents can Julia claim? A) 0 B) 1 C) 2 D) 3

C) 2

John supports Kevin, his cousin, who lived with him throughout 2019. 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 John's cousin Assume that Donna, Melissa, Morris, and Kevin each earn less than $4,200. How many dependents can John claim? A) 1 B) 2 C) 3 D) 4

C) 3

Taquin, age 67 and single, paid home mortgage interest of $5,000, charitable contributions of $5,000 and property taxes of $4,000 in 2019. He has no dependents. Taquin will claim a deduction from AGI of A) $13,850. B) $15,650. C) $15,500. D) $14,000.

D) $14,000. The $1,650 deduction supplement for age or blindness only increases the standard deduction amount, not the itemized deductions allowed. In this case the increased standard deduction of $13,850 ($12,200 + $1,650) is less than the total itemized deductions of $14,000.

A single taxpayer provided the following information for 2019: Salary $80,000 Interest on local government bonds (qualifies as a tax exclusion) 4,000 Allowable itemized deductions 13,000 What is taxable income? A) $71,000 B) $67,800 C) $80,000 D) $67,000

D) $67,000

Charlie is claimed as a dependent by his parents in 2019. He received $8,000 during the year from a part-time acting job, which was his only income. What is his standard deduction? A) $1,100 B) $12,200 C) $8,000 D) $8,350

D) $8,350 For a dependent, the standard deduction is the greater of earned income plus $350 or $1,100, but no more than the current year regular standard deduction amount.

Taxable income for an individual is generally defined as A) AGI reduced by itemized deductions and tax credits. B) gross income reduced by itemized deductions. C) AGI reduced by tax credits. D) AGI reduced by the greater of the standard deduction or itemized deductions.

D) AGI reduced by the greater of the standard deduction or itemized deductions.

The regular standard deduction is available to which one of the following taxpayers? A) a married taxpayer filing a separate return where the other spouse itemizes B) a person who has only unearned income and is a dependent of another C) a nonresident alien D) None of the above.

D) None of the above.

All of the following items are included in gross income except A) pension benefits received. B) rent income. C) interest earned on a bank account. D) child support payments received.

D) child support payments received.

All of the following items are deductions for adjusted gross income except A) contributions to health savings accounts. B) trade or business expenses. C) rent and royalty expenses. D) state and local income taxes.

D) state and local income taxes.

Hannah is single with no dependents and has a salary of $102,000 for 2019, along with tax exempt interest income of $3,000 from a municipality. Her itemized deductions total $12,600. Required: Compute her taxable income.

Salary $102,000 (Interest income is excluded) Less: Itemized deductions ( 12,600) Taxable income $ 89,400

Kadeisha is single with no dependents and has a salary of $102,000 for 2019, along with tax exempt interest income of $3,000 from a municipality. Her itemized deductions total $11,600. Required: Compute her taxable income.

Salary $102,000 (Interest income is excluded) Less: Standard deduction ( 12,200) Taxable income $ 89,800