2021 Tax Chpt 3 (3-2) study

Indicate the maximum tax rate for the following types of capital gains. d.) All other long-term capital gains

20%, 15%, 0r 0%

Indicate the maximum tax rate for the following types of capital gains. b.) Capital gains associated with certain depreciable property used in trade or business (held for more than one year) 25%

25%

Indicate the maximum tax rate for the following types of capital gains. c.) Capital gains associated with collectibles (held for more than one year) 28%

28%

Indicate the maximum tax rate for the following types of capital gains. a.)Short-term gains (held for less than one year) 37%

37%

Support Test: Over 50%of the support of the qualifying relative must be furnished by the taxpayer. If the individual does not spend funds that have been received from any source, the unexpended amounts are not counted for purposes of the support test. Under a multiple support agreement one member of a group of taxpayers who furnish support for a qualifying relative may claim a dependency exemption if together the group provides over fill in the 50% of the support. Any person who contributed more than 10% of the support is entitled to claim the exemption if each person in the group who contributed more 10% files a written consent.

50%; are not; 50%; 10%; 10%.

Indicate whether the following individuals meet the definition for a qualifying child when considering the relationship test for dependents. a. Adopted child b. Grandchild c. Step child d. Son-in-law e. Nephew

A.) meets B.)meets C.)meets D.) does not meet E.) meets The relationship test includes a taxpayer's child (son or daughter), adopted child, stepchild, eligible foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of these parties (e.g., grandchild, nephew, niece). Note that ancestors of any of these parties (e.g., uncles and aunts) and in-laws (e.g., son-in-law and brother-in-law) are not included.

Gross Income Test: A dependent's gross income must be less than _______, the exemption amount . Gross income is determined by the income that is taxable .

Ans $4,300; exemption amount; taxable A dependent's gross income must be less than the exemption amount—$4,300 in 2020.

Tax Formula for Individuals Income (broadly conceived) Less:Exclusions Equals:Gross income Less:Deductions for AGI Equals:Adjusted gross income Less:The greater of the standard deduction or itemized deductions Equals:Taxable income

Tax Formula for Individuals Income (broadly conceived) Less:Exclusions Equals:Gross income Less:Deductions for AGI Equals:Adjusted gross income Less:The greater of the standard deduction or itemized deductions Equals:Taxable income

There is an important distinction between tax credits and tax deductions. Tax deductions reduce taxable income on which the tax liability is based. Tax credits reduce the tax liability dollar for dollar.

Tax deductions, Tax credits The income tax from the Tax Table or the Tax Rate Schedules is reduced first by the individual's tax credits. There is an important distinction between tax credits and tax deductions. Tax credits reduce the tax liability dollar for dollar. Tax deductions reduce taxable income on which the tax liability is based.