Tax Ch - 1
Tom Suzuki's tax liability for the year is $2,450. He had $2,050 of federal income taxes withheld from his paycheck during the year by his employer and has $2,000 in tax credits. What are Tom's taxes due or tax refund for the year?
$1,600 tax refund, computed as follows: Description Amount Explanation (1) Gross tax liability $ 2,450 (2) Tax credits (2,000) Credits offset tax liability dollar for dollar (3) Tax withheld (2,050) Tax (refund) $ (1,600) (1) + (2) + (3)
Jane and Ed Rochester are married with a 2-year-old child, who lives with them and whom they support financially. In 2020, Ed and Jane realized the following items of income and expense: Ed's Salary $ 35,000 Jane's Salary 70,000 Municipal bond interest income 400 Qualified business income 1,000 Alimony paid (pre-2019 divorce decree) (7,000) Real property tax (from AGI deduction) (10,000) Charitable contributions (from AGI) (15,000) They also qualified for a $2,000 child tax credit. Their employers withheld $5,800 in federal income taxes from their paychecks (in the aggregate). Finally, the 2020 standard deduction amount for MFJ taxpayers is $24,800. What is the couple's gross income?
$106,000, see calculations below. Description Amount Explanation (1) Ed's salary $ 35,000 (2) Jane's salary 70,000 (3) Qualified business income 1,000 (4) Municipal bond interest income 0 Municipal bond interest is excluded from gross income (5) Gross income 106,000 Sum of (1) through (3)
Hannah, who is single, received a qualified dividend of $1,000. Hannah's marginal ordinary income tax rate is 32 percent. What amount of tax must she pay on the $1,000 dividend?
$150 ($1,000 × 15%).
Doug and Lisa have determined that their tax liability on their joint return is $3,700. They have made prepayments of $1,000 and also are entitled to a $2,000 child tax credit and $2,900 of recovery rebate credit. Assume they did not receive the recovery rebate in advance. What is the amount of their tax refund or taxes due?
$2,200 taxes refund ($3,700 tax liability minus $4,900 tax credits minus $1,000 prepayments).
11) Jane and Ed Rochester are married with a 2-year-old child, who lives with them and whom they support financially. In 2020, Ed and Jane realized the following items of income and expense: Item Amount Ed's Salary $ 38,000 Jane's Salary 70,000 Municipal bond interest income 400 Qualified business income 1,000 Alimony paid (pre-2019 divorce decree) (7,000) Real property tax (from AGI deduction) (10,000) Charitable contributions (from AGI) (18,000) The Rochester's qualified for a $2,000 child tax credit and $2,900 in recovery rebate credit ($2,400 for themselves and $500 for their child). Assume the Rochesters did not receive the recovery rebate in advance. Their employers withheld $5,800 in federal income taxes from their paychecks (in the aggregate). Finally, the 2020 standard deduction amount for MFJ taxpayers is $24,800. What is the couple's tax due or tax refund? (Use the tax rate schedules, not tax tables.)
$2,239 tax refund, see calculations below. Description Amount Explanation (1) Ed's salary $ 38,000 (2) Jane's salary 70,000 (3) Qualified business income 1,000 (4) Municipal bond interest income 0 Municipal bond interest is excluded from gross income (5) Gross income 109,000 Sum of (1) through (3) (6) Alimony paid (7,000) For AGI deduction (7) Adjusted gross income 102,000 (5) + (6) (8) Standard deduction (24,800) Married filing jointly (9) Itemized deductions (28,000) Real property tax and charitable contributions (10) Greater of (8) or (9) (28,000) Itemized deductions exceed the standard deduction (11) Deduction for qualified business income (200) $1,000 QBI × 20% (12) Total deductions from AGI (28,200) (10) + (11) (13) Taxable income $ 73,800 (7) + (12) (14) Tax liability 8,461 $1,975 + 12% × ($73,800 − 19,750) (15) Tax credits (4,900) Child tax credit $2,000; Recovery rebate credit $2,900. (16) Tax withheld (5,800) Tax refund $ (2,239) (14) + (15) + (16)
The Inouyes filed jointly in 2020. Their AGI is $78,000. They reported $3,000 of qualified business income and $22,000 of itemized deductions. They have two children, one of whom qualifies as their dependent as a qualifying child. The 2020 standard deduction amount for MFJ taxpayers is $24,800. What is the total amount of from AGI deductions they are allowed to claim on their 2020 tax return?
$25,400, determined as follows: From AGI deductions include the following:Greater of standard deduction ($24,800) or itemized deductions ($22,000) is $24,800. Their deduction for qualified business income is $600 ($3,000 × 20%). Total from AGI deduction is $25,400 ($24,800 + $600)
In 2020, Brittany, who is single, cares for her father, Raymond. Brittany pays the bills relating to Raymond's home. She also buys groceries and provides the rest of his support. Raymond has no gross income. Brittany received $45,000 of salary from her employer during the year. Brittany reports $3,000 of itemized deductions. What is Brittany's taxable income?
$26,350 ($45,000 − $18,650 standard deduction for head of household).
The Dashwoods have calculated their taxable income to be $88,000 for 2020, which includes $2,000 of long-term capital gains. Using the appropriate tax rate schedules, calculate the Dashwoods' income tax liability assuming they are married and file a joint return
$28,000, computed as follows:From AGI deductions include the following:Greater of standard deduction ($24,800) or itemized deductions ($26,000) is $26,000. Their deduction for qualified business income is $2,000 ($10,000 × 20%).Total from AGI deduction is $28,000 ($26,000 + $2,000)
The Tanakas filed jointly in 2020. Their AGI is $120,000. They reported $10,000 of qualified business income and $26,000 of itemized deductions. They also have two dependent qualifying children. The 2020 standard deduction amount for MFJ taxpayers is $24,800. What is the total amount of from AGI deductions they are allowed to claim on their 2020 tax return?
$28,000, computed as follows:From AGI deductions include the following:Greater of standard deduction ($24,800) or itemized deductions ($26,000) is $26,000. Their deduction for qualified business income is $2,000 ($10,000 × 20%).Total from AGI deduction is $28,000 ($26,000 + $2,000)
Greg is single. During 2020, he received $60,000 of salary from his employer. That was his only source of income. He reported $3,000 of for AGI deductions and $9,000 of itemized deductions. The 2020 standard deduction amount for a single taxpayer is $12,400. What is Greg's taxable income?
$44,600, computed as follows: Description Amount Explanation (1) Salary $ 60,000 (2) For AGI deductions (3,000) (3) Adjusted gross income 57,000 (1) + (2) (4) Standard deduction (12,400) Standard deduction for single filing status (5) Itemized deductions (9,000) (6) Greater of (4) or (5) (12,400) (4) exceeds (5) Taxable income $ 44,600 (3) + (6)
Jane and Ed Rochester are married with a 2-year-old child, who lives with them and whom they support financially. In 2020, Ed and Jane realized the following items of income and expense: Item Amount Ed's Salary $ 35,000 Jane's Salary 70,000 Municipal bond interest income 400 Qualified business income 1,000 Alimony paid (pre-2019 divorce decree) (7,000) Real property tax (from AGI deduction) (10,000) Charitable contributions (from AGI) (15,000) They also qualified for a $2,000 child tax credit. Their employers withheld $5,800 in federal income taxes from their paychecks (in the aggregate). Finally, the 2020 standard deduction amount for MFJ taxpayers is $24,800. What is the couple's tax due or tax refund? (Use the tax rate schedules, not tax tables.)
$661 tax due, see calculations below. Description Amount Explanation (1) Ed's salary $ 35,000 (2) Jane's salary 70,000 (3) Qualified business income 1,000 (4) Municipal bond interest income 0 Municipal bond interest is excluded from gross income (5) Gross income 106,000 Sum of (1) through (3) (6) Alimony paid (7,000) For AGI deduction (7) Adjusted gross income 99,000 (5) + (6) (8) Standard deduction (24,800) Married filing jointly (9) Itemized deductions (25,000) Real property tax and charitable contributions (10) Greater of (8) or (9) (25,000) Itemized deductions exceed the standard deduction (11) Deduction for qualified business income (200) $1,000 QBI × 20% (12) Total deductions from AGI (25,200) (10) + (11) (13) Taxable income $ 73,800 (7) + (12) (14) Tax liability 8,461 $1,975 + 12% × ($73,800 − 19,750) (15) Tax credits (2,000) Child tax credit (16) Tax withheld (5,800) Tax due $ 661 (14) + (15) + (16)
Doug and Lisa have determined that their tax liability on their joint return is $3,700. They have made prepayments of $1,000 and also are entitled to a $2,000 child tax credit. What is the amount of their tax refund or taxes due?
$700 taxes due ($3,700 tax liability minus $2,000 tax credits minus $1,000 prepayments).
Jane and Ed Rochester are married with a 2-year-old child, who lives with them and whom they support financially. In 2020, Ed and Jane realized the following items of income and expense: Item Amount Ed's Salary $ 35,000 Jane's Salary 70,000 Municipal bond interest income 400 Qualified business income 1,000 Alimony paid (pre-2019 divorce decree) (7,000) Real property tax (from AGI deduction) (10,000) Charitable contributions (from AGI) (15,000) They also qualified for a $2,000 child tax credit. Their employers withheld $5,800 in federal income taxes from their paychecks (in the aggregate). Finally, the 2020 standard deduction amount for MFJ taxpayers is $24,800. What is the couple's taxable income?
$73,800, see calculations below. Description Amount Explanation (1) Ed's salary $ 35,000 (2) Jane's salary 70,000 (3) Qualified business income 1,000 (4) Municipal bond interest income 0 Municipal bond interest is excluded from gross income (5) Gross income 106,000 Sum of (1) through (3) (6) Alimony paid (7,000) For AGI deduction (7) Adjusted gross income 99,000 (5) + (6) (8) Standard deduction (24,800) Married filing jointly (9) Itemized deductions (25,000) Real property tax and charitable contributions (10) Greater of (8) or (9) (25,000) Itemized deductions exceed the standard deduction (11) Deduction for qualified business income (200) $1,000 QBI × 20% (12) Total deductions from AGI (25,200) (10) + (11) (13) Taxable income $ 73,800 (7) + (12)
Jane and Ed Rochester are married with a 2-year-old child, who lives with them and whom they support financially. In 2020, Ed and Jane realized the following items of income and expense: Item Amount Ed's Salary $ 35,000 Jane's Salary 70,000 Municipal bond interest income 400 Qualified business income 1,000 Alimony paid (pre-2019 divorce decree) (7,000) Real property tax (from AGI deduction) (10,000) Charitable contributions (from AGI) (15,000) They also qualified for a $2,000 child tax credit. Their employers withheld $5,800 in federal income taxes from their paychecks (in the aggregate). Finally, the 2020 standard deduction amount for MFJ taxpayers is $24,800. What is the couple's adjusted gross income?
) $99,000, see calculations below. Description Amount Explanation (1) Ed's salary $ 35,000 (2) Jane's salary 70,000 (3) Qualified business income 1,000 (4) Municipal bond interest income 0 Municipal bond interest is excluded from gross income (5) Gross income 106,000 Sum of (1) through (3) (6) Alimony paid (7,000) For AGI deduction (7) Adjusted gross income 99,000 (5) + (6)
79) Jasmine and her husband, Arty, have been married for 25 years. In May of this year, the couple divorced. During the year, Jasmine provided all the support for herself and her 22-year-old child, Dexter, who lived in the same home as Jasmine for the entire year. Dexter is employed full time, earning $29,000 this year. What is Jasmine's most favorable filing status for the year? A)Single. B)Married filing separately. C)Surviving spouse .D)Head of household.
A
All of the following are tests for determining qualifying child status except the _____. A) gross income test B) age test C) support test D) residence test
A
Catherine de Bourgh has one child, Anne, who is 18 years old at the end of the year. Anne lived at home for seven months during the year before leaving home to attend State University for the remaining five months of the year. During the year, Anne earned $6,000 while working part time. Catherine provided 80 percent of Anne's support and Anne provided the rest. Which of the following statements regarding whether Anne is Catherine's qualifying child for the current year is correct? A)Anne is a qualifying child of Catherine. B)Anne is not a qualifying child of Catherine because she fails the gross income test. C)Anne is not a qualifying child of Catherine because she fails the residence test. D)Anne is not a qualifying child of Catherine because she fails the support test.
A
Charlotte is the Lucas family's 22-year-old daughter. She is a full-time student at an out-of-state university but plans to return home when the school year ends. During the year, Charlotte earned $4,000 of income working part time. Her support totaled $30,000 for the year. Of this amount, Charlotte paid $7,000 with her own funds, her parents paid $14,000, and Charlotte's grandparents paid $9,000. Which of the following statements most accurately describes whether Charlotte's parents can claim Charlotte as a dependent? A)Yes, Charlotte is a qualifying child of her parents. B)No, Charlotte fails the support test for both qualifying children and qualifying relatives. C)No, Charlotte does not pass the gross income test. D)Yes, Charlotte is a qualifying relative of her parents.
A
In June of Year 1, Edgar's wife, Cathy, died, and Edgar did not remarry during the year. What is his filing status for Year 1 (assuming they did not have any dependents)? A)Married filing jointly. B)Single. C)Qualifying widower .D)Head of household.
A
Jane is unmarried and has no children, but provides more than half of her mother's financial support. Jane's mother lives in an apartment across town and has a part-time job earning $5,000 a year. Which is the most advantageous filing status available to Jane? A)Single. B)Head of household .C)Qualifying individual. D)Surviving single.
A
Joanna received $60,000 compensation from her employer, the value of her stock in ABC company appreciated by $5,000 during the year (but she did not sell any of the stock), and she received $30,000 of life insurance proceeds from the death of her husband. What is the amount of Joanna's gross income from these items? A)$60,000.B)$65,000.C)$95,000.D)$90,000.
A
Joanna received $73,200 compensation from her employer, the value of her stock in ABC company appreciated by $11,000 during the year (but she did not sell any of the stock), and she received $40,200 of life insurance proceeds from the death of her husband. What is the amount of Joanna's gross income from these items? A)$73,200.B)$84,200.C)$124,400.D)$113,400.
A
Mason and his wife, Madison, have been married for five years. Jaxon, who is 18 years old and unrelated to Mason and Madison, has been living with Mason and Madison for the last two years. In May of Year 1, Mason and Madison divorced. Mason and Jaxon stayed in the home and Madison moved out. During Year 2, Mason provided all of Jaxon's support, and Jaxon lived in the home for all of Year 2. Jaxon did not earn any income during Year 2. What is Mason's most favorable filing status for Year 2? A)Single. B)Married filing separately. C)Surviving spouse. D)Head of household.
A
Sheri and Jake Woodhouse have one daughter, Emma, who is 16 years old. They also have taken in Emma's friend, Harriet, who has lived with them since February of the current year and is also 16 years of age. The Woodhouses have not legally adopted Harriet but Emma often refers to Harriet as her "sister." The Woodhouses provide all of the support for both girls, and both girls live at the Woodhouse residence. Which of the following statements is true regarding whom Sheri and Jake may claim as dependents for the current year? A)They may claim Emma as a dependent qualifying child but may not claim Harriet as a dependent. B)They may claim Emma as a dependent qualifying child and they may claim Harriet as a dependent qualifying child. C)They may claim Emma as a dependent qualifying child and they may claim Harriet as a dependent qualifying relative. D)None of these statements are true.
A
Which of the following is not an itemized deduction? A)Alimony paid. B)Medical expenses. C)Real estate taxes. D)Charitable contributions.
A
Which of the following series of inequalities is generally most accurate? A)Gross income ≥ adjusted gross income ≥ taxable income B)Adjusted gross income ≥ gross income ≥ taxable income C)Adjusted gross income ≥ taxable income ≥ gross income D)Gross income ≥ taxable income ≥ adjusted gross income
A
Which of the following statements regarding for AGI tax deductions is true? A)Taxpayers subtract for AGI deductions from gross income to determine AGI. B)A taxpayer may deduct for AGI deductions only if the deductions exceed the taxpayer's standard deduction amount. C)The deduction for qualified business income is a for AGI deduction. D)A taxpayer may deduct for AGI deductions only if the deductions exceed the taxpayer's itemized deductions.
A
Anna is a 21-year-old full-time college student (she plans on returning home at the end of the school year). Her total support for the year was $34,000 (including $8,000 of tuition). Anna covered $12,000 of her support costs out of her own pocket (from savings, she did not work) and she received an $8,000 scholarship that covered all of her tuition costs. Which of the following statements regarding who is allowed to claim Anna as an exemption is true? A) Even if Anna's parents provided the remaining $14,000 of support for Anna ($34,000 minus $12,000 minus $8,000), they would not be able to claim her as a dependent. B) Even if Anna's grandparents provided the remaining $14,000 of support for Anna ($34,000 minus $12,000 minus $8,000), they would not be able to claim her as a dependent. C) Because she provided more than half her own support, Anna would not qualify as her parents' dependent. D) None of these statements are true.
B
Earl and Lawanda Jackson have been married for 15 years. They have no children. Ned, who is an old friend from high school, has been living with the Jacksons during the current year. Which of the following is a true statement regarding whether the Jacksons can claim Ned as a dependent for the current year? A)If Ned moved into the Jackson's home in June and he lived there for the remainder of the year, he may qualify as the Jackson's qualifying relative. B)Assume that Ned originally moved into the Jackson's home two years ago and he has lived there ever since. If this year Ned earned $3,000 at a part-time job and he received $5,000 in municipal bond interest, he may qualify as the Jackson's dependent so long as the Jacksons provided more than half his support. C)If Ned lived in the Jackson's home for the entire year, he will qualify as their dependent no matter who provided his support. D)If Ned is over 19 or he is not a full-time student, he cannot qualify as the Jackson's dependent
B
For filing status purposes, the taxpayer's marital status is determined at what point during the year? A) The beginning of the year. B) The end of the year. C) The middle of the year. D) None of the choices are correct.
B
In June of Year 1, Eric's wife, Savannah, died. Eric did not remarry during Year 1, Year 2, or Year 3. Eric maintains the household for his dependent daughter, Catherine, in Year 1, Year 2, and Year 3. Which is the most advantageous filing status for Eric in Year 2? A)Head of household .B)Qualifying widower. C)Single. D)Married filing separately.
B
In June of Year 1, Jake's wife, Darla, died. The couple did not have any children and Jake did not remarry in Year 1 or Year 2. Which is the most favorable filing status for Jake in Year 2? A)Married filing separately. B)Single. C)Head of household. D)Qualifying widower.
B
In order to be a qualifying relative of another, an individual's gross income must be less than _______. A)the applicable standard deduction amount B)the dependency exemption amount C)one-half of the individual's support D)None of the choices are correct.
B
Jamison's gross tax liability is $7,000. Jamison had $2,000 of available credits and he had $4,000 of taxes withheld by his employer. What are Jamison's taxes due (or taxes refunded) with his tax return? A)$5,000 taxes due. B)$1,000 taxes due. C)$1,000 tax refund .D)$3,000 taxes due.
B
Jamison's gross tax liability is $7,900. Jamison had $2,930 of available credits and he had $4,100 of taxes withheld by his employer. What are Jamison's taxes due (or taxes refunded) with his tax return? A)$4,970 taxes due. B)$870 taxes due. C)$870 tax refund. D)$3,800 taxes due.
B
Jan is unmarried and has no children, but she provides all of the financial support for her mother, who lives in an apartment across town. Jan's mother qualifies as Jan's dependent. Which is the most advantageous filing status available to Jan? A)Single. B)Head of household. C)Qualifying individual D)Surviving single.
B
Miguel, a widower whose wife died in Year 1, maintains a household for himself and his daughter, who qualifies as his dependent. Miguel did not remarry. What is the most favorable filing status that Miguel qualifies for in Year 3? A)Single. B)Qualifying widower. C)Head of household. D)Married filing separately.
B
Which of the following is not a filing status? A)Head of household. B)Unmarried. C)Qualifying widow or widower .D)Married filing jointly.
B
Which of the following statements regarding dependents is false? A)A taxpayer may be allowed to claim another as a dependent even if the taxpayer has no family relationship with the other person. B)To qualify as a dependent of another, an individual must be a resident of the United States .C)An individual who qualifies as a dependent of another taxpayer may not claim any dependents. D)An individual cannot qualify as a dependent of another as a qualifying relative taxpayer if the individual's gross income exceeds a certain amount.
B
Which of the following statements regarding realized income is true? A)Taxpayers need not include realized income in gross income unless a specific provision of the tax code requires them to do so. B)Realized income requires some type of transaction or exchange with a second party .C)Once income is realized it cannot be excluded from gross income. D)None of these statements are true.
B
William and Charlotte Collins divorced in November of Year 1. William moved out and Charlotte remained in their house with their 10-month-old daughter, Autumn. Diana, Charlotte's mother, lived in the home and acted as Autumn's nanny for all of Year 1. William provided 70 percent of Autumn's support, Diana provided 20 percent, and Charlotte provided 10 percent. When the time came to file their tax returns for Year 1, William, Charlotte, and Diana each wanted to claim Autumn as a dependent. Their respective adjusted gross incomes for Year 1 were $50,000, $35,000, and $52,000. Who has priority to claim Autumn as a dependent? A)William. B)Charlotte. C)Diana. D)They must negotiate amongst themselves.
B
45) Madison's gross tax liability is $13,150. Madison had $5,400 of tax credits available and she had $10,900 of taxes withheld by her employer. What are Madison's taxes due (or taxes refunded) with her tax return? A)$0 taxes due and $0 tax refund. B)$7,750 taxes due C)$3,150 tax refund. D)$2,250 taxes due.
C
Char and Russ Dasrup have one daughter, Siera, who is 16 years old. In November of last year, the Dasrups took in Siera's 16-year-old friend Angela, who has lived with them ever since. The Dasrups have not legally adopted Angela but Siera often refers to Angela as her "sister." The Dasrups provide all of the support for both girls, neither girl receives any income during the year, and both girls live at the Dasrups' residence. Which of the following statements is true regarding whom Char and Russ may claim as dependents for the current year? A)They may claim Siera as a dependent qualifying child; they are not allowed to claim Angela as a dependent. B)They may claim Siera as a dependent qualifying child and they may claim Angela as a dependent qualifying child .C)They may claim Siera as a dependent qualifying child and they may claim Angela as a dependent qualifying relative .D)None of these statements are true.
C
Filing status determines all of the following except ___________ A) the applicable standard deduction amount. B) the appropriate tax rate schedule or tax table. C) the top-stated marginal rate in the tax rate schedule. D) the AGI threshold for reductions in certain tax benefits.
C
In April of Year 1, Martin left his wife, Marianne. While the couple was apart, they were not legally divorced. Marianne found herself having to financially provide for the couple's only child (who qualifies as Marianne's dependent) and to pay all the costs of maintaining the household. When Marianne filed her tax return for Year 1, she filed a return separate from Martin. What is Marianne's most favorable filing status for Year 1? A)Married filing separately. B)Single. C)Head of household .D)Qualifying widow.
C
In Year 1, the Bennetts' 25-year-old daughter, Jane, is a full-time student at an out-of-state university but she plans to return home after the school year ends. In previous years, Jane has never worked and her parents have always been able to claim her as a dependent. In Year 1, a kind neighbor offers to pay for all of Jane's educational and living expenses. Which of the following statements is most accurate regarding whether Jane's parents would be allowed to claim Jane as a dependent for Year 1, assuming the neighbor pays for all of Jane's support? A) No, Jane must include her neighbor's gift as income and thus fails the gross income test for a qualifying relative. B) Yes, because she is a full-time student and does not provide more than half of her own support, Jane is considered her parent's qualifying child. C) No, Jane is too old to be considered a qualifying child and her parents fail the support test of a qualifying relative because they did not provide more than half her support. D) Yes, because she is a student, her absence is considered as "temporary." Consequently she meets the residence test and is considered a qualifying child of the Bennetts.
C
Lebron received $50,000 of compensation from his employer and he received $400 of interest from a municipal bond. What is the amount of Lebron's gross income from these items? A)$0.B)$400.C)$50,000.D)$50,400.
C
Lebron received $70,200 of compensation from his employer and he received $480 of interest from a municipal bond. What is the amount of Lebron's gross income from these items? A)$0.B)$480.C)$70,200.D)$70,680.
C
Lydia and John Wickham filed jointly in Year 1. They divorced in Year 2.Late in Year 2, the IRS discovered that the Wickhamshad underpaid their Year 1 taxes by $2,000. Both Lydia and John worked in Year 1 and received equal income but John had $2,000 less tax withheld than Lydia did. Who is legally liable for the tax underpayment? A)Lydia. B)John. C)Both Lydia and John .D)Neither Lydia nor John.
C
Madison's gross tax liability is $9,000. Madison had $3,000 of tax credits available and she had $8,000 of taxes withheld by her employer. What are Madison's taxes due (or taxes refunded) with her tax return? A)$0 taxes due and $0 tax refund .B)$6,000 taxes due. C)$2,000 tax refund. D)$1,000 taxes due.
C
Michael, Diane, Karen, and Kenny provide support for their mother, Janet, who is 75 years old. Janet lives by herself in an apartment in Los Angeles. Janet's gross income for the year is $3,000. Janet provides 10 percent of her own support, Michael provides 40 percent of Janet's support, Diane provides 8 percent of Janet's support, Karen provides 10 percent of Janet's support, and Kenny provides the remaining 32 percent of Janet's support. Under a multiple support agreement, who is eligible to claim Janet as a dependent as a qualifying relative? A) Michael, Diane, Karen, and Kenny. B) Michael, Karen, and Kenny. C) Michael and Kenny. D) Michael.
C
Which of the following relationships does NOT pass the relationship test for a qualifying child? A)Stepsister's daughter. B)Half-brother C)Cousin. D)Stepsister.
C
Which of the following shows the correct relationship among standard deduction amounts for the respective filing statuses? A)Single > Head of Household > Married Filing Jointly B)Married Filing Jointly > Married Filing Separately > Head of Household C)Married Filing Jointly > Head of Household > Single D)Head of Household > Married Filing Separately > Married Filing Jointly
C
Which of the following statements is true? A) Income character determines the tax year in which the income is taxed. B) Income character depends on the taxpayer's filing status. C) Qualified dividend income is taxed at a lower rate than an equal amount of ordinary income. D) A taxpayer selling a capital asset at a gain recognizes ordinary income.
C
Which of the following statements regarding tax credits is true? A)Tax credits reduce taxable income dollar for dollar. B)Tax credits provide a greater tax benefit the greater the taxpayer's marginal tax rate. C)Tax credits reduce taxes due dollar for dollar. D)None of these statements are true.
C
Which of the following statements regarding tax deductions is false? A)Taxpayers are not entitled to any deductions unless specific provisions in the tax code allow the deductions. B)Deductions can be labeled as deductions above the line or deductions below the line. C)From AGI deductions tend to be associated with business activities while for AGI deductions tend to be associated with personal activities. D)The standard deduction is a from AGI deduction.
C
Which of the following statements regarding the difference between the requirements for a qualifying child and the requirements for a qualifying relative is false? A) The relationship requirement is more broadly defined (more inclusive) for qualifying relatives than for qualifying children. B) Qualifying children are subject to age restrictions while qualifying relatives are not. C) The support test for qualifying relatives focuses on the support the potential dependent self-provides while the support test for qualifying children focuses on the support the taxpayer provides. D) Qualifying relatives are subject to a gross income restriction while qualifying children are not.
C
25) Sally received $60,000 of compensation from her employer and she received $500 of interest from a corporate bond. What is the amount of Sally's gross income from these items? A) $0. B)$500. C)$60,000 .D)$60,500.
D
33) All of the following are for AGI deductions except: A) Contributions to qualified retirement accounts. B) Rental and royalty expenses. C) Business expenses for a self-employed taxpayer. D) Charitable contributions.
D
All of the following are for AGI deductions except: A) Contributions to qualified retirement accounts. B)Rental and royalty expenses. C)Business expenses for a self-employed taxpayer. D)None of the above. All of the above are for AGI deductions.
D
All of the following are tests for determining qualifying relative status except _____. A)relationship test B)gross income test C)support test D)residence test
D
All of the following represent a type or character of income except: A)Ordinary. B)Capital .C)Qualified dividend. D)Normal.
D
For purposes ofdetermining filing status, which of the following is not a requirement for a married taxpayer to be treated as unmarried at the end of the year? A) The taxpayer claims a child as a dependent. B) The taxpayer pays more than half the costs of maintaining his or her home for the entire year and the home is the principal residence for a dependent qualifying child for more than half the year. C) The taxpayer files a tax return separate from the other spouse. D) The spouse does not live in the taxpayer's home at all during the year.
D
In April of Year 1, Martin left his wife, Marianne. The couple has two children under the age of 15. While the couple was apart, they were not legally divorced. Marianne remained in the home and paid all the costs of maintaining the home for the remainder of the year. Assuming the couple does not file jointly, which of the following statements regarding filing status is true? A)No matter the post-separation residence(s) of the children, both spouses must file as married filing separately .B)No matter the post-separation residence(s) of the children, Martin must file as married filing separately but Marianne may qualify to file as head of household. C)No matter the post-separation residence(s) of the children, Marianne must file as married filing separately but Martin may qualify to file as head of household .D)Depending on the post-separation residence(s) of the children, both spouses may qualify to file as head of household.
D
In Year 1, Harold Weston's wife died. Since her death, he has maintained a household for their son, Frank (age 3), his qualifying child. Which is the most advantageous filing status available to Harold in Year 4? A)Married filing jointly. B)Surviving spouse. C)Qualifying widower. D)Head of household.
D
Katy has one child, Dustin, who is 18 years old at the end of the year. Dustin lived at home for three months during the year before leaving home to work full time in another city. During the year, Dustin earned $15,000. Katy provided more than half of Dustin's support for the year. Which of the following statements regarding whether Katy may claim Dustin as a dependent for the current year is accurate? A)Dustin is a qualifying child of Katy. B)Dustin fails the residence test for a qualifying child but he is considered a qualifying relative of Katy. C)Dustin fails the support test for a qualifying relative .D)Dustin fails the gross income test for a qualifying relative.
D
Sally received $68,400 of compensation from her employer and she received $693 of interest from a corporate bond. What is the amount of Sally's gross income from these items? A) $0. B) $693. C) $68,400. D) $69,093.
D
The income tax base for an individual tax return is: A)Realized income from whatever source derived. B)Gross income. C)Adjusted gross income. D)Adjusted gross income minus from AGI deductions.
D
Which of the following is NOT a from AGI deduction? A)Standard deduction. B)Itemized deduction. C)Deduction for qualified business income. D)None of these. All of these arefrom AGI deductions.
D
Which of the following statements about a qualifying person for head of household filing status is true? A) One individual (who is a qualifying person) may qualify more than one taxpayer for head of household filing status. B) The taxpayer is required to live with a qualifying person for the entire year in order to qualify for head of household filing status. C) A taxpayer's parent cannot be a qualifying person for purposes of determining head of household filing status. D) A qualifying person must have a family relationship with the taxpayer in order for the qualifying person to qualify the taxpayer for head of household filing status.
D
Which of the following statements regarding exclusions and/or deferrals is false? A) Exclusions are favorable because taxpayers never pay tax on income that is excluded. B) Interest income from municipal bonds is excluded from gross income. C) Deferrals are income items taxpayers realize in one year but include in gross income in a subsequent year. D) An income item need not be realized in order to qualify as an exclusion item.
D
Which of the following statements regardingdependents is true? A)To qualify as a dependent of another, an individual must be a resident of the United States. B)To qualify as a dependent of another, an individual may not file a joint return with the individual's spouse under any circumstance. C)To qualify as a dependent of another, an individual must have a family relationship with the other person. D)To qualify as a dependent of another, an individual must be either a qualifying child or a qualifying relative of the other person.
D
John Maylor is a self-employed plumber of John's John Service, his sole proprietorship. In the current year, John's John Service had revenue of $120,000 and $40,000 of business expenses. John also received $2,000 of interest income from corporate bonds. What is John's adjusted gross income, assuming he had no other income or expenses? (ignore any deduction for self-employment tax.)
Description Amount Explanation (1) Gross income $ 122,000 $120,000 from business + $2,000 interest income (2) Business expenses (40,000) For AGI deduction Adjusted gross income $ 82,000 (1) + (2)
Kabuo and Melinda got married on December 15, Year 1. Kabuo's salary for the year was $54,000, and Melinda's was $62,000. In addition, Kabuo received $250 of interest income, ($100 of which was from municipal bonds), and Melinda received $10,000 of alimony from a former spouse (pre-2019 divorce decree). If Kabuo and Melinda choose to file jointly, what is their Year 1 gross income?
Description Amount Explanation (1) Kabuo's salary $ 54,000 (2) Melinda's salary 62,000 (3) Interest income 150 $100 municipal bond interest is excluded (4) Alimony received 10,000 Gross income $ 126,150 Sum of (1) through (4)
Which of the following types of income are not considered ordinary income? A) Compensation income. B) Short term capital gains. C) Qualified dividend income. D) Both compensation income and qualified dividend income. E) Both short term capital gains and qualified dividend income.
E
119) To determine filing status, a taxpayer's marital status is determined based on the number of days the taxpayer was married during the year compared to the number of days they were not married. ⊚true⊚false
F
120) It is generally more advantageous from a tax perspective for a married couple to file separately than it is for them to file jointly. ⊚ true ⊚ false
F
127) A taxpayer is not permitted to use the head of household filing status if she does not have any dependent children. ⊚ true ⊚ false
F
An individual receiving $6,000 of tax-exempt income during the year could qualify as a qualifying child of another taxpayer but could not qualify as a qualifying relative of another taxpayer. ⊚ true ⊚ false
F
Anna is a qualifying child of her parents. However, she was recently married. Anna and her husband filed a joint return. If they had filed separately, Anna would have owed no taxes, though her husband would have owed just $5. Because Anna herself owed no taxes, her parents can still claim her as a dependent. ⊚ true ⊚ false
F
Charles, who is single, pays all of the costs of maintaining a home for himself and Damarcus. Charles and Damarcus have no family relationship but Damarcus lives with Charles for the entire year. Damarcus qualifies as a qualifying relative of Charles. (Charles claims Damarcus as a dependent on his tax return.) Charles qualifies for head of household filing status. ⊚ true ⊚ false
F
Eric and Josephine were married in Year 1. In Year 2, Eric dies. The couple did not have any children. Assuming Josephine does not remarry, she may file as a qualifying widow in Year 3. ⊚ true ⊚ false
F
For AGI deductions are commonly referred to as deductions "below the line." ⊚true⊚false
F
From AGI deductions are generally more valuable to taxpayers than for AGI deductions. ⊚true⊚false
F
If a taxpayer does not provide more than half the support of a child, that child cannot qualify as the taxpayer's qualifying child. ⊚ true ⊚ false
F
If an unmarried taxpayer iseligible to claim another as a dependent, the taxpayer is automatically eligible for the head of household filing status. ⊚ true ⊚ false
F
If an unmarried taxpayer provides more than half the support for a cousin who lives in the taxpayer's home for the entire year, the taxpayer will qualify for head of household filing status. ⊚ true ⊚ false
F
If no one qualifies as the dependent of an unmarried taxpayer, the unmarried taxpayer may still be able to qualify for the head of household filing status. ⊚ true ⊚ false
F
Inventory is a capital asset. ⊚ true ⊚ false
F
Itemized deductions and the standard deduction are deductions from AGI but the deduction for qualified business income is a deduction for AGI. ⊚ true ⊚ false
F
Qualified dividends are taxed at the same rate as ordinary income. ⊚ true ⊚ false
F
Tax credits reduce taxable income dollar for dollar. ⊚ true ⊚ false
F
Taxpayers are allowed to deduct a specific amount for each of their dependents. ⊚true⊚false
F
Taxpayers are generally allowed to claim deductions for expenditures unless a specific tax provision indicates the expenditure is not deductible. ⊚ true ⊚ false
F
Taxpayers need not include an income item in gross income unless there is a specific tax provision requiring the taxpayer to include the income item in gross income. ⊚true⊚false
F
Taxpayers who file as qualifying widows/widowers use a different tax rate schedule than taxpayers who are married filing jointly for tax purposes. ⊚ true ⊚ false
F
The only from AGI deductions are the standard deduction and itemized deductions. ⊚ true ⊚ false
F
The relationship requirement for qualifying relative includes cousins. ⊚ true ⊚ false
F
The relationship test for qualifying relative requires the potential qualifying relative to have a family relationship with the taxpayer. ⊚ true ⊚ false
F
The test for a qualifying child includes a gross income restriction while the test for qualifying relative does not. ⊚ true ⊚ false
F
To be considered a qualifying child of a taxpayer, the individual must be the son or daughter of the taxpayer. ⊚ true ⊚ false
F
When determining whether a child meets the qualifying child support test for the child's grandparents, scholarships earned by the child do not count as self-support provided by the child. ⊚true⊚false
F
82) The standard deduction amount for married filing separately taxpayers (MFS) is less than the standard deduction amount for married filing jointly taxpayers. ⊚ true ⊚ false
T
A personal automobile is a capital asset. ⊚true⊚false
T
A taxpayer may qualify for the head of household filing status if she has no dependent children but pays more than half of the cost of maintaining a separate household for her dependent parent. ⊚ true ⊚ false
T
A taxpayer who is claimed as a dependent on another's tax return may not claim any dependents on his or her tax return. ⊚ true ⊚ false
T
An individual may be considered as a qualifying child of her parents and a qualifying child of her grandparents in the same year. ⊚ true ⊚ false
T
An individual may meet the relationship test to be a taxpayer's qualifying relative even if the individual has no family relationship with the taxpayer. ⊚ true ⊚ false
T
An individual may never be considered as both a qualifying relative and a qualifying child of the same taxpayer. ⊚ true ⊚ false
T
An individual with gross income of $6,000 could qualify as a qualifying child of another taxpayer but could not qualify as a qualifying relative of another taxpayer. ⊚ true ⊚ false
T
Certain types of income are taxed at a lower rate than ordinary income. ⊚ true ⊚ false
T
For AGI deductions are commonly referred to as deductions "above the line." ⊚ true ⊚ false
T
For purposes of the qualifying child residence test, a child's temporary absence from the taxpayer's home to attend school full time is counted as though the child lived in the taxpayer's home during the absence. ⊚ true ⊚ false
T
From AGI deductions are commonly referred to as deductions "below the line." ⊚true⊚false
T
In addition to the individual income tax, individuals may be required to pay taxes imposed on tax bases other than individual taxable income. ⊚ true ⊚ false
T
In certain circumstances, a married taxpayer who does not file a joint tax return with her spouse may qualify for the head of household filing status. ⊚true⊚false
T
In certain circumstances, a taxpayer who provides less than half the support of another may still be able to claim that person as a dependent as a qualifying relative. ⊚ true ⊚ false
T
It is generally more advantageous for liability protection purposes for a married couple to file separately than it is for them to file jointly. ⊚true⊚false
T
Jennifer and Stephan are married at year-end and they file separate tax returns. If Jennifer itemizes deductions on her return, Stephan must also itemize deductions on his return even if his itemized deductions don't exceed his standard deduction. ⊚ true ⊚ false
T
Jeremy and Annie are married. During the year Jeremy dies. When Annie files her tax return for the year in which her husband dies, she may file under the married filing jointly filing status even if she does not remarry. ⊚ true ⊚ false
T
Kelsey and Austin file a joint return. Kelsey works and receives income during the year but Austin does not. If the couple files a joint tax return, Austin is responsible for paying any taxes due if Kelsey is unable to pay the taxes. ⊚ true ⊚ false
T
Tax credits are generally more valuable than tax deductions because tax credits reduce a taxpayer's gross tax liability dollar for dollar while tax deductions do not. ⊚ true ⊚ false
T
Taxpayers are allowed to claim a child tax credit for their qualifying children and certain other qualifying dependents. ⊚ true ⊚ false
T
Taxpayers may prepay their tax liability through withholdings and through estimated tax payments. ⊚ true ⊚ false
T
The character of income is a factor in determining the rate at which the income is taxed. ⊚ true ⊚ false
T
The relationship requirement is more broadly defined (includes more relationships) for a qualifying relative than for a qualifying child. ⊚true⊚false
T
The standard deduction amount varies by filing status. ⊚ true ⊚ false
T
The test for qualifying child includes an age restriction but the test for qualifying relative does not. ⊚true⊚false
T
When determining whether a child meets the qualifying child support test for the parents, scholarships earned by the child do not count as self-support provided by the child. ⊚true⊚false
T
In February of 2019, Lorna and Kirk were married. During 2020, Lorna received $40,000 of compensation from her employer and Kirk received $30,000 of compensation from his employer. The couple together reported $2,000 of itemized deductions. Lorna and Kirk filed separately in 2020. What is Lorna's taxable income and what is her tax liability? (tax rate schedules.) Use the applicable tax rate schedule. (Round your answers to the nearest whole number.)
Taxable income is $27,600 ($40,000 − $12,400 standard deduction).Tax liability is $3,115 [$987.50 + 12% × (27,600 − 9,875)].
Sullivan's wife, Susan, died four years ago. Sullivan has not remarried and he maintains a home for his dependent child, Sammy. In 2020, Sullivan received $70,000 of salary from his employer and $3,000 of qualified business income from a business investment, and he paid $10,000 of itemized deductions. What is Sullivan's taxable income for 2020?
Taxable income is $53,750 computed as follows: Description Amount Explanation (1) Salary $ 70,000 (2) Qualified business income 3,000 (3) For AGI deductions (0) (4) Adjusted gross income 73,000 (1) + (2) + (3) (5) Standard deduction (18,650) Standard deduction for head of household filing status (6) Itemized deductions (10,000) (7) Greater of (5) or (6) (18,650) Standard deduction exceeds itemized deductions (8) Deduction for qualified business income (600) $3,000 QBI × 20% (9) Total deductions from AGI (19,250) (7) + (8) Taxable income $ 53,750 (4) + (9)
By the end of Year 1, Harold and Jamie Allred had been married for 30 years and have filed a joint return every year of their marriage. Their three sons, Jacob, Larry, and Andi, are ages 13, 16, and 23, respectively, and all live at home and are fully supported by their parents. Andi is employed full time, earning $17,000 in Year 1. Whom can the Allreds claim as dependents?
The Allreds may claim Jacob and Larry as dependents as qualifying children. They are not allowed to claim Andi because he is neither a qualifying child (fails age test) nor a qualifying relative (fails gross income test).
Sam andTracy have been married for 25 years. They have filed a joint return every year of their marriage. They have two sons, Christopher and Zachary. Christopher is 19 years old and Zachary is 14 years old. Christopher lived in his parents' home from January through August and he lived in his own apartment from September through December. During the year, Christopher attended college for one month before dropping out. Christopher's living expenses totaled $12,000 for the year. Of that, Christopher paid $5,000 from income he received while working a part-time job. Sam and Tracy provided the remaining $7,000 of Christopher's support. Zachary lived at home the entire year and did not earn any income. Whom are Sam and Tracy allowed to claim as dependents?
They can claim Zachary as a dependent qualifying child but they are not allowed to claim Christopher as a dependent. He does not qualify as either a qualifying child or qualifying relative. See analysis below. Qualifying child test Test Christopher Zachary Relationship Yes, son. Yes, son. Age No, not under 19 years of age and not a full-time student. Yes, under age 19 at end of year. Residence Yes, lived in parents' home for more than half the year. Yes, lived at home entire year. Support Yes. Did not provide more than half of own support. Yes. Did not provide more than half of own support. Qualifying relative test: Test Christopher Relationship Yes, son Age Not applicable to qualifying relative. Residence Not applicable to qualifying relative. Support Yes. Sam and Tracy provided more than half of Christopher's support ($7,000/$12,000). Gross income No, Christopher's gross income is not less than $4,300.
