Exam 5: Deductions for Individuals and Tax Determination

Sebastian (age 46) and Kaitlin (age 45) are married and file a joint tax return. Their 2018 adjusted gross income is $390,000 and includes $2,600 in investment income ($2,000 in short-term capital gains and $600 of interest income). They provided 100% of the support for their daughter, Olivia, age 26, who lives with them, and earned $4,700 from her part-time job. They also provided 100 percent of the support for Sebastian's mother, Emily, who is 67, blind, and lives in a nursing home. Emily received $4,000 in Social Security benefits and $450 of interest income. What is Sebastian and Kaitlin standard deduction on their 2018 tax return if they do not itemize?

Buffy and Biff are both employed. They have two dependent children ages 9 and 10 and they pay $7,200 for child care while they work. In 2018, their combined salary and wage income is $560,000. They each put $4,000 into their traditional IRAs (these IRAs are their only retirement plans). Their itemized deductions are $28,000. What is their net tax liability after all allowable credits if they file jointly and the child tax credit begins to phase out at $400,000?

Margo is single and has twin sons who are freshmen in college and a daughter who is a junior during 2018. Margo also attends the local college and took one graduate course each semester. She pays $4,000 tuition and fees for each of the three children and $1,900 in tuition and fees for her courses. What are her allowable education credits if her AGI is $61,000 and the LLC phaseout range is $57,000-$67,000?

Which of the following statements is true regarding the deductibility of investment interest expense?

Samuel, a single individual, has adjusted gross income of $150,000 and the following itemized deductions before applicable floor limitations for 2018: What are Samuel's itemized deductions for alternative minimum tax purposes?

All of the following are a common filing status for a married person except:

Colin (age 40) is single, itemizes his deductions, and has AGI of $100,000. Colin provided the following information about his cash expenditures for 2018: Interest on American Express card 1,200 Points to refinance his home for 10 years at the end of December 2,600 Mortgage interest payments on $250,000 principal amount 11,800 Real estate taxes 2,100 State income taxes withheld on salary 5,400 Additional state income tax estimated payment 1,200 Contribution to Republican Party 2,000 Contribution to United Way 500 If Colin itemizes, what are his total itemized deductions in 2018:

Sophie, age 68, has AGI of $47,000. Her itemized deductions after limitations are $1,400 for medical expenses, $700 in property taxes, $4,500 of mortgage interest and $800 for charitable contributions. What are her AMTI itemized deductions?

To qualify as head of household, the taxpayer must pay more than half of the costs of a home in which a qualifying person lives for the entire year.

Which of the following is a refundable credit?

Sales taxes levied on the purchase of depreciable business property are deductible as part of depreciation.

Cailey and Dimitri are married and file a joint tax return. Cailey has $170,000 in salary and Dimitri has $210,000 in self-employment income in 2018. How much must they pay on their individual tax return for their Medicare surtax?

Explain the difference in benefits between a tax deduction and a tax credit?

John is a 36-year-old calendar-year taxpayer whose wife died in August of 2018. His eight year-old son lives with him. During 2018, he had salary income of $52,000, $600 of dividend income, and received $50,000 from the life insurance policy on his wife. He made a $2,000 contribution to his regular IRA and paid $9,800 for a hospital bill and $3,000 for a doctor bill for his deceased wife. He also paid $4,000 in mortgage interest, $800 in property taxes, $300 of credit card interest and $400 in job hunting expenses when he tried to find a better paying job in the same line of work in March. Determine John's income tax liability for 2018, before any allowable credits, if he itemizes his deductions. Should John consider using the standard deduction?

Cora, who is single, has $58,000 of salary income, $2,350 in dividends, and $3,800 in interest income. She has $13,200 of itemized deductions. Determine her tax liability for 2018.

Sebastian (age 46) and Kaitlin (age 45) are married and file a joint tax return. Their 2018 adjusted gross income is $390,000 and includes $2,600 in investment income ($2,000 in short-term capital gains and $600 of interest income). They provided 100% of the support for their daughter, Olivia, age 26, who lives with them, and earned $4,700 from her part-time job. They also provided 100 percent of the support for Sebastian's mother, Emily, who is 67, blind, and lives in a nursing home. Emily received $4,000 in Social Security benefits and $450 of interest income. Sebastian and Kaitlin also paid the following amounts in 2018: -$38,500 interest on their home mortgage (acquisition debt) on their principal residence purchased in 1995. The principal amount of the mortgage is $1,250,000. They also paid $8,250 in real estate taxes on the home. -$6,000 investment interest expense -$7,600 unreimbursed employee business expenses (none for meal or entertainment expenses) -$1,650 in state income taxes to the state of California where Sebastian worked for part of the year -$1,400 in state and local general sales taxes -$490 fee for preparation of their 2017 tax return, paid to their CPA in 2018 -$2,500 contributed to the State University Athletic Booster Club (to allow them to purchase tickets in good seat locations for football games) and $1,000 contributed to the State University Business School Alumni Association for academic scholarships. They also donated a painting (purchased 11 years ago for $4,200) to the Salvation Army, which was then sold for its fair market value of $17,000 at its fundraising auction. How much can Sebastian and Kaitlin deduct for taxes for 2018?

Which of the following filing statuses can never be used by a single individual?

The kiddie tax can only be imposed on

Carl, age 42, is married and has three children. In preparing to go to his accountant, he determines that he has $63,100 of salary income and $250 in dividends. He contributes $4,000 to a Roth IRA and has $6,800 of itemized deductions. His wife has no income. What is the taxable income on their 2018 joint return?

What is Cheryl's AGI if she has a taxable salary of $34,000, receives $6,000 of alimony (from a divorce agreement executed in 2017) and $600 of interest on her various savings accounts, contributes $3,000 to her traditional IRA, and paid a $100 penalty for cashing in her Certificates of Deposit early?