Exam 5: Deductions for Individuals and Tax Determination

John and Joanna have $125,000 in combined salary and wages, $8,000 in dividend income, and $3,000 in interest income. What is their tax liability for 2018 if they are married filing jointly and have $35,000 in itemized deductions?

Contributions to health savings accounts are made with before-tax dollars.

Which of the following is true regarding miscellaneous itemized deductions?

Colin (age 40) is single and itemizes his deductions. His AGI is $100,000. Colin provided the following information about his cash expenditures for 2018: Interest on loan to purchase corporate securities $ 900 Interest on American Express card 1,200 Points to refinance his home at the end of December 2,600 Mortgage interest payments 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 What is Colin's deduction for taxes?

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?

In 2018, Jacob earned a salary of $185,000 and also had the following items of investment income: $39,000 net short-term capital gain on sale of stock, $7,000 dividend income, $5,000 interest income from corporate bonds, and $4,000 interest income from tax-exempt municipal bonds. Compute Jacob's net investment income (NII) tax.

Surviving spouse status may be claimed for three years after the year of the spouse's death.

Toni is 61 and blind; her husband, Saul, is 67. What is their standard deduction if they file a joint tax return in 2018?

What is the purpose of the alternative minimum tax?

In 2017, a personal theft loss could be deducted if it exceeded $100 plus 10 percent of AGI.

What is Beth's maximum allowable deduction for the following contributions to qualified public charities during the current year if her adjusted gross income is $90,000?

Cleo's husband died in January of 2016. She has a 20 year-old son and a sister who live with her. Her son attends a trade school part-time and earned $11,000 from his part-time job. Cleo's sister is a full-time student and only earned $2,800 from her part-time job. What is Cleo's 2018 filing status?

Jan and James's divorce is final on December 31 of the current year. They must file married filing separately for the tax year.

Sonja is a talented 18 year-old dancer and has earned quite a bit of money over the last six years that her parents invested for her. During 2018, however, she earned only $5,500 from dancing but $1,900 in interest. If she qualifies as a dependent of her parents, what is her income tax liability in the current year?

The basic and additional standard deductions are both indexed for inflation.

All of the following are qualifying relatives who can qualify as dependents except:

George (49) and Jean (36), a married couple with no dependents, have AGI of $2,400,000. They have $120,000 of medical expenses related to a kidney transplant, $80,000 of property taxes on their principal residence, $65,000 of interest expense on the $680,000 acquisition mortgage, and $25,000 in charitable contributions before applying any limitations. If they have a $400,000 preference item, what is their regular taxable income, their alternative minimum taxable income, and their alternative minimum tax in 2018? (Exclude any medicare surtaxes on regular taxable income in your solution.)

Patricia's AGI was $80,000 in both 2017 and 2018. She made cash contributions to public charities of $43,000 in 2017 and $50,000 in 2018. Patricia's charitable contribution carryover to 2019 is:

A legally married couple can elect to file as married filing jointly or single individuals.

A homeowner who itemizes his or her deductions can only deduct the property taxes on his or her primary residence and one other residence.