Exam 8: Individual Income Tax Computation and Tax Credits

Akiko and Hitachi (married filing jointly for 2018) are both educators. They attended a conference to further their job-related skills. Tuition for the conference was $2,000 for each person. Their AGI was $120,000. How much lifetime learning credit can they claim?

Tax rate schedules are provided for use by (relatively) higher income taxpayers while the tax tables are provided for use by (relatively) lower income taxpayers.

Maria and Tony are married. They are preparing to file their 2018 tax return. If they were to file as single taxpayers, Maria and Tony would report $10,000 and $70,000 of taxable income, respectively. On their joint tax return, their taxable income is $80,000. How much of a marriage penalty or benefit will Maria and Tony experience in 2018? (Use Tax Rate Schedule.)

Jocelyn, a single taxpayer, had $742,000 of taxable income in 2018. All of the income is ordinary. What is her tax liability for the year? (Use Tax Rate Schedule.)

Due to the alternative minimum tax rate structure, a taxpayer with a large amount of long-term capital gains may be susceptible to the alternative minimum tax.

Hera wants to reduce her income tax liability by shifting some of her income to her 10-year-old daughter (a dependent), Athena. Last year, Hera gifted corporate bonds to Athena. This year, Athena received $1,550 in interest income from the bonds. What amount of tax will Athena pay on the interest income?

Persephone has a regular tax liability of $12,475 and a tentative minimum tax of $11,500. Given just this information, what is her alternative minimum tax liability for the year?

When applying credits against a taxpayer's gross tax liability, nonrefundable personal credits are applied first, then business credits, and finally refundable personal credits.

Katlyn reported $300 of net income from her sole proprietorship. She is not required to pay self-employment tax.

During all of 2018, Mr. and Mrs. Clay lived with their four children (all are under the age of 17). They provided over one-half of the support for each child. Mr. and Mrs. Clay file jointly for 2018. Neither is blind, and both are under age 65. They reported the following tax-related information for the year: (Use the tax rate schedules) A. What is the Clays' taxes payable or (refund due) (ignore the alternative minimum tax)? B. What is the Clays' tentative minimum tax and alternative minimum tax?

In 2018, Maia (who files as a head of household) reported regular taxable income of $115,000. She itemized her deductions, deducting $8,000 in charitable contributions and $3,000 in state income taxes. What is Maia's alternative minimum taxable income?

In 2018, John (52 years old) files as a head of household with one 18-year old dependent (qualifying) child. John is eligible to claim a $700 American opportunity credit for the year. John did not have any taxes withheld by his employer during the year and he did not make any estimated tax payments. After taking credits into account, what is the amount of John's taxes payable or refund assuming that his AGI is $26,000 (all from salary) and his taxable income is $8,000?

Assuming the kiddie tax applies, what amount of a child's income is subject to the kiddie tax?

Wolfina's twins, Romulus and Remus, finished their first year of school at an accredited university in 2018. She paid $10,000 in qualified educational expenses for Romulus and $2,000 of qualifying expenses for Remus. Wolfina is a head of household with an AGI of $85,000. What amount of American opportunity credit may she claim?

What happens if the taxpayer owes an underpayment penalty, but does not compute it on Form 2210?

Depending on the year, the original (unextended) due date for an individual's tax return may be after April 15.

Linda is a qualifying widow in 2018. In 2018, she reports $80,000 of taxable income (all ordinary). What is her gross tax liability using the tax rate schedules? (Tax rate schedule)

Hestia (age 17) is claimed as a dependent by her parents, Rhea and Chronus. In 2018, Hestia received $1,000 of interest income from a corporate bond that she owns. In addition, she has earned income of $200. What is her taxable income for 2018?

Which of the following statements regarding the child and dependent care credit is False?

Which of the following statements concerning a comparison between employees and independent contractors is most accurate?