Exam 14: The Individual Tax Formula

Mr. and Mrs. Arlette spent $5,900 for child care for their 12-year-old daughter. Mr. Arlette's earned income was $178,000, Mrs. Arlette's earned income was $33,100, and the AGI on their joint return was $225,200. Calculate their dependent care credit.

Mr. and Mrs. Stern reported $312,440 alternative minimum taxable income before any exemption on their 2016 Form 1040. Calculate their AMT exemption.

Mr. and Mrs. Bennett file a joint tax return. Determine if each of the following unmarried individuals is either a qualifying child or a qualifying relative for whom the couple can claim an exemption. a. Son Alex, age 22, lives in his parents' home and works fulltime as a tax accountant. Alex is self-supporting except for the fact that he does not pay rent to his parents. b. Daughter Samantha, age 20, is a full-time college student. Samantha lives in a dormitory during the school year, but her parents' home is her permanent residence and they provide 100% of her financial support. c. Mr. Bennett's brother Max is 42 years old and mentally handicapped. Max lives in a privately operated group home, and Mr. and Mrs. Bennett provide 100% of his financial support. Max has no gross income. d. Mrs. Bennett's mother, Vera, age 67, lives in a retirement community. Mr. and Mrs. Bennett provide about 75% of her financial support. Vera earned $5,000 this year as a part-time receptionist.

In computing taxable income, an individual is allowed to deduct the lesser of itemized deductions or the standard deduction.

Alice Grim, a single taxpayer, has $219,000 taxable income, which includes a $20,000 capital gain taxed at 15%. Her alternative minimum taxable income in excess of her exemption amount is $237,400. Compute Alice's regular tax, AMT, and total tax.

Mr. Lenz died on May 4, 2015. His widow, Mrs. Lenz, maintains a home for her three children, ages 4, 6, and 11. Mrs. Lenz must file as a head of household in 2016.

Only natural and adopted children or stepchildren can be a qualifying child for tax purposes.

Which of the following statements regarding tax payments is true?

Benjamin, who files as a single taxpayer, has $359,900 taxable income in 2016. Compute his regular tax liability.

Miss Blixen's regular income tax is $77,390, and her tentative minimum tax is $74,100. Consequently, Miss Blixen's alternative minimum tax (AMT) is zero.

Julie, an unmarried individual, lives in a home with her 13-year-old dependent son, Oscar. This year, Julie had the following tax information. Business income from sole proprietorship \ 95,000 Dividend income Deduction for self-employment tax 6,712 Iternized deductions 13,600 Compute Julie's adjusted gross income (AGI) and taxable income.

Individual taxpayers can obtain an automatic extension of time to file a calendar year Form 1040 until October 15 of the following year.

Mr. Thomas is age 69, has perfect vision, and files as a single taxpayer. His standard deduction for 2015 is $7,850.

Harry and Sally were married on December 23, 2015. Their income for the entire year is reported on a joint return.

Mr. and Mrs. Lansing, who file a joint tax return, have four dependent children under age 17. Which of the following statements is false?

Mr. and Mrs. Harvey's tax liability before credits was $1,675. Their income tax withholding was $1,050, and they are entitled to a $1,189 earned income credit. Which of the following statements is true?

Mr. and Mrs. Cox reported $115,900 AGI on their joint return. The couple has three dependent children under age 17. Compute their child credit.

An individual must pay the greater of her regular income tax or her alternative minimum tax (AMT) for the year.

Every individual taxpayer is entitled to an AMT exemption, the amount of which varies with filing status.

Mr. Jones and his first wife were legally divorced on February 19, 2016. Mr. Jones remarried the second Mrs. Jones on December 20, 2016. Which of the following describes Mr. Jones' filing status in 2016?