Exam 14: The Individual Tax Formula

Hunter, age 17, is claimed as a dependent on his parents' tax return. This year, Hunter earned $8,500 for appearing in a television commercial. Compute Hunter's standard deduction.

Kent, an unmarried individual, invited his widowed father, Martin, to move into his home in January of this year. Martin's only income item was a $14,000 taxable pension from his former employer. Kent provides about 75% of his father's financial support. What is Kent's filing status and number of exemptions for the year?

Julie, an unmarried individual, lives in a home with her 13-year-old dependent son, Oscar. This year, Julie had the following tax information. Compute Julie's adjusted gross income (AGI) and taxable income.

An individual who files his own tax return but is claimed as a dependent on another individual's return is not allowed any standard deduction or personal exemption.

Eileen, a single individual, had $125,000 taxable income. Compute her income tax assuming that: a. Taxable income includes no capital gains. b. Taxable income includes $14,000 capital gain eligible for the 15% preferential rate.

Which of the following statements regarding the calculation of regular tax liability is false?

Mr. Andrews is age 58, legally blind, and files as a single taxpayer. His standard deduction for 2013 is $6,100.

Which of the following statements regarding exemptions is false?

Ms. Dorley's regular tax liability on her Form 1040 is $45,890. Which of the following statements is true?

Mr. Marshall was employed by IMP Inc. until October, when he accepted a new position with Turine Inc. Mr. Marshall earned $129,000 compensation from IMP and $36,000 compensation from Turine. Which of the following statements is false?

Which of the following situations result in a marriage penalty for federal income tax purposes?

Which of the following statements describing individual tax deductions is false?

Mr. and Mrs. Liddy, ages 39 and 41, file a joint return and have no dependents for the year. Here is their relevant information. Compute their adjusted gross income (AGI) and taxable income.

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

Mr. and Mrs. David file a joint tax return. They have $169,300 taxable income in 2013, $120,300 of which is ordinary income and $49,000 of which is taxed at a 15% preferential rate. Compute their tax savings from the preferential rate.

Adjusted gross income equals total income less itemized deductions.

Mr. and Mrs. Kay, ages 68 and 66, file a joint return. Mrs. Kay is legally blind. Compute their standard deduction.

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. 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.

Ruth Anne, a single taxpayer, reported $152,600 alternative minimum taxable income before any exemption on her 2013 Form 1040. Calculate Ruth Anne's AMT exemption.