Exam 14: The Individual Tax Formula

Mr. and Mrs. Upton's marginal tax rate on their joint return is 33%. This year, their itemized deductions totaled $13,800, and their standard deduction (MFJ) was $12,600. Compute their incremental tax savings from their itemized deductions.

In determining the standard deduction, which of the following statements is true?

Mr. and Mrs. Toliver's AGI on their jointly filed return is $339,000. Regardless of the number of their children, the Tolivers are not eligible for a child credit.

In order to be claimed as a dependent, an individual must be either a qualifying child or a qualifying relative.

Last year, Mr. Corbett's AGI was $141,000, and his total tax liability was $33,650. This year, his total tax liability is $35,290. Compute the minimum amount of current year tax that Mr. Corbett had to prepay (withholding and estimated payments) to avoid an underpayment penalty.

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

The tax rates for individuals who qualify as a head-of-household are lower than the tax rates for single individuals.

Mrs. Raines died on June 2, 2014. Mr. Raines has not remarried and has no children or other dependents. What is his filing status for 2014 and 2015?

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.

Linda and Raj are engaged to be married. Linda's 2015 taxable income as a single individual would be $83,500. Raj's 2015 taxable income as a single individual would be $118,000. When they marry before the end of 2015, how much of a marriage penalty will they incur?

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

Mrs. Paley died on July 14, 2014. Her husband has not remarried. The Paleys' two children, ages 34 and 36, are financially independent. Mr. Paley may file as a surviving spouse in 2015 and 2016.

An above-the-line deduction reduces both adjusted gross income and taxable income.

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

Which of the following statements concerning the exemption phaseout is true?

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.

Determine Mr. Smith's 2015 filing status in each of the following independent cases. a. Mr. Smith and Mrs. Smith were legally divorced on December 1. Mr. Smith has not remarried and has no dependent children. b. Mr. Smith and the first Mrs. Smith were legally divorced on February 10. Mr. Smith remarried the second Mrs. Smith on December 5. He has no dependent children. c. Mrs. Smith dies on June 22. Mr. Smith has not remarried and has no dependent children. d. Mrs. Smith died on November 1, 2013. Mr. Smith has not remarried and maintains a home for one dependent child. e. Mrs. Smith died on April 3, 2014. Mr. Smith has not remarried and has no dependent children. f. Mr. and Mrs. Smith were legally divorced on September 10, 2012. Mr. Smith has not remarried and maintains a home for his two dependent children.

Which of the following statements regarding a qualifying child is false?

Adjusted gross income equals total income less itemized deductions.

Mr. and Mrs. Borem spent $1,435 for child care for their two dependent children, who are two and four years old. Mr. Borem's earned income was $55,870, Mrs. Borem had no earned income, and the AGI on their joint return was $66,210. Calculate their dependent care credit.