Exam 2: Determination of Tax

Avi and Rianna are considering marriage before year-end.They each earn a salary of about $150,000,have some investment income and some itemized deductions.What additional taxes will Avi and Rianna face as a married couple?

John supports Kevin,his cousin,who lived with him throughout 2017.John also supports three other individuals who do not live with him: Donna,who is John's mother Melissa,who John's stepsister Morris,who is Kevin's brother Assume that Donna,Melissa,Morris and Kevin each earn less than $4,050.How many personal and dependency exemptions may John claim?

All of the following items are included in gross income except

The oldest age at which the "Kiddie Tax" could apply to a dependent child is

Julia provides more than 50 percent of the support for three individuals: Theresa,an unrelated child who lives with Julia all year long; Margaret,Julia's cousin,who lives in another city; and Emma,Julia's daughter,who lives in her own home.Each of the potential dependents earned less than $4,050.How many dependency exemptions can Julia claim on her 2017 tax return?

Mia is a single taxpayer with projected AGI of $275,000 in 2017.She is considering selling a long-term investment before year-end.She expects to realize a gain of $25,000.If Mia sells the investment by December 31,her 2017 taxable income will increase by $25,000.

Nonrefundable tax credits are allowed to reduce or totally eliminate a taxpayer's tax liability but any credits in excess of the tax liability are lost.

Adam attended college for much of 2017,during which time he was supported by his parents.Erin married Adam in December 2017.They live in a common law state.Adam graduated and will commence work in January 2018.Erin worked during 2017 and earned $20,000.Adam's only income was interest of $1,100.Adam's parents are in the 28% tax bracket.Thus,claiming Adam as a dependent would save them $1,134 ($4,050 × .28). a.What is Erin and Adam's tax liability if they file a joint return? b.What is Erin and Adam's total tax liability if they file separate returns and Adam's parents claim him as a dependent?

Paige is starting Paige's Poodle Parlor and is considering alternative organizational forms.She anticipates the business will earn $100,000 from operating before compensating her for her services and before charitable contributions.Page,who is single,has $6,000 of income from other sources and other itemized deductions of $12,000.Her compensation for services will be $50,000.Charitable contributions to be made by the business are expected to be $5,000.Other distributions (dividends) to her from the business are expected to be $14,000. Required: Compare her current income tax assuming she operates the business as a proprietorship,an S corporation,and a C corporation.Ignore payroll and other taxes.

Tom and Alice were married on December 31 of last year.What is their filing status for last year?

Sean and Martha are both over age 65 and Martha is considered blind by tax law standards.Their total income in 2017 from part-time jobs and interest income from a bank savings account is $60,000.Their itemized deductions are $12,000. Required: Compute their taxable income.

Kelsey is a cash-basis,calendar-year taxpayer.Her salary is $30,000,and she is single.She plans to purchase a residence in 2018.She anticipates her property taxes and interest will total $8,000 in 2018.Each year,Kelsey contributes approximately $1,500 to charity.Her other itemized deductions total $2,000.For purposes of this problem,assume the 2017 standard deduction amount remains in effect for 2018. a.What will be her deductions from AGI in 2017 and 2018 if she contributes $1,500 to charity in each year? b.What will her gross tax be in 2017 and 2018 if she contributes $3,000 to charity in 2017 but makes no contribution in 2018? c.What will her gross tax be in 2017 and 2018 if she makes no contribution in 2017 but contributes $3,000 to charity in 2018? d.Why does option C yield the largest deductions over time?

Brett,a single taxpayer with no dependents,earns salary of $500,000 and dividend income of $50,000.Itemized deductions for home mortgage interest,property taxes and charitable contributions total $35,000.Calculate Brett's total federal income tax liability for 2017.

Keith,age 17,is a dependent of his parents.During 2017,he received $3,000 of dividend income.The parent's marginal rate is 28% and Keith's rate is 10%.Keith's tax is

For purposes of the dependency exemption,a qualifying child must be under age 19,a full-time student under age 24,or a permanently and totally disabled child.

Deborah,who is single,is claimed as a dependent on her parents' tax return.She had a part-time job during 2017 and earned $850 during the year,which was her only income.What is her standard deduction?

Artco Inc.is a C corporation.This year it earned $50,000 of taxable income and paid a $10,000 distribution (dividend) to Lily,its sole shareholder.Lily has a marginal tax rate of 25%.Due to the corporation's results and the distribution paid,the IRS will receive total taxes of

In 2017 Carol and Robert have salaries of $35,000 and $27,000,respectively.Their itemized deductions total $8,000.They are married,under 65,and live in a common law state. a.Compute their taxable income assuming that they file a joint return. b.Compute their taxable income assuming that they file separate returns and that Robert claims all of the itemized deductions.

You may choose married filing jointly as your filing status if you are married and both you and your spouse agree to file a joint return.Which of the following facts would prevent you from being considered married for filing purposes?

Bill and Tessa have two children whom they support and who live in their home.Timmy is 17 and has earned income of $5,000 for the year.Their other child,Tommy,is 15.Tessa's mother also lives with them and may be claimed as their dependent.She is 89 years old.Their adjusted gross income is $130,000. Required: Compute Bill and Tessa's taxable income for 2017 if they file a joint return and they do not itemize deductions.