Exam 8: Taxation of Individuals

Brock incurs $950 interest on his GMAC auto loan, $150 interest on a loan with Computer Express to buy a multi-media equipped computer (personal use), $500 interest on his credit cards, and $1,000 investment interest. Brock's net investment income is $650. Brock's deductible interest amount is

Cory is a 32 years old, unmarried, and has no children. Cory's father lives in a nursing home. I.Because Cory's father does not live in the same household, Cory cannot file as a head of household. II.If his father's taxable income is less than $4,150 and the other dependency tests are met, Cory will file as head of household. ​

Garcia is single, 65 years old, and has no dependents. Garcia will not have to file a tax return in 2018 if: I.his gross income does not exceed $12,000. II.his only income is $11,000 of social security benefits. ​

Alan is a 23-year old student at Upper State College. He earned $4,400 at a summer job. I.Because he earns over $4,150 he is not a dependent of his parents II.His parents can claim a $500 family tax credit for Alan as a dependent. ​

During 2018, Marla earns $2,700 from a summer job. She also has interest income of $2,400. Marla, age 19, is a full-time student at Western College. Her parents claim her as a dependent. Their taxable income is $100,000. What is Marla's tax liability for 2018?

Frank's wife died in 2016. He has not remarried and maintains a home for himself and his dependent daughter. What is Frank's filing status for 2018?

Which of the following qualify for the medical expense deduction? I.Insulin. II.Medicare insurance premiums. ​

Anita receives a state income tax refund of $550 in May 2018. When she filed her 2017 federal income tax return, she used the standard deduction amount. Although the all-inclusive income concept would require Anita to report the $550 in her federal gross income for 2018, she may exclude it. What tax concept explains why the exclusion is permitted in this case?

Marci is single and her adjusted gross income is $30,000. In addition, she pays the following expenses during the year: ? Psychiatrist's fee \ 800 Hospital bill for medical services and room 1,800 Transportation to/from hospital 100 Prescription drugs 750 Over-the-counter vitamins 200 Chiropractor's fees 700 Marci pays $600 for medical insurance premiums and receives a reimbursement of $1,000 from the insurance company for her medical expenses. Compute her medical deduction.

To qualify as a qualifying relative, an individual must meet three of five tests. These are the gross income test; the support test; the relationship or member of the household test; the citizen or residency test; and the joint return test.

Match each statement with the correct term below. -Deductions from AGI

Indicate the proper treatment in the current year for the underlined amounts. Treat each item as an independent event. Indicate whether the amount is deductible or not; if deductible whether it is deductible FOR or FROM AGI; and indicate the amount of the deduction for the current year considering any relevant limitations. Assume the taxpayer has deductions greater than the standard deduction, has AGI of $69,000 without regard to the following transactions and has no "total" income limitations related to itemized deductions. -Travel and lodging expense of $800 incurred by an employee on a business related trip (no reimbursement). Amount: $800

Under the legislative grace concept, Congress allows certain personal expenses to be deducted when they exceed the standard deduction.

Which of the following taxes is deductible from adjusted gross income when paid by an individual taxpayer? I.State income tax. II.Social Security tax ​

Smokey purchases undeveloped land in 1999 for $20,000. In the current year he contributes the property to the Camp Fire Girls of America to use as their summer camp. The fair market value of the land at the date of the contribution is $25,000. If Smokey's AGI is $100,000, what is his maximum deductible charitable contribution?

To qualify as a qualifying child, an individual must meet five tests. These are the age test; the non-support test; the principal residence test; relationship test; and the citizen or residency test.

Indicate the proper treatment in the current year for the underlined amounts. Treat each item as an independent event. Indicate whether the amount is deductible or not; if deductible whether it is deductible FOR or FROM AGI; and indicate the amount of the deduction for the current year considering any relevant limitations. Assume the taxpayer has deductions greater than the standard deduction, has AGI of $69,000 without regard to the following transactions and has no "total" income limitations related to itemized deductions. -Hobby expenses of $2,500. Hobby income is $2,000.

Gerald purchases a new home on June 30, 2017. During January 2018, he receives his real estate tax statement for calendar year 2017 showing $1,800 payable. Gerald pays the $1,800 on March 1, 2018. The seller of the residence had credited Gerald with $900 of the 2017 taxes on the closing statement. What is the amount of real estate taxes that Gerald may claim as an itemized deduction in 2018?

In which of the following circumstances will income of the child be taxed at the rates applicable to estates and trusts? I.Martin, age 6, earns $14,000 this year by acting in television commercials. II.Allen, age 22 and a full time college student, has $4,000 of interest income on municipal bonds that he inherited from his grandfather last year. ​

Match each statement with the correct term below. -Married, filing separately