Exam 8: Taxation of Individuals

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. -Taxpayer's only passive activity is a rental activity that results in a loss of $8,000. Amount: $8,000, since AGI is less than $100,000

Which of the following individuals or couples qualify for the 2018 earned income credit? I.Holly is single, 23 years old, and has just finished drama school. She earns $2,000 doing commercials and another $6,000 as a taxicab driver. II.Larry and Shari are both 30 years old. Larry works part-time and earns $6,000, and Shari, who is starting her own business, earns $9,000. They have one child. ​

Simone and Fillmore were divorced last year. Fillmore has custody of their two children. Simone pays $9,600 in child support payments during the current year. The total cost of supporting the children is $12,500. Fillmore and Simone do not have any special agreement about dependents. How many total dependents may Simone claim for the current year?

Robbie is 18, and a dependent on his parent's return. His income consists of interest of $1,300, and $2,500 from being a lifeguard. What is Robbie's 2018 tax liability?

Linda's personal records for the current year show the following facts: ? -Pays $\$ 11,000$ to St. John's Church. $\$ 4,000$ is for her daughter's tuition in the church's middle school and she contributes the balance when she attends church. -Linda has diabetes and gives $\$ 800$ to the American Diabetes Association in hopes that she will benefit from a cure -Pays $\$ 300$ in annual dues to the Moose Lodge. -Nati onal Airways, Inc., common stock with a fair market value of $\$ 2,000$ to the March of Dimes. The stock was purchased 4 years ago for $\$ 3,000$ . Linda's AGI for the current year is $32,000. What is her charitable contribution deduction?

Match each statement with the correct term below. -Gross income test

Shannon is 16 years old and is a qualified dependent of her mother. Shannon earns $1,500 as a counselor at a church summer camp and receives $2,500 of interest on a savings account established by her grandparents. Shannon's 2016 taxable income is:

Cory and Leslie are married and have two children in college. Jason is a sophomore, and Justine is a junior. They pay $2,500 in tuition and fees for Jason, $900 for his books and $3,000 for his room and board. Justine's tuition and fees are $5,000, her book expense is $800, and her room and board expenses are $2,600. Their adjusted gross income is $50,000. What amount can they claim as a tax credit for the higher education expenses she pays?

Match each statement with the correct term below. -Head of household

Hank, whose adjusted gross income is $100,000, purchases a new principal residence in the current year for $250,000. He borrows $220,000 from a local mortgage company and pays loan origination fees of $1,600. During the year, Hank pays $7,000 of interest on the loan. What is Hank's allowable interest deduction for the year?

Sergio wants to know if he can claim his daughter, Sarah, as a dependent on his income tax return. Sarah lives at home with her parents all year. Sergio provides $11,500 for her support (i.e., food, shelter, and transportation). Sarah, age 18, made $13,250 last year by acting and working as a cashier at a restaurant. Sarah saved $9,000 of her income and spent $4,250 on clothes and entertainment. Can Sergio claim his daughter, Sarah, as a dependent for income tax purposes?

In each of the following independent cases determine Mei-ling's filing status. a.Mei-ling's husband died in 2017. She maintains a household for her unmarried son during 2018, who did not qualify as her dependent. b.Mei-ling is unmarried and lives in an apartment. Mei-ling's parents do not live with her. She is not able to claim them as dependents for 2018.?

COMPREHENSIVE TAX CALCULATION PROBLEM. Girardo and Gloria are married with 3 children, ages 14, 11, and 8. Gloria is a senior vice-president for a security firm and Girardo is a househusband who spends 15 hours a week doing volunteer work for local organizations. Girardo inherited $800,000 from his grandfather in 1999. He spends 10 hours a week managing the rental property they purchased with part of the inheritance and the family's stock portfolio. Prior to becoming a househusband, Girardo was an award winning high school accounting teacher. In February of 2018, Girardo is approached by the high school principal about returning to his former position. Girardo would receive an annual salary of $50,000. He is a little hesitant about accepting the offer, because he enjoys his volunteer work. Girardo's accountant has provided him with the following projection of their 2018 tax liability: ? Gloria's sal ary \ 130,000 Interest income 6,500 Short-term capital gains 2,500 Rental loss (5,000) Adjusted gross income \ 134,000 Standard deduction (24,000) Taxable income \ 110,0000 Tax liability before tax credit \ 16,079 Child credit (\ 2,000\times3) (6,000) Net tax liability \ 10,079 Girardo's projection from his accountant does not include his salary from teaching. Assume that Girardo's pro-rata salary for the year will be $30,000. Calculate Girardo and Gloria's tax liability, if Girardo decides to return to teaching. Also determine the marginal and effective tax rates on Girardo's salary. ?

Which of the following qualify for the medical expense deduction? I.Over-the-counter cough medicine. II.Chiropractic treatments. ​

Wayne purchases a new home during the year, borrowing $450,000 from Century National Bank to finance the purchase. He also pays $4,500 in points and $3,500 in loan origination fees. During the year he pays interest of $18,000 on the loan. What is Wayne's allowable interest deduction?

Canfield is single, 70 years old, and has no dependents. Canfield 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 $300 of self-employment income. ​

Concerning the credit for child and dependent care I.If a taxpayer's adjusted gross income does not exceed $43,000, the child and dependent care credit rate is 30%. II.Expenditures qualifying for credit can exceed the earned income of the taxpayer. ​

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

Any charitable contributions made in excess of the individual's limitation on charitable contributions can be carried forward seven years.

Richard pays his license plate fee for his car in July of the current year. Of the $400 he paid $10 represented a registration fee, $140 represented a charge based on the weight of the car, and a $200 charge based on the value of the car. How much of the $400 can Richard deduct on his current-year tax return?