Question 1

Harmony reports a regular tax liability of $15,000 and tentative minimum tax of$17,000. Given just this information, what is her alternative minimum tax liability for the year?

Accepted Answer

A)  $0 
B)  $17,000 
C)  $2,000 
D)  $15,000

Question 2

Which of the following is not typical of taxpayers who are most likely affected by theAMT?

Accepted Answer

A)  Pay high property taxes. 
B)  Have many dependents. 
C)  Have relatively low capital gains. 
D)  Pay high state income tax.

Question 3

The tax rate schedules are set up to tax lower levels of income at higher tax rates thanhigher levels of income.

Accepted Answer

A) True 
 B)False

Question 4

For alternative minimum tax purposes, taxpayers are allowed to deduct state income taxes but are not allowed to deduct charitable contributions.

Accepted Answer

A) True 
 B)False

Question 5

Taxpayers are not allowed to deduct personal or dependency exemptions for alternative minimum tax purposes.

Accepted Answer

A) True 
 B)False

Question 6

Apollo is single and his AMT base is $100,250. This amount includes $500 of qualified dividends (the dividends were taxed at 15% in determining the regular tax liability). What is Apollo's tentative minimum tax?

Accepted Answer

The answer of Apollo is single and his AMT base...

Question 7

In certain circumstances a child with very little income may have at least a portion of their income taxed at the parents' marginal tax rate.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not a true statement about the American opportunity credit (AOC) and lifetime learning credits (assume the 2016 rules apply for the qualified education expense deduction)?

Accepted Answer

A)  The AGI phase-out threshold for phasing out the AOC is higher than the AGI phase-out threshold for the lifetime learning credit. 
B)  Taxpayers may choose to either (1) deduct qualifying education expenses of an individual as for AGI deductions or (2) claim educational credits for the individual's expenses (but not both) 
C)  Certain educational expenses qualify for both credits but taxpayers must claim one credit or the other for the expenditures (the taxpayer cannot claim both credits for the same expenditures). 
D)  A taxpayer may not report both an AOC and a lifetime learning credit on the same tax return.

Question 9

Rhianna and Jay are married filing jointly in 2017. They have six children for whom they may claim the child tax credit. Their AGI was $123,440. What amount of child tax credit may they claim on their 2017 tax return?

Accepted Answer

A)  $6,000 
B)  $5,300 
C)  $12,000 
D)  $4,000

Question 10

Stephanie and Mitch are married and they file a joint tax return. Mitch received a slightly higher salary than Stephanie did during the year. Which of the following statements is true?

Accepted Answer

A)  Stephanie and Mitch likely receive a tax marriage benefit. 
B)  Stephanie and Mitch likely pay no tax marriage penalty nor receive a tax marriage benefit. 
C)  Stephanie and Mitch likely will pay a tax marriage penalty and receive a tax marriage benefit. 
D)  Stephanie and Mitch likely pay a tax marriage penalty.

Question 11

During 2017, Jasmine (age 12) received $2,400 from a corporate bond. She also received$600 from a savings account established for her by her parents. Jasmine lives with her parents and she is their dependent. Assuming her parents' marginal tax rate is 28%, what is Jasmine's gross tax liability?

Accepted Answer

A)  $357 
B)  $0 
C)  $252 
D)  $105

Question 12

Atlas earned $17,300 from his sole proprietorship in 2017. This was his only source of income.How much in self-employment taxes will Atlas be able to deduct?

Accepted Answer

The answer of Atlas earned $17,300 from his sole proprietorship...

Question 13

Employees are allowed to deduct a portion of the FICA taxes they pay.

Accepted Answer

A) True 
 B)False

Question 14

A marriage penalty occurs when a couple pays more taxes by filing a joint tax return thanthey would have paid had they filed married filing separate returns.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is not true of the American opportunity credit?

Accepted Answer

A)  A taxpayer may not claim a credit unless the taxpayer pays a dependent's qualifying educational expenses. 
B)  It is phased out based on the taxpayer's AGI. 
C)  A taxpayer with multiple eligible dependents can claim a credit for each dependent's qualifying expenses. 
D)  The credit is available for students during their first four years of postsecondary education only.

Question 16

Maria and Tony are married. They are preparing to file their 2017 tax return. If they were to file as single taxpayers, Maria and Tony would report $40,000 and $60,000 of taxable income,respectively. On their joint tax return, their taxable income is $100,000. How much of a marriage penalty or benefit will Maria and Tony experience in 2017? (Use Tax Rate Schedule.)

Accepted Answer

The answer of Maria and Tony are married. They are...

Question 17

John and Sally pay Janet (Sally's older sister) to watch John and Sally's child Dexterduring the day. Janet cares for Dexter in her home. John and Sally may claim a child and dependent care credit based on the amount they pay Janet to care for Dexter.

Accepted Answer

A) True 
 B)False

Question 18

Cassy reports a gross tax liability of $1,000. She also claims $400 of nonrefundablepersonal credits, $700 of refundable personal credits, and $200 of business credits. What is Cassy's tax refund or tax liability due after applying the credits?

Accepted Answer

A)  $300 refund. 
B)  $0 refund or taxes payable. 
C)  $700 refund. 
D)  $1,000 taxes payable.

Question 19

Persephone has a regular tax liability of $12,475 and a tentative minimum tax of$11,500. Given just this information, what is her alternative minimum tax liability for the year?

Accepted Answer

A)  $975 
B)  $12,475 
C)  $0 
D)  $11,500

Question 20

The AMT exemption amount is phased-out for high income taxpayers.

Accepted Answer

A) True 
 B)False

Exam 8: Individual Income Tax Computation and Tax Credits

Harmony reports a regular tax liability of $15,000 and tentative minimum tax of$17,000. Given just this information, what is her alternative minimum tax liability for the year?

Which of the following is not typical of taxpayers who are most likely affected by theAMT?

The tax rate schedules are set up to tax lower levels of income at higher tax rates thanhigher levels of income.

For alternative minimum tax purposes, taxpayers are allowed to deduct state income taxes but are not allowed to deduct charitable contributions.

Taxpayers are not allowed to deduct personal or dependency exemptions for alternative minimum tax purposes.

Apollo is single and his AMT base is $100,250. This amount includes $500 of qualified dividends (the dividends were taxed at 15% in determining the regular tax liability). What is Apollo's tentative minimum tax?

In certain circumstances a child with very little income may have at least a portion of their income taxed at the parents' marginal tax rate.

Which of the following is not a true statement about the American opportunity credit (AOC) and lifetime learning credits (assume the 2016 rules apply for the qualified education expense deduction) ?

Rhianna and Jay are married filing jointly in 2017. They have six children for whom they may claim the child tax credit. Their AGI was $123,440. What amount of child tax credit may they claim on their 2017 tax return?

Stephanie and Mitch are married and they file a joint tax return. Mitch received a slightly higher salary than Stephanie did during the year. Which of the following statements is true?

During 2017, Jasmine (age 12) received $2,400 from a corporate bond. She also received$600 from a savings account established for her by her parents. Jasmine lives with her parents and she is their dependent. Assuming her parents' marginal tax rate is 28%, what is Jasmine's gross tax liability?

Atlas earned $17,300 from his sole proprietorship in 2017. This was his only source of income.How much in self-employment taxes will Atlas be able to deduct?

Employees are allowed to deduct a portion of the FICA taxes they pay.

A marriage penalty occurs when a couple pays more taxes by filing a joint tax return thanthey would have paid had they filed married filing separate returns.

Which of the following is not true of the American opportunity credit?

John and Sally pay Janet (Sally's older sister) to watch John and Sally's child Dexterduring the day. Janet cares for Dexter in her home. John and Sally may claim a child and dependent care credit based on the amount they pay Janet to care for Dexter.

Cassy reports a gross tax liability of $1,000. She also claims $400 of nonrefundablepersonal credits, $700 of refundable personal credits, and $200 of business credits. What is Cassy's tax refund or tax liability due after applying the credits?

Persephone has a regular tax liability of $12,475 and a tentative minimum tax of$11,500. Given just this information, what is her alternative minimum tax liability for the year?

The AMT exemption amount is phased-out for high income taxpayers.