Question 1

Jennifer, an unmarried individual, lives in a home with her 13-year-old dependent son, Oscar. This year, Jennifer had the following tax information.
Qualified Business income from sole proprietorship $ 95,000
Dividend income 2,800
Deduction for self-employment tax 6,712
Itemized deductions 19,200
Compute Jennifer's adjusted gross income (AGI) and taxable income.

Accepted Answer

A)  AGI $97,800; taxable income $69,188. 
B)  AGI $95,000; taxable income $75,900. 
C)  AGI $91,088; taxable income $34,888. 
D)  AGI $91,088; taxable income $52,888.

Question 2

Mr and Mrs Stern reported $1,148,340 alternative minimum taxable income before any exemption on their 2018 Form 1040. Calculate their AMT exemption.

Accepted Answer

A)  $0 
B)  $37,085 
C)  $109,400 
D)  None of the above

Question 3

An individual who files his own tax return but is claimed as a dependent on another individual's return is not allowed any standard deduction.

Accepted Answer

A) True 
 B)False

Question 4

In computing taxable income, an individual will deduct the lesser of itemized deductions or the standard deduction.

Accepted Answer

A) True 
 B)False

Question 5

The Section 199A deduction always has the impact of lowering taxable income.

Accepted Answer

A) True 
 B)False

Question 6

Mr and Mrs Kline file a joint return on which they claim the standard deduction. If the taxable income on their return is $35,000, they are not paying a marriage penalty.

Accepted Answer

A) True 
 B)False

Question 7

In computing taxable income, an individual is allowed to deduct both the standard deduction and any itemized deduction for the year.

Accepted Answer

A) True 
 B)False

Question 8

Mr Pearl's total income and self-employment tax on this year's Form 1040 is $72,610. If Mr Pearl paid at least $65,349 of this tax in the form of withholding or quarterly estimated payments, he will not incur an underpayment penalty.

Accepted Answer

A) True 
 B)False

Question 9

Mr and Mrs Steel, who file a joint return, have $513,200 taxable income in 2018. Compute their regular tax liability.

Accepted Answer

A)  $105,062 
B)  $130,999 
C)  $179,620 
D)  None of the above

Question 10

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

Accepted Answer

A)  Regardless of filing status, the highest marginal rate for individual taxpayers is 37%. 
B)  The individual tax rate schedules are adjusted annually for inflation. 
C)  All of the tax brackets in the married-filing-separately rate schedule are one-half of the brackets in the married-filing-jointly rate schedule. 
D)  None of the above is false.

Question 11

It is impossible for a progressive income tax system to be both marriage neutral and horizontally equitable.

Accepted Answer

A) True 
 B)False

Question 12

An itemized deduction doesn't result in any tax savings in a year in which an individual taxpayer takes the standard deduction.

Accepted Answer

A) True 
 B)False

Question 13

The standard deduction is not deductible in the computation of alternative minimum taxable income.

Accepted Answer

A) True 
 B)False

Question 14

Only natural and adopted children or stepchildren can be a qualifying child for tax purposes.

Accepted Answer

A) True 
 B)False

Question 15

Last year, Mr Tyker's AGI was $182,800, and his total tax liability was $51,650. This year, his total tax liability is $65,440. Compute the minimum amount of current year tax that Mr Tyker had to prepay (withholding and estimated payments) to avoid an underpayment penalty.

Accepted Answer

A)  $65,440 
B)  $51,650 
C)  $56,815 
D)  $58,896

Question 16

Mr and Mrs Cox reported $40,900 AGI on their joint return. The couple has three dependent children under age 17. Compute their child credit.

Accepted Answer

A)  $0 
B)  $5,100 
C)  $5,700 
D)  $6,000

Question 17

Mrs Starling worked for Abbot Inc. from January 1 through September 19. Her salary from Abbot for this period totaled $150,000. Mrs Starling worked for JJT Inc. from October 1 through December 31. Her salary from JJT for this period totaled $38,000. JJT is not required to withhold Social Security tax from Mrs Starling's salary because Abbot Inc. already withheld the maximum tax for the year.

Accepted Answer

A) True 
 B)False

Question 18

Mr Thomas is age 69, has perfect vision, and files as a single taxpayer. His standard deduction for 2018 is $13,600.

Accepted Answer

A) True 
 B)False

Question 19

Samantha died on January 18, 2018. Her husband Dave lived by himself until he remarried in 2019. What was Dave's filing status in 2018 and 2019?

Accepted Answer

A)  Married filing jointly in 2018; surviving spouse in 2019. 
B)  Married filing jointly in 2018; single in 2019. 
C)  Surviving spouse in 2018 and 2019. 
D)  Surviving spouse in 2018; single in 2019.

Question 20

Which of the following statements is false?

Accepted Answer

A)  The determination that an individual is a qualifying child of the taxpayer has the potential to impact the availability of certain credits for the taxpayer. 
B)  A qualifying child must be the natural child, the adopted child, or the stepchild of the taxpayer. 
C)  A qualifying relative may include an unrelated individual who is a member of the taxpayer's household for the year. 
D)  There is no limit on the amount of gross income that a qualifying child may earn in a year.

Exam 14: The Individual Tax Formula

Mr and Mrs Stern reported $1,148,340 alternative minimum taxable income before any exemption on their 2018 Form 1040. Calculate their AMT exemption.

An individual who files his own tax return but is claimed as a dependent on another individual's return is not allowed any standard deduction.

In computing taxable income, an individual will deduct the lesser of itemized deductions or the standard deduction.

The Section 199A deduction always has the impact of lowering taxable income.

Mr and Mrs Kline file a joint return on which they claim the standard deduction. If the taxable income on their return is $35,000, they are not paying a marriage penalty.

In computing taxable income, an individual is allowed to deduct both the standard deduction and any itemized deduction for the year.

Mr Pearl's total income and self-employment tax on this year's Form 1040 is $72,610. If Mr Pearl paid at least $65,349 of this tax in the form of withholding or quarterly estimated payments, he will not incur an underpayment penalty.

Mr and Mrs Steel, who file a joint return, have $513,200 taxable income in 2018. Compute their regular tax liability.

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

It is impossible for a progressive income tax system to be both marriage neutral and horizontally equitable.

An itemized deduction doesn't result in any tax savings in a year in which an individual taxpayer takes the standard deduction.

The standard deduction is not deductible in the computation of alternative minimum taxable income.

Only natural and adopted children or stepchildren can be a qualifying child for tax purposes.

Last year, Mr Tyker's AGI was $182,800, and his total tax liability was $51,650. This year, his total tax liability is $65,440. Compute the minimum amount of current year tax that Mr Tyker had to prepay (withholding and estimated payments) to avoid an underpayment penalty.

Mr and Mrs Cox reported $40,900 AGI on their joint return. The couple has three dependent children under age 17. Compute their child credit.

Mr Thomas is age 69, has perfect vision, and files as a single taxpayer. His standard deduction for 2018 is $13,600.

Samantha died on January 18, 2018. Her husband Dave lived by himself until he remarried in 2019. What was Dave's filing status in 2018 and 2019?

Which of the following statements is false?