Question 1

Mr. and Mrs. Toliver's AGI on their jointly filed return is $339,000. Regardless of the number of their children, the Tolivers are not eligible for a child credit.

Accepted Answer

A) True 
 B)False

Question 2

Mr. and Mrs. Liddy, ages 39 and 41, file a joint return and have no dependents for the year. Here is their relevant information. $$\begin{array} { l r } 
\text { Salaries } & \$ 47,000 \
\text { Taxable interest incone } & 5,000 \
\text { Above-the-line deductions } & 1,800 \
\text { Iterrized deductions } & \mathbf { 3 , 2 0 0 }
\end{array}$$ Compute their adjusted gross income (AGI) and taxable income.

Accepted Answer

A)  AGI $50,200; taxable income $29,500 
B)  AGI $52,000; taxable income $31,300 
C)  AGI $52,000; taxable income $29,500 
D)  AGI $50,200; taxable income $40,300

Question 3

Lennie and Margo spent $2,800 for child care for their 7-year-old son. Lennie's earned income was $41,000, Margo's earned income was $24,800, and the AGI on their joint return was $71,200. Calculate their dependent care credit.

Accepted Answer

A)  $0 
B)  $560 
C)  $980 
D)  $2,800

Question 4

Hunter, age 17, is claimed as a dependent on his parents' tax return. This year, Hunter earned $8,500 for appearing in a television commercial. Compute Hunter's standard deduction.

Accepted Answer

A)  $1,050 
B)  $8,500 
C)  $6,300 
D)  $0

Question 5

Leon died on August 23, 2014, and his wife Mary has not remarried. Since her husband's death, Mary has maintained a home for her two dependent children, who were ages 7 and 4 when their father died. Which of the following describes Mary's filing status for 2015, 2016, and 2017?

Accepted Answer

A)  Surviving spouse for 2015, 2016, and 2017. 
B)  Surviving spouse for 2015 and 2016; head of household for 2017. 
C)  Head of household for 2015, 2016, and 2017. 
D)  Surviving spouse for 2015; head of household for 2016 and 2017.

Question 6

Eileen, a single individual, had $125,000 taxable income. Compute her income tax assuming that:
a. Taxable income includes no capital gains.
b. Taxable income includes $14,000 capital gain eligible for the 15% preferential rate.

Accepted Answer

The answer of Eileen, a single individual, had $125,000 taxable...

Question 7

Ruth Anne, a single taxpayer, reported $152,600 alternative minimum taxable income before any exemption on her 2016 Form 1040. Calculate Ruth Anne's AMT exemption.

Accepted Answer

A)  $8,225 
B)  $45,675 
C)  $53,900 
D)  None of the above

Question 8

Mr. and Mrs. David file a joint tax return. They have $169,300 taxable income in 2016, $120,300 of which is ordinary income and $49,000 of which is taxed at a 15% preferential rate. Compute their tax savings from the preferential rate.

Accepted Answer

A)  $6,370 
B)  $5,422 
C)  $4,900 
D)  None of the above.

Question 9

Determine Mr. Smith's 2016 filing status in each of the following independent cases.
a. Mr. Smith and Mrs. Smith were legally divorced on December 1. Mr. Smith has not remarried and has no dependent children.
b. Mr. Smith and the first Mrs. Smith were legally divorced on February 10. Mr. Smith remarried the second Mrs. Smith on December 5. He has no dependent children.
c. Mrs. Smith dies on June 22. Mr. Smith has not remarried and has no dependent children.
d. Mrs. Smith died on November 1, 2014. Mr. Smith has not remarried and maintains a home for one dependent child.
e. Mrs. Smith died on April 3, 2015. Mr. Smith has not remarried and has no dependent children.
f. Mr. and Mrs. Smith were legally divorced on September 10, 2013. Mr. Smith has not remarried and maintains a home for his two dependent children.

Accepted Answer

The answer of Determine Mr. Smith's 2016 filing status in...

Question 10

The standard deduction for single individuals equals one-half of the standard deduction for married individuals filing jointly.

Accepted Answer

A) True 
 B)False

Question 11

Mr. and Mrs. Borem spent $1,435 for child care for their two dependent children, who are two and four years old. Mr. Borem's earned income was $55,870, Mrs. Borem had no earned income, and the AGI on their joint return was $66,210. Calculate their dependent care credit.

Accepted Answer

A)  $0 
B)  $287 
C)  $502 
D)  $1,435

Question 12

Linda and Raj are engaged to be married. Linda's 2016 taxable income as a single individual would be $83,500. Raj's 2016 taxable income as a single individual would be $118,000. When they marry before the end of 2016, how much of a marriage penalty will they incur?

Accepted Answer

A)  $0 
B)  $388 
C)  $683 
D)  None of the above

Question 13

Mr. and Mrs. Anderson file a joint return. They provide more than 50% of the financial support of their two children, Dana, age 26, and John, age 17. Both children live in the Andersons' home. Dana earned $7,100 from a part-time job, while John earned no income this year. Which of the following statements is true?

Accepted Answer

A)  Both Dana and John are qualifying children of the Andersons. 
B)  Dana is a qualifying relative and John is a qualifying child of the Andersons. 
C)  John is a qualifying child of the Andersons. 
D)  Neither Dana nor John is a qualifying child of the Andersons.

Question 14

Based on the 2016 tax rates, an individual is indifferent between filing as a single taxpayer or a head of household if he has $9,275 or less of taxable income.

Accepted Answer

A) True 
 B)False

Question 15

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 or personal exemption.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Mr. Marshall was employed by IMP Inc. until October, when he accepted a new position with Turine Inc. Mr. Marshall earned $129,000 compensation from IMP and $36,000 compensation from Turine. Which of the following statements is false?

Accepted Answer

A)  Turine must withhold Social Security tax from Mr. Marshall's $36,000 compensation. 
B)  Turine must withhold Medicare tax from Mr. Marshall's $36,000 compensation. 
C)  Mr. Marshall is entitled to an income tax credit for excess Social Security tax withheld by his employers this year. 
D)  None of the above is false.

Question 18

Mr. and Mrs. Reid reported $435,700 ordinary taxable income for regular tax purposes and had $58,200 positive AMT adjustments and preferences. Compute their tentative minimum tax.

Accepted Answer

A)  $113,946 
B)  $134,566 
C)  $128,414 
D)  $138,292

Question 19

Melissa, age 16, is claimed as a dependent on her parents' tax return. This year, Melissa earned $2,000 from babysitting and $1,280 interest income from a savings account. Compute Melissa's standard deduction.

Accepted Answer

A)  $2,000 
B)  $2,350 
C)  $0 
D)  $1,050

Question 20

Which of the following statements concerning extensions of time to file an individual tax return is true?

Accepted Answer

A)  The extension of time to file does not extend the time for payment of tax. 
B)  The extension of time to file is for four months. 
C)  An individual who requests an extension of time to file must provide the IRS with a reasonable explanation. 
D)  The IRS may deny an extension request if the taxpayer fails to provide a reasonable explanation.

Exam 14: The Individual Tax Formula

Mr. and Mrs. Toliver's AGI on their jointly filed return is $339,000. Regardless of the number of their children, the Tolivers are not eligible for a child credit.

Lennie and Margo spent $2,800 for child care for their 7-year-old son. Lennie's earned income was $41,000, Margo's earned income was $24,800, and the AGI on their joint return was $71,200. Calculate their dependent care credit.

Hunter, age 17, is claimed as a dependent on his parents' tax return. This year, Hunter earned $8,500 for appearing in a television commercial. Compute Hunter's standard deduction.

Leon died on August 23, 2014, and his wife Mary has not remarried. Since her husband's death, Mary has maintained a home for her two dependent children, who were ages 7 and 4 when their father died. Which of the following describes Mary's filing status for 2015, 2016, and 2017?

Eileen, a single individual, had $125,000 taxable income. Compute her income tax assuming that: a. Taxable income includes no capital gains. b. Taxable income includes $14,000 capital gain eligible for the 15% preferential rate.

Ruth Anne, a single taxpayer, reported $152,600 alternative minimum taxable income before any exemption on her 2016 Form 1040. Calculate Ruth Anne's AMT exemption.

Mr. and Mrs. David file a joint tax return. They have $169,300 taxable income in 2016, $120,300 of which is ordinary income and $49,000 of which is taxed at a 15% preferential rate. Compute their tax savings from the preferential rate.

The standard deduction for single individuals equals one-half of the standard deduction for married individuals filing jointly.

Mr. and Mrs. Borem spent $1,435 for child care for their two dependent children, who are two and four years old. Mr. Borem's earned income was $55,870, Mrs. Borem had no earned income, and the AGI on their joint return was $66,210. Calculate their dependent care credit.

Linda and Raj are engaged to be married. Linda's 2016 taxable income as a single individual would be $83,500. Raj's 2016 taxable income as a single individual would be $118,000. When they marry before the end of 2016, how much of a marriage penalty will they incur?

Based on the 2016 tax rates, an individual is indifferent between filing as a single taxpayer or a head of household if he has $9,275 or less of taxable income.

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 or personal exemption.

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

Mr. Marshall was employed by IMP Inc. until October, when he accepted a new position with Turine Inc. Mr. Marshall earned $129,000 compensation from IMP and $36,000 compensation from Turine. Which of the following statements is false?

Mr. and Mrs. Reid reported $435,700 ordinary taxable income for regular tax purposes and had $58,200 positive AMT adjustments and preferences. Compute their tentative minimum tax.

Melissa, age 16, is claimed as a dependent on her parents' tax return. This year, Melissa earned $2,000 from babysitting and $1,280 interest income from a savings account. Compute Melissa's standard deduction.

Which of the following statements concerning extensions of time to file an individual tax return is true?