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Exam 14: The Individual Tax Formula

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Question 21

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Adjusted gross income equals total income less itemized deductions.

A) True
B) False

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Question 22

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Mr. and Mrs. Kain reported $80,000 AGI on their joint return. The couple has four dependent children: Beatrice, age 19; Bruce, age 16; Angie, age 11, and Arnold, age 8. Compute the Kains' child credit.

A) $1,000
B) $2,000
C) $3,000
D) $4,000

E) A) and D)
F) A) and C)

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Question 23

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For the taxable year in which a married person dies, the widow or widower can file a joint return with the deceased.

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. Casey have two dependent children, ages 3 and 6. The Caseys spent $10,300 for child care this year. Mrs. Casey is employed full-time as an attorney. Mr. Casey is an unpublished novelist who has yet to earn any money from his writing. The Caseys are eligible for a dependent care credit.

Which of the following statements describing individual tax deductions is false?

Kent, an unmarried individual, invited his widowed father, Martin, to move into his home in January of this year. Martin's only income item was a $14,000 taxable pension from his former employer. Kent provides about 75% of his father's financial support. What is Kent's filing status and number of exemptions for the year?

The earned income credit is available only to low-income taxpayers with dependent children.

Mr. and Mrs. Queen provide 90% of the financial support for Mrs. Queen's mother, Doreen, who lives in the couples' home. Doreen's only income this year is a $7,500 taxable pension from her former employer. Mr. and Mrs. Queen can't claim Doreen as a dependent this year.

An above-the-line deduction reduces both adjusted gross income and taxable income.

Mr. and Mrs. Warren's AGI last year was $90,300, and their total tax was $13,988. This year, the couple's total tax is $14,700. Unless the Warrens paid at least $13,988 in the form of withholding and quarterly estimated payments, they will incur an underpayment penalty this year.

Charlie is single and provides 100% of the financial support for his dependent mother, Angela, who lives with Charlie. Charlie's filing status is head of household.

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

Which of the following statements regarding exemptions is false?

Mrs. Paley died on July 14, 2015. Her husband has not remarried. The Paleys' two children, ages 34 and 36, are financially independent. Mr. Paley may file as a surviving spouse in 2016 and 2017.

The highest individual marginal rate for regular tax purposes is 39.6%, while the highest individual marginal rate for alternative minimum tax (AMT) purposes is only 28%.

Ms. Lewis' maintains a household which is the principal place of residence for Kathy. Ms. Lewis' provides more than 50% of Kathy's financial support. In which of the following cases can Ms. Lewis' claim Kathy as a qualifying child?

Which of the following statements regarding the calculation of taxable income is false?

Which of the following taxpayers can't use the tax rates for married filing jointly in 2016?

Mr. and Mrs. Daniels, ages 45, and 42, had the following income items in 2015: $\begin{array} { l l } \text { Salaries and wages } & \$ 122,500 \\\text { Interest incorne } & 6,300 \\\text { Dividends eligible for } 15 \% \text { rate } & 4,000 \\\text { Capital gain eligible for } 15 \% / 4 a t e & 1,900\end{array}$ Mr. and Mrs. Daniels have no dependents and claim the standard deduction. Compute their income tax liability on a joint return.