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Name: Home work-Chapter 8. (Tax year is 2011, unless you have different information.) Part-1. Exemptions Personal, Dependency 1 Rachael is a single parent who maintains a home in Boston in which she and her 16-year-old daughter reside. She also provides most of the support for her son, Stockton, age 25, who is a full-time student at Harvard Law School, lives at home, and earns $2,000 as a part-time waiter at a local diner. How many personal and dependency exemptions can Rachael claim? a. 1 b. 2 c. 3 d. 4 e. Other 2 Anita was entirely supported by her sons Bart, Bill and Bob who provided this support: Bart 42%; Bill 49%; Bob 9% Which brother is entitled to claim Anita as a dependent, assuming a multiple support agreement exists? a. Bart b. Bart or Bill c. Bill or Bob d. Bart, Bill or Bob 3 Laura and Michael were divorced last year. Michael has custody of their two children. Laura pays $8,600 in child support payments during the current year. The total cost of supporting the children is $12,500. Michael and Laura do not have any special agreement about dependency exemptions. How many total exemptions may Michael claim for the current year? a. 1 b. 2 c. 3 d. 4 e. Other 4 In October of the current year, Brandy and her husband Ben split up and do not speak to each other. Neither individual will cooperate with the other on anything including finalizing the divorce. Ben supports their two children after the split up and maintains their household. What is Ben's filing status for the current year? a. Single. b. Married filing separately. c. Head of household. d. Surviving Spouse. Part-2. Filing Status Joint, Separate, Single, Head of Household 5 Nell Brown's husband died in 2010. Nell did not remarry, and continued to provide a home and support for herself and her dependent infant child during 2010, 2011, and 2012. For 2012, Nell's filing status is: a. Single. b. Married filing joint return. c. Head of household. d. Qualifying widow. Part-3. Deductions From AGI Std. Deduction, Various itemized deduction 6 Which type of deductions is not deductible in arriving at adjusted gross income? a. Alimony b. Exemption c. Expenses of rental property d. IRA Contributions 7 Mr. and Mrs. Smith have combined salaries of $62,000. Their only expenditures affecting the tax return are state income taxes of $6,000 and real estate taxes amounting to $2,000. They have two small children whom they support, and file a joint return. They have taxable income for the current year of: a. Not more than 36,000 b. More than $36,000, but not more than $37,000 c. More than $38,000 d. More than $37,000, but not more than $38,000 8 Bob and Pam are both age 67 and legally blind. What is their standard deduction on a joint return for current year? a. $7,950 b. $8,900 c. $13,500 d. $16,200 9 Eleanor is 67, single and has an adjusted gross income of $14,300. She has no dependents and her itemized deductions are $6,000. What is her taxable income for the current year? a. $ 3,350 b. $ 4,250 c. $ 4,550 d. $ 4,800
e
Other
D
e
$ 4,900
10 Dan Daniels has AGI of $90,000. This year he paid state income taxes of $10,000. He incurred
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$14,000 of medical expenses and received a reimbursement of $3,000 from his health insurance company for these medical expenses. What is his allowable medical expense deduction for the current year if he itemizes? a. $4,250 b. $7,240 c. $11,000 d. $14,000 11 Sue Graduate provided this information about to her state income taxes: State income taxes withheld in 2011 $3,500 Refund of 2010 state income tax, received in 2011 400 Deficiency paid in 2011 after audit of her 2009 state income tax return: State income tax 600 Interest 100 A state income tax refund of $200 for 2011 will be claimed on the 2011 state income tax return filed on April 15, 2012. What is her deduction for state income taxes on her 2011 federal tax return? a. $3,500 b. $3,700 c. $4,100 d. $4,300 e. Other 12 What is Jeremy's total itemized deduction for taxes on his Form 1040-Schedule A for the current year? State income tax $3,000 Federal income tax 12,000 County real estate tax 2,000 Fee for his car inspection that he uses only personally 50 Homeowners' association fees on his personal home 500 Gift Tax 2,000 Self-employment tax 1,000 a. $18,550 b. $6,000 c. $5,000 d. $5,500 IRS-2004 13 Samantha incurs the following medical expenses for the current year: Face-lift for cosmetic purposes $800 Dentist fees 500 Doctors' fees for Samantha's daughter 400 How much may Samantha include as qualified medical expenses on her current tax return before any limitation? a. $ 400 b. $ 500 c. $ 900 d. $1,300 e. $1,700 14 Phil incurs the following medical expenses during the current tax year: Surgeon's fees $1,200 Medical insurance premiums 600 Hospital fees 800 Prescription drugs 310 Wheel chair 200 Phil's adjusted gross income for the year is $32,000. He receives a $500 reimbursement from his insurance company. Determine the amount of his medical expense deduction for the current year. a. $ - 0 b. $ 210 c. $2,360 d. $2,400 e. $2,610
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15 Reggie is a single individual who had total itemized deductions in 2011 of $5,900. His itemized deductions include $2,000 for state income taxes. After filing his 2011 state income tax return (in 2012) he receives a refund of $275 in 2012. a. Reggie must include $275 as income on his 2012 federal income tax return. b. Reggie must amend his 2011 federal tax return to reflect state income taxes of $1,725 ($2,000 - $275). c. If Reggie itemizes his tax return in 2012 he must reduce his state tax deduction by $275. d. Reggie must include $100 as income on his 2012 federal income tax return e. Reggie does not have to report any of the state income tax refund on his 2012 tax return because the refund was less than $5,700. 16 What is Bobby Boston's deductible interest for the current year? Mortgage interest expense $5,000 Interest on credit cards 1,000 Interest on a loan used to purchase municipal bonds 1,000 a. 0 b. $5,000 c. $6,000 d. $7,000
e. Other
17 Wayne purchased a new home during the year, borrowing $725,000 from Century National Bank to finance the purchase. Mortgage interest expense $71,000 Points paid 7,250 Loan origination fee 4,500 What is Wayne's allowable interest deduction? a. $ - 0 b. $ 7,250 c. $71,000 d. $78,250 e. $82,750 18 Jill (who is single) has AGI of $100,000. She made the following gifts: $10,000 (1) to her church, (2) $2,000 to United Way, (3) $1,000 to the Republican Party and (4) $400 to a needy family whose house had burned and they had no insurance on the house. What is her charitable contribution deduction? a. 0 b. $10,000 c. $12,000 d. $13,000 e. $13,400 19 Which one of these types of itemized deductions is included in the category of expenses deductible only if the aggregate of such expenses exceeds 2% of the taxpayer's adjusted gross income? a. Union dues b. Interest expense c. Employee moving expenses d. Medical expenses 20 Alex has AGI of $41,500, and makes the following donations in the current year: $1,000 cash to the United Way. 100 hours contributed to Red Cross to help flood victims (Alex's normal billing rate is $40 per hour in his consulting business). 15 old dress shirts to Good Will Industries Foundation, (original cost $300; FMV $45). $1,000 cash to an old friend, Sam, to help cover his medical bills What is Alex's charitable contribution deduction for the current year? a. $1,000 b. $1,045 c. $2,045 d. $6,045 e. $6,300 21 David purchased investment realty in 2002 for $20,000. During the current year he contributed it to the American Heart Association to use as the site for its new local headquarters. The realty has a value of $52,000 on the contribution date, and David's AGI is $100,000. David's maximum current year contribution deduction is a. $ - 0 b. $ 20,000 c. $ 30,000 d. $ 50,000 e. $ 52,000
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Part-4. Limits High income taxpayers' deductions, Standard deduction for children, Kiddie tax The next 3 questions are not relevant for the Spring 2012 course, because the president and Congress agreed to extend the Bush tax cuts, and those cuts involved "phasing out" these phaseouts. A Democratic leader has expressed a desire to reinstate these limits in the future. 22 George and Laura (husband and wife) have one dependent child. On a joint return for the current year, their adjusted gross income is $300,000. What is their deduction for exemptions for the current year? a. $0 b. $774 c. $1,290 d. $9,490 e.
Other
23 Betty is single and her adjusted gross income is $184,050 in the current year. What is her allowable personal exemption amount? a. $$3,500 b. $2,800 c. $3,033 d. $3,480 e. Other 24 Marshall and Sue are married with 4 children. Their adjusted gross income is $300,500. Marshall and Sue have $26,900 of itemized deductions consisting of: $12,350 of interest expense, $8,750 of taxes, $4,200 of charitable contributions, $1,600 (after limitation) of miscellaneous itemized deductions. What is their taxable income for the current year? a. $252,600 b. $253,526 c. $256,103 d. $259,734 e. $261,910 -----------------------------------------------------------------------------------------------------------------25 Scott is 15 years old and qualifies as a dependent on his parents' tax return. In current year, he earned $2,500 from a part-time job and received $800 of dividend income. What is Scott's federal taxable income? a. $3,300 b. $2,500 c. $500 d. $0 26 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 federal taxable income for the current year is: a. $ - 0 b. $1,500 c. $2,200 d. $2,500 e. $3,100 27 Brian is 18, a full-time student, and a dependent on his parent's return. His income consists of interest of $1,300, and $2,500 from being a lifeguard. His parent's taxable income is $72,000. What is Brian's federal income tax liability for the current year? a. $ -0b. $100 c. $130 d. $250 e. $295 Part-5. Tax Credits Child Credit, Earned income credit, Dependent care, Higher Education 28 Deana and Joseph are married and have two children ages 17 and 15. Their adjusted gross income for the current year is $100,000. What amount can they claim for the child tax credit? a. $ - 0 b. $ 600 c. $1,000 d. $1,200 e. $2,000 29 Maurice and Lana are married and have two children ages 12 and 10. Their adjusted gross income for the current year is $120,000. What amount can they claim for the child tax credit? a. $ 500 b. $ 800 c. $1,000 d. $1,500 e. $2,000 30 Susan files as head of household and has three dependent children ages 12, 14, and 16. Her AGI is $85,000. How much can Susan claim for the child tax credit for the current year? a. $3,000 b. $2,750 c. $2,500 d. $0 e. Other Amount
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31 Jerry has two dependent children, Greg and Mandy, who are attending an accredited college in the current year. Greg is a graduate student (5th year of college) who had $7,000 for tuition and fees. Mandy, a freshman with no prior postsecondary education, had tuition expenses of $4,000. Jerry meets all the income and filing status requirements for the education credits. There is no tax-free assistance to pay these expenses. Jerry's adjusted gross income equals $50,000. What is the maximum credit that Jerry may claim on his federal income tax return for the current year? a. $2,200 Lifetime Learning Credit. b. $3,000 AOTC (Hope) Credit. c. $1,650 AOTC (Hope) Credit & $2,000 Lifetime Learning Credit d. $2,500 AOTC (Hope) Credit & $1,400 Lifetime Learning Credit 32 Ruth had wages of $34,000 and her husband John's wages were $27,000. They have three children ages 3, 6 and 9. They paid a total of $8,000 to Creative Child Care School, Inc. Assuming a 20% credit rate, what will be their child and dependent care credit? a. $960 b. $1,200 c. $1,600 d. $6,000 e. Other 33 Floyd is a single parent with an 11-year-old daughter. Floyd's adjusted gross income is $27,000, and he pays $2,100 in qualified child-care expenses. Floyd can claim a child-care credit of: a. $ 420 b. $ 441 c. $ 609 d. $ 735 e. $2,100 Part-6. Filing requirements 34 Mr. T is age 21, single, and cannot be claimed as a dependent by another taxpayer. He does not have any self-employment income. For the current year, he must file a federal income tax return if he had gross income of at least: a. $2,550 b. $3,050 c. $4,000 d. $9,500 35 Al is single, 65 years old, and has no dependents. Al will not be required to file a tax return in for the current year if: I. his gross income does not exceed $10,300. II. his only income is $18,000 of social security benefits. a. Only statement I is correct. b. Both statements are correct. c. d. Neither statement is correct Only statement II is correct.