Chapter 2 Determination of Tax Learning Objective 1.Tax Formula 1 Taxable income for an individual is defined as: A) AGI reduced by itemized deductions.B) AGI reduced by personal and dependency exemptions.C) total income reduced by the standard deduction.D) AGI reduced by deductions from AGI and personal and dependency exemptions.Answer: D2 Kate is single and a homeowner. In the current year, she has property taxes on her home of $3,000, makes charitable contributions of $2,000, and pays home mortgage interest of $7,000. Kate's adjusted gross income for the year is $77,000. What is Kate’s taxable income?A) $60,950B) $76,950C) $64,950D) $69,000Answer: ARequired: Compute her taxable income forAnswer: Adjusted gross income$77,000Minus:Itemized deductions:Property taxes$3,000Home mortgage interest7,000Charitable contributions 2,000( 12,000)Minus:Personal exemption( 4,050)Taxable income$60,950Answer: Adjusted gross income$47,000 Minus:Standard deduction( 6,300)Minus:Personal exemption(4,000)Taxable income$36,700 Sam is single and rents an apartment for which he pays $800 per month and makes charitable contributions of $1,000. Sam's adjusted gross income is $47,000. Required: Compute his taxable income. Show all calculations. Learning Objective 2. Personal and Dependency Exemptions: 3 Carolyn and Craig are married. They have two children (8 years old and 13 years old) living with them. How many personal and dependency exemptions are claimed on the family's tax return?
4 During the year, Minerva Malcolm was entirely supported by her three sons, Alfred, Bill, and Charles, who provided support in the following percentages: Alfred8%Bill45%Charles 47%Which of the brothers is entitled to claim his mother as a dependent, assuming a multiple supportagreement exists? General Feedback: Alfred is not eligible for the multiple support agreement because he did not contribute over 10 percent of the support. 5 Jim and Kay Ross contributed to the support of their two children, Dale and Kim, and Jim’s widowed mother, Grant. For Year 1, Dale, a 19-year old full-time college student, earned $4500 as a baby-sitter. Kim, a 23-year old bank teller, earned $12,000. Grant received $5000 in dividend income and $4000 in nontaxable Social Security benefits. Grant and Kim are U.S. citizens and were over one-half supported by Jim and Kay, but neither of the two currently reside with Jim and Kay. Dale’s main place of residence is with Jim and Kay, and he is currently on a temporary absence to attend school. How many exemptions can Jim and Kay claim on their Year 1 joint income tax return?
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