Indiv. 2008 TB Ch 14

Indiv. 2008 TB Ch 14 - Chapter I:14 Special Tax Computation...

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Chapter I:14 Special Tax Computation Methods, Tax Credits and Payment of Tax True-False I:14-1. The present AMT applies to individuals, corporations, estates, and trusts. T, p. I:14-2. I:14-2. The alternative minimum tax applies to individuals only if it exceeds the taxpayer's regular income tax liability. T, p. I:14-2. I:14-3. For purposes of the AMT, the standard deduction, but not the personal and dependency exemptions, is allowed. F, p. I:14-3. Solution: Neither is allowed. I:14-4. An example of an AMT tax preference is the excess of accelerated depreciation over the straight-line depreciation amount for real property placed in service before 1987. T, p. I:14-4. I:14-5. Municipal bond interest income is always classified as a tax preference. F, p. I:14-4. Solution: While exempt from federal tax, municipal bond interest is not a preference item. I:14-6. Casualty and theft losses in excess of 10% of AGI are deductible for AMT purposes. T, p. I:14-4. I:14-7 Medical expenses in excess of 7.5% of AGI are deductible when computing AMT. F, p. I:14-4. Solution: Medical expenses in excess of 10% of AGI are deductible. I:14-8. For purposes of the AMT, only the foreign tax credit and refundable personal credits are allowed to reduce the tentative minimum tax. F, p. I:14-6. Solution: The foreign tax credit and nonrefundable personal credits reduce the tentative minimum tax. I:14-9. If an individual is classified as an employee, the employer is required to withhold the employee's share of the FICA tax and to provide a matching amount. T, p. I:14-8. I:TB14-1
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I:14-10. Under the tax laws, there is no difference between an employee and an independent contractor. F, p. I:14-8. Solution: Tax law does make a distinction in the treatment of employees and independent contractors. I:14-11. Self-employed individuals are subject to the self-employment tax if their net earnings are more than the personal exemption amount. F, p. I:14-8. Solution: Individuals are subject to self-employment tax if their net earnings are more than $400. I:14-12. One-half of the self-employment tax imposed is allowed as a For AGI deduction. T, p. I:14-8. I:14-13. If an individual is an employee and also has self-employment income, the tax base for computing self-employment tax is reduced by the wages that are subject to the FICA tax. T, p. I:14-8. I:14-14. When a husband and wife file a joint return and both have self-employment income, the self-employment tax must be computed separately. T, p. I:14-9. I:14-15. Nonrefundable credits may offset tax liability but may not result in additional payments to the taxpayer. T, p. I:14-10. I:14-16. Nonrefundable personal tax credits are allowed against the taxpayer's tax liability before other credits are claimed. T, p. I:14-10.
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This note was uploaded on 11/18/2008 for the course ACCT 45089 taught by Professor Instructor during the Spring '08 term at University of Phoenix.

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Indiv. 2008 TB Ch 14 - Chapter I:14 Special Tax Computation...

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