Take_Home_Study_Exam_for_Final_with_solutions

Take_Home_Study_Exam_for_Final_with_solutions - FEDERAL...

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1) G had income and expenses as follows for the current taxable year: Total income \$32,400 Exclusions (municipal bond interest) 2,000 Deductions for A.G.I. 1,200 Total itemized deductions 9,920 Standard deduction 5,450 Exemption deductions 7,000 What are G’s adjusted gross income and her taxable income, respectively? a. \$29,200; \$12,280 b. \$31,200; \$14,680 c. \$29,200; \$17,050 d. \$28,000; \$12,680 a. Adjusted gross income is gross income (\$32,400 - \$2,000 = \$30,400) less any deductions for adjusted gross income (\$1,200), or \$29,200. Taxable income is the adjusted gross income minus the larger of the standard deduction (\$5,450) or the itemized deductions (\$9,920) and minus the personal and dependency 2) J and Z, husband and wife, created a trust for J’s aging mother, Betty. This year the trust received dividend income of \$15,000 and distributed \$10,000 to Betty. The taxable income of the trust and Betty is? a. Trust \$15,000, Betty \$10,000 b. Trust \$0, Betty \$15,000 c. Trust \$5,000, Betty \$10,000 d. Trust \$15,000, Betty \$0 e. None of the above. c. A trust is treated as a separate taxable entity. It is taxed on the taxable income it received but is entitled to a deduction to the extent it distributes it. The trust received \$15,000 of taxable dividend income and distributed \$10,000 so the trust reports \$5,000 (\$15,000 - \$10,000) of taxable income while Betty reports \$10,000 taxable income. Note that all of the taxable income is taxed.
3) Barnum and Bailey incorporated their circus this year and elected to be treated as an S corporation. Barnum owns 60% of the corporation’s stock while Bailey owns the remaining 40%. This year, the corporation had net income of \$300,000 before the owners took any money out of the business (e.g., before salaries, dividend distributions, etc.).

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Take_Home_Study_Exam_for_Final_with_solutions - FEDERAL...

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