ACCT 301 Lecture Notes - Lecture 3: Adjusted Gross Income, Standard Deduction, Itemized Deduction
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Rick, who is single, has been offered a position as a city landscape consultant. The position pays $92,500 in cash wages. Assume Rick files single and is entitled to one personal exemption. Rick deducts the standard deduction instead of itemized deductions. (use the tax rate schedules.)
2017 Tax Schedule : https://ezto-cf-media.mheducation.com/Media/Connect_Production/bne/accounting/spilker_9e/taxrateschedulea.jpg
A. What is the amount of Rickâs after-tax compensation (ignore payroll taxes)? (Do not round intermediate calculations. Round income tax liability and After-tax compensation to 2 decimal places. Enter deductions as negative amounts)
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b-1. Suppose Rick receives a competing job offer of $87,500 in cash compensation and nontaxable (excluded) benefits worth $4,950. What is the amount of Rickâs after-tax compensation for the competing offer? (Do not round intermediate calculations. Round income tax liability and After-tax compensation to 2 decimal places. Enter deductions as negative amounts)
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1. Jeremy earned $260,000 in salary and $9,000 in interest income during the year. Jeremy has two qualifying dependent children who live with him. He qualifies to file as head of household and has $20,500 in itemized deductions. Neither of his dependents qualifies for the child tax credit. (use the tax rate schedules.). (Do not round intermediate calculations. Round "Income tax liability" to 2 decimal places.)
a. Use the 2017 tax rate schedules to determine Jeremyâs taxes due.
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2. b. Assume that in addition to the original facts, Jeremy has a long-term capital gain of $12,500. What is Jeremyâs tax liability including the tax on the capital gain?
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3. c. Assume the original facts except that Jeremy had only $3,000 in itemized deductions. What is Jeremyâs total income tax liability?
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4. Jasper and Crewella Dahvill were married in year 0. They filed joint tax returns in years 1 and 2. In year 3, their relationship was strained and Jasper insisted on filing a separate tax return. In year 4, the couple divorced. Both Jasper and Crewella filed single tax returns in year 4. In year 5, the IRS audited the coupleâs joint year 2 tax return and each spouseâs separate year 3 tax returns. The IRS determined that the year 2 joint return and Crewellaâs separate year 3 tax return understated Crewellaâs self-employment income, causing the joint return year 2 tax liability to be understated by $13,300 and Crewellaâs year 3 separate return tax liability to be understated by $6,700. The IRS also assessed penalties and interest on both of these tax returns. Try as it might, the IRS has not been able to locate Crewella, but they have been able to find Jasper. (Leave no cells blank - be certain to enter "0" wherever required.)
a. What amount of tax can the IRS require Jasper to pay for the Dahvillâs year 2 joint return?
Amount of tax: ?
5. Trudy and Ben file a joint return. Trudyâs reported income creates $200 of income tax and Benâs reported income creates $180 of income tax. In addition to the reported income, Trudy has unreported income on which she owes $50 of income tax. How much of the $430 potential tax liability is Ben liable for?
a. $50
b. $180
c. $380
d. $430
6. James received $25,000 of compensation from his employer and he received $1,900 of interest from a municipal bond. What is the amount of Jamesâs gross income?
a. $0
b. $1,900
c. $25,000
d. $26,900
7. Which of the following is a from AGI deduction?
a. moving expenses
b. rental and royalty expenses
c. business expenses for a self employed taxpayer
d. charitable contributions
8.Which of the following is not an itemized deduction?
a. personal casualty losses
b. medical expenses
c. personal property taxes for a personal use automobile
d. charitable contributions
e. none of the choices are correct
9. In May of year 1, David left his wife Juliette. While the couple was apart, they were not legally divorced. Juliette found herself having to financially provide for the coupleâs only child (6 years of age) and to pay all the costs of maintaining the household. When Juliette filed her tax return for year 1, she filed a return separate from David. What is Julietteâs most favorable filing status for year 1?
a. head of household
b. single
c. married filing separately
d. qualifying widow
10. Caroline and her husband Chris got divorced in May of this year. During the year, Caroline provided all the support for herself and her 23-year-old child Hans (not a full-time student) who lived in the same home as Caroline for the entire year. Hans earned $29,000 this year. What is the Carolineâs most favorable filing status for the year?
a. head of household
b. married filing separately
c. surviving spouse single
The Tax Formula for Individuals, Filing Status and TaxComputation (LO 1.3, 1.5, 1.6, 1.7)
Diego, age 28, married Dolores, age 27, in 2017. Their salariesfor the year amounted to $94,000 and they had interest income of$3,700. Diego and Dolores' deductions for adjusted gross incomeamounted to $8,240; their itemized deductions were $11,050; theyclaimed two exemptions on their return; and, they filed a jointreturn.
Table for the standard deduction
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Click here to access the tax tables.
a. What is the amount of their adjusted grossincome?
$
b. In order to minimize taxable income, Diegoand Dolores will _______ in the amount of $__________
c. What is the amount of their taxableincome?
$
d. What is their tax liability for 2017?
$
