ACCT-4040 Study Guide - Midterm Guide: Standard Deduction, Foreign Earned Income Exclusion, Term Life Insurance
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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
5. The Samsons are trying to determine whether they can claim their 22-year-old adopted son, Jason, as a dependent. Jason is currently a full-time student at an out-of-state university. Jason lived in his parentsâ home for three months of the year and he was away at school for the rest of the year. He received $9,500 in scholarships this year for his outstanding academic performance and earned $4,800 of income working a part-time job during the year. The Samsons paid a total of $5,000 to support Jason while he was away at college. Jason used the scholarship, the earnings from the part-time job, and the money from the Samsons as his only sources of support.
d. Assume the original facts except that Jason earned $5,500 while working part-time and used this amount for his support. Can the Samsons claim Jason as their dependent?
yes or no?
6. [The following information applies to the questions displayed below.]
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 $9,800 and Crewellaâs year 3 separate return tax liability to be understated by $9,500. 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: ?
7. 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 $9,800 and Crewellaâs year 3 separate return tax liability to be understated by $9,500. 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.)
b. What amount of tax can the IRS require Jasper to pay for Crewellaâs year 3 separate tax return?
Amount of tax: ?
8. Camille Sikorski was divorced last year. She currently provides a home for her 15-year-old daughter, Kaly, and 18-year-old son, Parker. Both children lived in Camilleâs home, which she owns, for the entire year, and Camille paid for all the costs of maintaining the home. She received a salary of $80,000 and contributed $5,200 of it to a qualified retirement account (a for AGI deduction). She also received $11,000 of alimony from her former husband. Finally, Camille paid $3,700 of expenditures that qualified as itemized deductions.
a. What is Camilleâs taxable income?
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9. Camille Sikorski was divorced last year. She currently provides a home for her 15-year-old daughter, Kaly, and 18-year-old son, Parker. Both children lived in Camilleâs home, which she owns, for the entire year, and Camille paid for all the costs of maintaining the home. She received a salary of $80,000 and contributed $5,200 of it to a qualified retirement account (a for AGI deduction). She also received $11,000 of alimony from her former husband. Finally, Camille paid $3,700 of expenditures that qualified as itemized deductions.
b. What would Camilleâs taxable income be if she incurred $11,300 of itemized deductions instead of $3,700?
| cription | Amount | ||
| (1) | Gross income | ? | |
| (2) | For AGI deductions | ? | |
| (3) | Adjusted gross income | $0 | |
| (4) | Standard deduction | ? | |
| (5) | Itemized deductions | ? | |
| (6) | ? | ? | |
| (7) | Personal and dependency exemptions | ? | |
| (8) | Total deductions from AGI | $0 | |
| Taxable income ? | |||
10. Camille Sikorski was divorced last year. She currently provides a home for her 15-year-old daughter, Kaly, and 18-year-old son, Parker. Both children lived in Camilleâs home, which she owns, for the entire year, and Camille paid for all the costs of maintaining the home. She received a salary of $80,000 and contributed $5,200 of it to a qualified retirement account (a for AGI deduction). She also received $11,000 of alimony from her former husband. Finally, Camille paid $3,700 of expenditures that qualified as itemized deductions.
c. Assume the original facts but now suppose Camilleâs daughter, Kaly, is 25 years old and a full-time student. Kalyâs gross income for the year was $6,300. Kaly provided $3,780 of her own support, and Camille provided $6,300 of support. What is Camilleâs taxable income?
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