Question 1

Hestia (age 17)is claimed as a dependent by her parents,Rhea and Chronus.In 2017,Hestia received $1,000 of interest income from a corporate bond that she owns.In addition,she has earned income of $200.What is her taxable income for 2017?

Accepted Answer

The answer of Hestia (age 17)is claimed as a dependent...

Question 2

Which of the following is not typical of taxpayers who are most likely affected by the AMT?

Accepted Answer

Taxpayers with relatively low capital gains are less likely to be affected by the Alternative Minimum Tax (AMT), which typically impacts those with high deductions such as state income and property taxes, or many dependents.

Question 3

Harmony reports a regular tax liability of $15,000 and tentative minimum tax of $17,000.Given just this information,what is her alternative minimum tax liability for the year?

Accepted Answer

To calculate the Alternative Minimum Tax liability, we need to compare the Regular Tax Liability and Tentative Minimum Tax and pay the difference between them as AMT.

In this case, Regular Tax Liability is $15,000 and Tentative Minimum Tax is $17,000. As Tentative Minimum Tax is higher than Regular Tax Liability, we need to pay the difference between them as AMT.

So, AMT = Tentative Minimum Tax - Regular Tax Liability
AMT = $17,000 - $15,000
AMT = $2,000

Therefore, the alternative minimum tax liability for the year is $2,000 (Choice B).

Question 4

Allen Green is a single taxpayer with an AGI (and modified AGI)of $210,000,which includes $170,000 of salary,$25,000 of interest income,$10,000 of dividends,and $5,000 of long-term capital gains.What is Allen's net investment income tax liability this year,rounded to the nearest whole dollar amount?

Accepted Answer

The answer of Allen Green is a single taxpayer with...

Question 5

Which of the following items is not added back to regular taxable income in computing alternative minimum taxable income?

Accepted Answer

Home mortgage interest expense is generally deductible for both regular tax and AMT purposes, so it is not added back when computing alternative minimum taxable income.

Question 6

In 2017,Maia (who files as a head of household)reported regular taxable income of $115,000.She itemized her deductions,deducting $8,000 in charitable contributions and $3,000 in state income taxes.She claimed exemptions for herself and her son,Hermes,($4,050 each).What is Maia's alternative minimum taxable income?

Accepted Answer

The correct answer is D. Maia's alternative minimum taxable income is $126,100. This is calculated by adding back the itemized deductions that are not allowed for AMT purposes, which are the charitable contributions and the state income taxes. So, $115,000 + $8,000 + $3,000 = $126,000.

Question 7

Which of the following could explain why a large number of taxpayers are subject to (or could become subject to)AMT?

Accepted Answer

The AMT was designed to ensure that high-income individuals pay a minimum amount of tax. Since regular tax rates have decreased over time, more taxpayers could fall into the AMT category because the AMT thresholds and exemptions have not kept pace with inflation or regular tax rate reductions.

Question 8

During 2017,Montoya (age 15)received $2,200 from a corporate bond.  He also received $600 from a savings account established for him by his parents.Montoya lives with his parents and he is their dependent.What is Montoya's taxable income?

Accepted Answer

Montoya's taxable income is calculated by adding up all of his income for the year and subtracting any applicable deductions. In this case, Montoya's income is $2,200 + $600 = $2,800. However, he may be able to claim the standard deduction for a dependent, which is $1,050 for the 2017 tax year. So, his taxable income would be $2,800 - $1,050 = $1,750, which is option D.

Question 9

Which of the following statements accurately describes the alternative minimum tax rate(s)?

Accepted Answer

The answer of Which of the following statements accurately describes...

Question 10

The Olympians have three children.The kiddie tax applies to unearned income received by which of the following children?

Accepted Answer

The kiddie tax applies to unearned income of children under 19 or full-time students under 24 who do not support themselves. Poseidon fits this criteria.

Question 11

Which of the following statements regarding the AMT exemption amounts is not true?

Accepted Answer

The AMT exemption is not a choice between claiming the exemption or itemizing deductions; it is automatically applied based on the taxpayer's filing status and income level.

Question 12

Which of the following is not a barrier to income shifting among family members?

Accepted Answer

Option C is incorrect, as it is a measure that has been adopted to curb income shifting among family members. Options A and B are barriers to income shifting - the assignment of income doctrine prohibits taxpayers from transferring their income to another person to avoid paying taxes, while net unearned income for children 18 and younger is taxed at their parents' marginal tax rates to prevent parents from shifting investment income to their children. Option D is not correct, as it is not a valid option - it includes two choices without specifying which ones.

Question 13

Assuming the kiddie tax applies,what amount of a child's income is subject to the kiddie tax?

Accepted Answer

The kiddie tax only applies to the child's unearned income, such as investment income. The amount subject to the kiddie tax is the net unearned income, which is the child's total unearned income minus any deductions or expenses related to producing that income. Therefore, the correct answer is C - the net unearned income.

Question 14

Hester (age 17)is claimed as a dependent by his parents,Charlton and Abigail.In 2017,Hester received $10,000 of qualified dividends and he received $6,200 from a part time job.What is his taxable income for 2017?

Accepted Answer

Hester's taxable income is calculated by subtracting the standard deduction for a dependent from his total income. In 2017, the standard deduction for a dependent is the greater of $1,050 or earned income plus $350, up to the standard deduction for a single filer ($6,350). Hester's earned income is $6,200, so his standard deduction is $6,550 ($6,200 + $350). His total income is $16,200 ($10,000 dividends + $6,200 job), so his taxable income is $9,850 ($16,200 - $6,350).

Question 15

Asteria earned a $25,500 salary as an employee in 2017.How much should her employer have withheld from her paycheck for FICA taxes (rounded to the nearest whole dollar amount)?

Accepted Answer

FICA taxes consist of Social Security tax and Medicare tax. For Social Security tax, the rate is 6.2% of the first $127,200 of wages, which for Asteria would come to $1,579.40. For Medicare tax, the rate is 1.45% of all wages, which for Asteria would come to $370.25. Adding these two amounts together, we get $1,949.65, which when rounded to the nearest whole dollar is $1,951. Therefore, the employer should have withheld $1,951 for FICA taxes.

Question 16

During 2017,Jasmine (age 12)received $2,400 from a corporate bond.  She also received $600 from a savings account established for her by her parents.  Jasmine lives with her parents and she is their dependent.  Assuming her parents' marginal tax rate is 28%,what is Jasmine's gross tax liability?

Accepted Answer

The answer of During 2017,Jasmine (age 12)received $2,400 from a...

Question 17

The alternative minimum tax base is typically ________ the regular income tax base.

Accepted Answer

The alternative minimum tax (AMT) base is typically larger than the regular income tax base because it adds back in certain tax preference items and adjustments that are excluded from the regular tax calculation.

Question 18

The computation of the alternative minimum tax base begins with regular taxable income.Which of the following is not part of the formula for computing the alternative minimum tax base?

Accepted Answer

Personal exemptions are not subtracted when computing the alternative minimum tax base.

Question 19

Montague (age 15)is claimed as a dependent by his parents Matt and Mary.In 2017,Montague received $5,000 of qualified dividends and he received $800 from a part time job.What is his taxable income for 2017?

Accepted Answer

As a dependent, Montague's standard deduction for 2017 is $1,050. 
His taxable income is calculated as follows: 
$5,000 (Qualified dividends) 
+ $800 (Part-time job income) 
- $1,050 (Standard deduction) 
= $4,750 
However, the first $1,050 of unearned income (such as qualified dividends) is tax-free for dependents, which means that Montague's taxable income is reduced by $1,050. 
$4,750 (Total taxable income) 
- $1,050 (Tax-free threshold for unearned income) 
= $3,700 
Therefore, Montague's taxable income for 2017 is $4,650.

Question 20

Persephone has a regular tax liability of $12,475 and a tentative minimum tax of $11,500.Given just this information,what is her alternative minimum tax liability for the year?

Accepted Answer

The alternative minimum tax (AMT) is calculated as the difference between the tentative minimum tax and the regular tax liability, but only when the tentative minimum tax is greater than the regular tax liability. Since Persephone's regular tax liability ($12,475) is higher than her tentative minimum tax ($11,500), she does not owe any AMT, making the correct answer $0.

Quiz 8: Individual Income Tax Computation and Tax Credits

Hestia (age 17) is claimed as a dependent by her parents,Rhea and Chronus.In 2017,Hestia received $1,000 of interest income from a corporate bond that she owns.In addition,she has earned income of $200.What is her taxable income for 2017?

Which of the following is not typical of taxpayers who are most likely affected by the AMT?

Harmony reports a regular tax liability of $15,000 and tentative minimum tax of $17,000.Given just this information,what is her alternative minimum tax liability for the year?

Which of the following items is not added back to regular taxable income in computing alternative minimum taxable income?

Which of the following could explain why a large number of taxpayers are subject to (or could become subject to) AMT?

During 2017,Montoya (age 15) received $2,200 from a corporate bond. He also received $600 from a savings account established for him by his parents.Montoya lives with his parents and he is their dependent.What is Montoya's taxable income?

Which of the following statements accurately describes the alternative minimum tax rate(s) ?

The Olympians have three children.The kiddie tax applies to unearned income received by which of the following children?

Which of the following statements regarding the AMT exemption amounts is not true?

Which of the following is not a barrier to income shifting among family members?

Assuming the kiddie tax applies,what amount of a child's income is subject to the kiddie tax?

Hester (age 17) is claimed as a dependent by his parents,Charlton and Abigail.In 2017,Hester received $10,000 of qualified dividends and he received $6,200 from a part time job.What is his taxable income for 2017?

Asteria earned a $25,500 salary as an employee in 2017.How much should her employer have withheld from her paycheck for FICA taxes (rounded to the nearest whole dollar amount) ?

During 2017,Jasmine (age 12) received $2,400 from a corporate bond. She also received $600 from a savings account established for her by her parents. Jasmine lives with her parents and she is their dependent. Assuming her parents' marginal tax rate is 28%,what is Jasmine's gross tax liability?

The alternative minimum tax base is typically ________ the regular income tax base.

The computation of the alternative minimum tax base begins with regular taxable income.Which of the following is not part of the formula for computing the alternative minimum tax base?

Montague (age 15) is claimed as a dependent by his parents Matt and Mary.In 2017,Montague received $5,000 of qualified dividends and he received $800 from a part time job.What is his taxable income for 2017?

Persephone has a regular tax liability of $12,475 and a tentative minimum tax of $11,500.Given just this information,what is her alternative minimum tax liability for the year?