Question 1

Mr. and Mrs. Jelk file a joint return. They provide 65% of the financial support for David, the 14-year old son of a friend who died three years ago. David lives in the home of his aunt Sarah, who provides 35% of his financial support. Which of the following statements is true?

Accepted Answer

David is neither a qualifying child nor a qualifying relative of the Jelks because he does not meet the relationship test for a qualifying child and the Jelks do not provide more than half of his support for him to be a qualifying relative.

Question 2

Alice is an unmarried individual. She has $182,340 taxable income in 2012. Compute Alice's regular tax liability if she files as a single taxpayer and if she files as a head of household.

Accepted Answer

- If Alice files as a single taxpayer, her regular tax liability would be $44,700 according to the 2012 tax brackets.
- If Alice files as a head of household, her regular tax liability would be $42,031 according to the 2012 tax brackets. 
Therefore, the best choice is C, Single $44,700; head of household $42,031.

Question 3

Mr. and Mrs. Kay, ages 68 and 66, file a joint return. Mrs. Kay is legally blind. Compute their standard deduction.

Accepted Answer

The standard deduction for married couples filing jointly is $13,050. However, Mrs. Kay is legally blind, which entitles them to an additional $1,300 deduction. Therefore, their total standard deduction is $13,050 + $1,300 = $14,350.

Question 4

Ms. Dolan, an unmarried individual, invited her elderly uncle, Martin, to move into her home in January of this year. Martin's only income item was $2,390 of taxable interest on a savings account. Ms. Dolan provides over 90% of her uncle's financial support. What is Ms. Dolan's filing status and number of exemptions for the year?

Accepted Answer

Ms. Dolan can file as head of household because she provided more than 50% of the cost of keeping up a home for herself and at least one other qualifying person (her uncle). Since her uncle is a dependent, she can claim him as an exemption, resulting in a total of two exemptions.

Question 5

Melissa, age 16, is claimed as a dependent on her parents' tax return. This year, Melissa earned $2,000 from babysitting and $1,280 interest income from a savings account. Compute Melissa's standard deduction.

Accepted Answer

Since Melissa is claimed as a dependent on her parents' tax return, her standard deduction is limited to the greater of $1,050 or her earned income plus $350, up to the regular standard deduction amount. In this case, Melissa's earned income is $2,000, so her standard deduction is $2,350 ($2,000 + $350). However, since this amount is less than the regular standard deduction for a single taxpayer ($12,200 in 2019), her standard deduction is limited to $1,200. Therefore, the correct answer is $2,350 - $1,150 = $2,300.

Question 6

Which of the following statements regarding the calculation of regular tax liability is false?

Accepted Answer

The answer of Which of the following statements regarding the...

Question 7

Which of the following statements describing individual tax deductions is false?

Accepted Answer

Self-employment tax deduction is an above-the-line deduction, not an itemized deduction. This means it can be taken regardless of whether an individual itemizes or takes the standard deduction, and it directly reduces adjusted gross income.

Question 8

Ms. Lewis' maintains a household which is the principal place of residence for Kathy. Ms. Lewis' provides more than 50% of Kathy's financial support. In which of the following cases can Ms. Lewis' claim Kathy as a qualifying child?

Accepted Answer

Only choice B satisfies the requirements for a qualifying child. Kathy is Ms. Lewis' niece and meets the relationship test for a qualifying child. She is also under the age of 19 (or under 24 if a full-time student) and lives with Ms. Lewis for more than half the year. Additionally, Ms. Lewis provides more than 50% of Kathy's financial support. Choices A and C do not meet the age or relationship tests for a qualifying child.

Question 9

Kent, an unmarried individual, invited his widowed father, Martin, to move into his home in January of this year. Martin's only income item was a $14,000 taxable pension from his former employer. Kent provides about 75% of his father's financial support. What is Kent's filing status and number of exemptions for the year?

Accepted Answer

The answer of Kent, an unmarried individual, invited his widowed...

Question 10

Which of the following statements regarding exemptions is false?

Accepted Answer

A qualifying child does not have to be the natural, adopted, or stepchild of the taxpayer; they can also be a sibling or a descendant of any of these.

Question 11

Which of the following statements regarding a qualifying child is false?

Accepted Answer

The statement that the child must have been alive at least 180 days during the tax year is false. The IRS does not specify a minimum number of days a child must be alive to qualify; rather, the child must simply meet the relationship, age, residency, support, and joint return tests as applicable.

Question 12

Mr. and Mrs. Anderson file a joint return. They provide more than 50% of the financial support of their two children, Dana, age 26, and John, age 17. Both children live in the Andersons' home. Dana earned $7,100 from a part-time job, while John earned no income this year. Which of the following statements is true?

Accepted Answer

A child is considered a qualifying child if they meet four tests: relationship, age, residence, and support. Both Dana and John meet the relationship, residence, and support tests, but only John meets the age test as he is under 19 years old. Therefore, John is the only qualifying child of the Andersons.

Question 13

Mr. and Mrs. Steel, who file a joint return, have $513,200 taxable income in 2012. Compute their regular tax liability.

Accepted Answer

To compute their regular tax liability, we need to use the 2012 tax table for married filing jointly. Based on the table, the tax liability for $513,200 income is $148,760. Therefore, the correct choice is B.

Question 14

Benjamin, who files as a single taxpayer, has $359,900 taxable income in 2012. Compute his regular tax liability.

Accepted Answer

The correct answer is A because the regular tax liability for a single taxpayer with $359,900 taxable income in 2012 is $103,295.

Question 15

Melissa, age 16, is claimed as a dependent on her parents' tax return. This year, Melissa earned $510 from babysitting and $220 interest income from a savings account. Compute Melissa's standard deduction.

Accepted Answer

The answer of Melissa, age 16, is claimed as a...

Question 16

Which of the following statements describing individual tax deductions is false?

Accepted Answer

According to IRS data, the majority of individual taxpayers (around 70%) take the standard deduction, while only around 30% itemize. Therefore, statement B is false.

Question 17

Mr. and Mrs. Upton's marginal tax rate on their joint return is 33%. This year, their itemized deductions totaled $13,400, and their standard deduction (MFJ) was $11,900. Compute their incremental tax savings from their itemized deductions.

Accepted Answer

The incremental tax savings is the difference between itemized deductions and the standard deduction, multiplied by the marginal tax rate: ($13,400 - $11,900) * 33% = $495.

Question 18

Ms. Kilo is an unmarried individual. She has $219,344 taxable income in 2012. Compute Ms. Kilo's regular tax liability if she files as a single taxpayer and if she files as a surviving spouse.

Accepted Answer

The answer of Ms. Kilo is an unmarried individual. She...

Question 19

Which of the following statements regarding the calculation of regular tax liability is false?

Accepted Answer

The answer of Which of the following statements regarding the...

Question 20

Hunter, age 17, is claimed as a dependent on his parents' tax return. This year, Hunter earned $8,500 for appearing in a television commercial. Compute Hunter's standard deduction.

Accepted Answer

Hunter's standard deduction is equal to the minimum standard deduction amount for a dependent, which is $5,950 for the tax year 2019. Hunter's earned income of $8,500 is less than the standard deduction, but since he is claimed as a dependent, he cannot claim his own personal exemption. Therefore, the standard deduction is his only means to reduce his taxable income.

Quiz 14: The Individual Tax Formula

Mr. and Mrs. Jelk file a joint return. They provide 65% of the financial support for David, the 14-year old son of a friend who died three years ago. David lives in the home of his aunt Sarah, who provides 35% of his financial support. Which of the following statements is true?

Alice is an unmarried individual. She has $182,340 taxable income in 2012. Compute Alice's regular tax liability if she files as a single taxpayer and if she files as a head of household.

Mr. and Mrs. Kay, ages 68 and 66, file a joint return. Mrs. Kay is legally blind. Compute their standard deduction.

Melissa, age 16, is claimed as a dependent on her parents' tax return. This year, Melissa earned $2,000 from babysitting and $1,280 interest income from a savings account. Compute Melissa's standard deduction.

Which of the following statements regarding the calculation of regular tax liability is false?

Which of the following statements describing individual tax deductions is false?

Ms. Lewis' maintains a household which is the principal place of residence for Kathy. Ms. Lewis' provides more than 50% of Kathy's financial support. In which of the following cases can Ms. Lewis' claim Kathy as a qualifying child?

Which of the following statements regarding exemptions is false?

Which of the following statements regarding a qualifying child is false?

Mr. and Mrs. Steel, who file a joint return, have $513,200 taxable income in 2012. Compute their regular tax liability.

Benjamin, who files as a single taxpayer, has $359,900 taxable income in 2012. Compute his regular tax liability.

Melissa, age 16, is claimed as a dependent on her parents' tax return. This year, Melissa earned $510 from babysitting and $220 interest income from a savings account. Compute Melissa's standard deduction.

Which of the following statements describing individual tax deductions is false?

Mr. and Mrs. Upton's marginal tax rate on their joint return is 33%. This year, their itemized deductions totaled $13,400, and their standard deduction (MFJ) was $11,900. Compute their incremental tax savings from their itemized deductions.

Ms. Kilo is an unmarried individual. She has $219,344 taxable income in 2012. Compute Ms. Kilo's regular tax liability if she files as a single taxpayer and if she files as a surviving spouse.

Which of the following statements regarding the calculation of regular tax liability is false?

Hunter, age 17, is claimed as a dependent on his parents' tax return. This year, Hunter earned $8,500 for appearing in a television commercial. Compute Hunter's standard deduction.