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Exam 7: Individual Income Tax Computation and Tax Credits

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Question 81

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Keith and Nicole are married filing joint with two daughters who qualify as dependents. Their gross income for 2014 is $21,000. Are they required to file a tax return? How do you know this without memorizing the gross income thresholds? In 2014, the standard deduction for taxpayers filing a joint return is $12,400 and the personal exemption is $3,950.

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Yes, Keith...

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Question 82

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Apollo is single and his AMT base is $100,250. This amount includes $500 of qualified dividends (the dividends were taxed at 15% in determining the regular tax liability). What is Apollo's tentative minimum tax?

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Question 83

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Rhianna and Jay are married filing jointly in 2014. They have six children for whom they may claim the child tax credit. Their AGI was $123,440. What amount of child tax credit may they claim on their 2014 tax return?

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

All else equal, a reduction in regular income tax rates would require more taxpayers to pay the alternative minimum tax.

When applying credits against a taxpayer's gross tax liability, nonrefundable personal credits are applied first, then business credits, and finally refundable personal credits.

Tamra and Jacob are married and they file a joint tax return. Tamra received nearly five times the salary that Jacob received. Which of the following statements is true?

Jamie is single. In 2014, she reported $100,000 of taxable income, including a long-term capital gain of $5,000. What is her gross tax liability, rounded to the nearest whole dollar amount (use the tax rate schedules) ?

Wolfina's twins, Romulus and Remus, finished their first year of school at an accredited university in 2014. She paid $10,000 in qualified educational expenses for Romulus and $2,000 of qualifying expenses for Remus. Wolfina is a head of household with an AGI of $85,000. What amount of American opportunity credit may she claim?

Julien and Sarah are married, file a joint return, and have two children, Kaya and Christopher. Kaya just finished her third year at college and Christopher just finished his first year of graduate school (fifth year of college). Tuition and books for the past year were $1,800 for Kaya and $5,000 for Christopher. How much can Julien and Sarah claim in educational credits if their joint AGI was $120,000 for 2014?

Tax rate schedules are provided for use by (relatively) higher income taxpayers while the tax tables are provided for use by (relatively) lower income taxpayers.

Why would a taxpayer file a tax return if not required to do so?

A marriage penalty occurs when a couple pays more taxes by filing a joint tax return than they would have paid had they filed married filing separate returns.

Which of the following statements regarding the earned income credit is true?

In certain circumstances a child with very little income may have their income taxed at the parents' marginal tax rate.

Miley, a single taxpayer, plans on reporting $27,900 of taxable income this year (all of her income is from a part-time job) . She is considering applying for a second part-time job that would give her an additional $10,000 of taxable income. By how much will the income from the second job increase her tax liability (use the tax rate schedules) ?