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Exam 3: Tax Formula and Tax Determination an Overview of Property Transactions

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Question 21

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Match the statements that relate to each other. Note: Choice l. may be used more than once. a.Available to a 70-year-old father claimed as a dependent by his son. b.Equal to tax liability divided by taxable income. c.The highest income tax rate applicable to a taxpayer. d.Not eligible for the standard deduction. e.No one qualified taxpayer meets the support test. f.Taxpayer's ex-husband does not qualify. g.A dependent child (age 18) who has only unearned income. h.Highest applicable rate is 39.6%. i.Applicable rate could be as low as 0%. j.Maximum rate is 28%. k.Income from foreign sources is not subject to tax. l.No correct match provided. -Multiple support agreement

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Question 22

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During the year,Kim sold the following assets: business auto for a $1,000 loss,stock investment for a $1,000 loss,and pleasure yacht for a $1,000 loss.Presuming adequate income,how much of these losses may Kim claim?

A) $0.
B) $1,000.
C) $2,000.
D) $3,000.
E) None of these.

F) B) and C)
G) C) and D)

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Question 23

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After Ellie moves out of the apartment she had rented as her personal residence,she recovers her damage deposit of $1,000.The $1,000 is not income to Ellie.

Regarding dependency exemptions, classify each statement in one of the four categories: a.Could be a qualifying child. b.Could be a qualifying relative. c.Could be either a qualifying child or a qualifying relative. d.Could be neither a qualifying child nor a qualifying relative. -A niece who lives with taxpayer,is 20 years old,earns $5,000,and is a full-time student.

The Hutters filed a joint return for 2016.They provide more than 50% of the support of Carla,Melvin,and Aaron.Carla (age 18) is a cousin and earns $2,800 from a part-time job.Melvin (age 25) is their son and is a full-time law student.He received from the university a $3,800 scholarship for tuition.Aaron is a brother who is a citizen of Israel but resides in France.Carla and Melvin live with the Hutters.How many personal and dependency exemptions can the Hutters claim on their Federal income tax return?

Match the statements that relate to each other. Note: Choice l. may be used more than once. a.Available to a 70-year-old father claimed as a dependent by his son. b.Equal to tax liability divided by taxable income. c.The highest income tax rate applicable to a taxpayer. d.Not eligible for the standard deduction. e.No one qualified taxpayer meets the support test. f.Taxpayer's ex-husband does not qualify. g.A dependent child (age 18) who has only unearned income. h.Highest applicable rate is 39.6%. i.Applicable rate could be as low as 0%. j.Maximum rate is 28%. k.Income from foreign sources is not subject to tax. l.No correct match provided. -Additional standard deduction

Lee,a citizen of Korea,is a resident of the U.S.Any rent income Lee receives from land he owns in Korea is not subject to the U.S.income tax.

Match the statements that relate to each other. Note: Choice l. may be used more than once. a.Available to a 70-year-old father claimed as a dependent by his son. b.Equal to tax liability divided by taxable income. c.The highest income tax rate applicable to a taxpayer. d.Not eligible for the standard deduction. e.No one qualified taxpayer meets the support test. f.Taxpayer's ex-husband does not qualify. g.A dependent child (age 18) who has only unearned income. h.Highest applicable rate is 39.6%. i.Applicable rate could be as low as 0%. j.Maximum rate is 28%. k.Income from foreign sources is not subject to tax. l.No correct match provided. -Gain on collectibles (held more than one year)

When the kiddie tax applies and the parents are divorced,the applicable parent (for determining the parental tax)is the one with the greater taxable income.

Match the statements that relate to each other. Note: Choice l. may be used more than once. a.Available to a 70-year-old father claimed as a dependent by his son. b.Equal to tax liability divided by taxable income. c.The highest income tax rate applicable to a taxpayer. d.Not eligible for the standard deduction. e.No one qualified taxpayer meets the support test. f.Taxpayer's ex-husband does not qualify. g.A dependent child (age 18) who has only unearned income. h.Highest applicable rate is 39.6%. i.Applicable rate could be as low as 0%. j.Maximum rate is 28%. k.Income from foreign sources is not subject to tax. l.No correct match provided. -Nonresident alien

When the kiddie tax applies,the child need not file an income tax return because the child's income will be reported on the parents' return.

Butch and Minerva are divorced in December of 2016.Since they were married for more than one-half of the year,they are considered as married for 2016.

Wilma,age 70 and single,is claimed as a dependent on her daughter's tax return.During 2016,she had interest income of $2,500 and $800 of earned income from babysitting.Wilma's taxable income is:

Kirby is in the 15% tax bracket and had the following capital asset transactions during 2016: Long-term gain from the sale of a coin collection $11,000 Long-term gain from the sale of a land investment 10,000 Short-term gain from the sale of a stock investment 2,000 Kirby's tax consequences from these gains are as follows:

Using borrowed funds from a mortgage on her home,Leah provides 52% of her own support,while her sons furnished the rest.Leah can be claimed as a dependent under a multiple support agreement.

Match the statements that relate to each other. Note: Choice l. may be used more than once. a.Available to a 70-year-old father claimed as a dependent by his son. b.Equal to tax liability divided by taxable income. c.The highest income tax rate applicable to a taxpayer. d.Not eligible for the standard deduction. e.No one qualified taxpayer meets the support test. f.Taxpayer's ex-husband does not qualify. g.A dependent child (age 18) who has only unearned income. h.Highest applicable rate is 39.6%. i.Applicable rate could be as low as 0%. j.Maximum rate is 28%. k.Income from foreign sources is not subject to tax. l.No correct match provided. -Kiddie tax may be imposed

Match the statements that relate to each other. Note: Choice l. may be used more than once. a.Not available to 65-year old taxpayer who itemizes. b.Exception for U.S. citizenship or residency test (for dependency exemption purposes). c.Largest basic standard deduction available to a dependent who has no earned income. d.Considered for dependency exemption purposes. e.Qualifies for head of household filing status. f.A child (age 15) who is a dependent and has only earned income. g.Considered in applying gross income test (for dependency exemption purposes). h.Not considered in applying the gross income test (for dependency exemption purposes). i.Unmarried taxpayer who can use the same tax rates as married persons filing jointly. j.Exception to the support test (for dependency exemption purposes). k.A child (age 16) who is a dependent and has only unearned income of $4,500. l.No correct match provided. -Abandoned spouse

During 2016,Madison had salary income of $80,000 and the following capital transactions: LTCG $13,000 LTCL 15,000 STCG 13,000 STCL 6,000 ​ How are these transactions handled for income tax purposes?

After paying down the mortgage on their personal residence,the Hills have found that their itemized deductions for each year are always slightly less than the standard deduction option. a.Explain what has happened. b.What remedy do you suggest?

In terms of the tax formula applicable to individual taxpayers,which,if any,of the following statements is correct?