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Exam 7: Individual Income Tax Computation and Tax Credits

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Question 71

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For alternative minimum tax purposes, taxpayers are required to add back the regular tax standard deduction amount for their filing status whether or not they itemized deductions for regular tax purposes.

A) True
B) False

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Question 72

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Maria and Tony are married. They are preparing to file their 2014 tax return. If they were to file as single taxpayers, Maria and Tony would report $10,000 and $70,000 of taxable income, respectively. On their joint tax return, their taxable income is $80,000. How much of a marriage penalty or benefit will Maria and Tony experience in 2014?

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Filing jointly will ...

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Question 73

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Which of the following statements concerning tax credits is true?

Which of the following is not true of the American opportunity credit?

The earned income credit is sometimes referred to as a negative income tax.

The amount of expenditures eligible for the child and dependent care credit is the least of three amounts. Which of the following is not one of those amounts?

Looking at the following partial calendar for April, when will individual tax returns be due? $\begin{array} {|c| } \hline { \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { April }\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad } \\\end{array}$ $\begin{array} { | r | r | r | r | r | r | r | } \hline \text { Sunday } & \text { Monday } & \text { Tuesday } & \text { Wednesday } & \text { Thursday } & \text { Friday } & \text { Saturday } \\\hline & & & & & & 1 \\\hline 2 & 3 & 4 & 5 & 6 & 7 & 8 \\\hline 9 & 10 & 11 & 12 & 13 & 14 & 15 \\\hline 16 & \begin{array} { r } 17 \\\text { National } \\\text { Accountants } \\\text { Day }\end{array} & 18 & 19 & 20 & 21 & 22 \\& \text { (Federal } \\&\text { Holiday) }& & & & \\\hline\end{array}$

If a married couple has one primary breadwinner, filing a joint return will likely result in a marriage penalty.

Which of the following taxpayers (all age 40) are required to file a return? $\begin{array} { | l | l | r | c | } \hline \text { Taxpayer } & \text { Filing Status } & \begin{array} { c } \text { Number } \\\text { of exemptions }\end{array} & \begin{array} { c } \text { Gross } \\\text { Income }\end{array} \\\hline \text { Jenny and Jim } & \begin{array} { l } \text { Married Filing } \\\text { Jointly }\end{array} & 2 & \$ 21,000 \\\hline \text { Allen } & \text { Single } & 1 & \$ 9,200 \\\hline \text { Timmy } & \text { Head of Household } & 2 & \$ 10,800 \\\hline\end{array}$

Long-term capital gains, dividends, and taxable interest income are all taxed at preferential rates.

Which of the following is not true of the lifetime learning credit?

Angelena files as a head of household. In 2014, she reported $50,000 of taxable income, including a $10,000 qualified dividend. What is her gross tax liability, rounded to the nearest whole dollar amount (use the tax rate schedules) ?

Linda is a qualifying widow in 2014. In 2014, she reported $75,000 of taxable income (all ordinary) . What is her gross tax liability using the tax rate schedules?

Candace is claimed as a dependent on her parent's tax return. Her parents' ordinary income marginal tax rate is 33%. In 2014, Candace received $5,000 of interest income from corporate bonds she obtained several years ago. This is her only source of income. She is 15 years old at year end. What is her gross tax liability?

Which of the following represents the correct order in which credits are applied to gross tax liability (from first to last) ?

Business credits are generally refundable credits.

Individuals may file for and receive a six-month extension of time to file their tax return and pay their taxes without penalty.

Which of the following statements regarding the child and dependent care credit is false?

During 2014, 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?

For alternative minimum tax purposes, taxpayers are allowed to deduct state income taxes but are not allowed to deduct charitable contributions.