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Exam 7: Individual Income Tax Computation and Tax Credits

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Question 81

Multiple Choice

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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?

A) Tamra and Jacob likely pay no tax marriage penalty nor receive a tax marriage benefit.
B) Tamra and Jacob likely pay a tax marriage penalty.
C) Tamra and Jacob likely receive a tax marriage benefit.
D) Tamra and Jacob likely will pay a tax marriage penalty and receive a tax marriage benefit.

E) C) and D)
F) All of the above

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Question 82

Multiple Choice

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

A) It is a nonrefundable credit
B) It is possible that a taxpayer with more earned income may receive more credit than a taxpayer with less earned income
C) A 70-year-old taxpayer with no dependents can qualify for the credit in certain circumstances
D) A taxpayer whose only source of income is interest from corporate bonds is eligible for the credit

E) B) and C)
F) All of the above

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Question 83

Multiple Choice

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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) ?

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?

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) ?

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

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

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.

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.

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

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

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?

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?

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.

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

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?