Sample/practice exam 15 October 2018, questions and answers PDF

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55.

Miley, a single taxpayer, plans on reporting $28,650 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)

A. $1,00 0 B. $1,50 0 C. $1,60 0 D. $2,50 0 Based on the single tax rate schedule, of the additional $10,000 of taxable income, $9,000 is taxed at 15% (the increase $28,650 to $37,650) and the remaining $1,000 ($38,650 minus $37,650) is taxed at 25%. To summarize, ($9,000 × 15%) + ($1,000 × 25%) = $1,600. AACSB: Analytical Thinking AACSB: Reflective Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation Blooms: Analyze Blooms: Remember Learning Objective: 08-01 Determine a taxpayer's regular tax liability and identify tax issues associated with the process. Level of Difficulty: 2 Medium Topic: Regular Federal Income Tax Computation

56.

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 marriage benefit. B. Tamra and Jacob likely penalty. C. Tamra and Jacob likely benefit. D. Tamra and Jacob likely marriage benefit.

pay no tax marriage penalty nor receive a tax pay a tax marriage receive a tax marriage will pay a tax marriage penalty and receive a tax

Couples with a primary bread winner are likely to receive a tax marriage benefit.

AACSB: Reflective Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation Blooms: Analyze Blooms: Remember Learning Objective: 08-01 Determine a taxpayer's regular tax liability and identify tax issues associated with the process. Level of Difficulty: 1 Easy Topic: Regular Federal Income Tax Computation

57.

Stephanie and Mitch are married and they file a joint tax return. Mitch received a slightly higher salary than Stephanie did during the year. Which of the following statements is true?

A. Stephanie and Mitch likely marriage benefit. B. Stephanie and Mitch likely penalty. C. Stephanie and Mitch likely benefit. D. Stephanie and Mitch likely marriage benefit.

pay no tax marriage penalty nor receive a tax pay a tax marriage receive a tax marriage will pay a tax marriage penalty and receive a tax

Couples earning similar amounts of income are likely to pay a marriage penalty.

AACSB: Reflective Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 08-01 Determine a taxpayer's regular tax liability and identify tax issues associated with the process. Level of Difficulty: 1 Easy Topic: Regular Federal Income Tax Computation

58.

Harrison received a qualified dividend. Without knowing any additional facts, which of the following statements is true regarding the rate at which the dividend will be taxed to Harrison?

A. The dividend will be taxed at a 15% tax rate. B. The dividend will be taxed at a 20% tax rate. C. The entire dividend will be taxed at either 15% or the entire dividend will be taxed at 20% depending on Harrison's marginal ordinary income tax rate. D. None of the above. Depending on Harrison's marginal ordinary income tax rate, the dividend may be taxed at 0%, 15%, 20% or some combination.

AACSB: Reflective Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation Blooms: Analyze Blooms: Remember Learning Objective: 08-01 Determine a taxpayer's regular tax liability and identify tax issues associated with the process. Level of Difficulty: 2 Medium Topic: Regular Federal Income Tax Computation

59.

Jamie is single. In 2016, she reported $100,000 of taxable income, including a longterm capital gain of $5,000. What is her gross tax liability, rounded to the nearest whole dollar amount? (use the tax rate schedules)

A. $19,63 7 B. $20,04 8 C. $20,38 7 D. $15,00 0 $95,000 of the taxable income is taxed at the ordinary rates and $5,000 of the taxable income is taxed at 15%.

AACSB: Analytical Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation Blooms: Apply Blooms: Remember Learning Objective: 08-01 Determine a taxpayer's regular tax liability and identify tax issues associated with the process. Level of Difficulty: 2 Medium Topic: Regular Federal Income Tax Computation

60.

Angelena files as a head of household. In 2016, she reported $51,000 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)

A. $5,48 8 B. $5,57 8 C. $7,52 1 D. $7,04 8 $41,000 is taxed at ordinary rates, $9,400 is taxed at 0%, and $600 is taxed at 15%. AACSB: Analytical Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation Blooms: Apply Blooms: Remember Learning Objective: 08-01 Determine a taxpayer's regular tax liability and identify tax issues associated with the process. Level of Difficulty: 3 Hard Topic: Regular Federal Income Tax Computation

61.

Allen Green is a single taxpayer with an AGI (and modified AGI) of $210,000, which includes $170,000 of salary, $25,000 of interest income, $10,000 of dividends, and $5,000 of long-term capital gains. What is Allen's net investment income tax liability this year, rounded to the nearest whole dollar amount?

A. $2,46 5 B. $1,52 0 C. $57 0 D. $38 0 The tax is the 3.8% times the lesser of: (a) $40,000 net investment income or (b) $210,000 modified AGI - $200,000 threshold. AACSB: Analytical Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation Blooms: Apply Blooms: Remember Learning Objective: 08-01 Determine a taxpayer's regular tax liability and identify tax issues associated with the process. Level of Difficulty: 3 Hard Topic: Regular Federal Income Tax Computation

62.

Which of the following is not a barrier to income shifting among family members?

A. The assignment of income doctrine B. Net unearned income for children 18 and younger taxed at parents' marginal tax rates C. Elimination of preferential tax rates (on dividends and long-term capital gains) for dependents D. Two of the above A and B reduce the benefits of shifting income to family members. However, under the tax laws, preferential rates on dividends or long-term capital gains apply to taxpayers who are dependents of others so this is not a barrier to income shifting among family members.

AACSB: Reflective Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 08-01 Determine a taxpayer's regular tax liability and identify tax issues associated with the process. Level of Difficulty: 2 Medium Topic: Regular Federal Income Tax Computation

63.

The Olympians have three children. The kiddie tax applies to unearned income received by which of the following children?

A. Poseidon is a 20-year-old full-time student who does not support himself B. Demeter, a 23-year-old full-time student who supports herself with a job at a grocery store C. Zeus is 20 years old and not a student D. Two of the above E. None of the above Because Poseidon is under the age of 24, a full time student, and does not support himself, his income is subject to the kiddie tax. AACSB: Reflective Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation Blooms: Apply Blooms: Remember Learning Objective: 08-01 Determine a taxpayer's regular tax liability and identify tax issues associated with the process. Level of Difficulty: 2 Medium Topic: Regular Federal Income Tax Computation

64.

Assuming the kiddie tax applies, what amount of a child's income is subject to the kiddie tax?

A. All of it B. All of the unearned income C. The net unearned income D. Taxable income less the standard deduction The kiddie tax base is the child's net unearned income. Net unearned income is the lesser of (1) the child's gross unearned income minus $2,100 or (2) the child's taxable income (the child is not taxed on more than her taxable income).

AACSB: Reflective Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation Blooms: Remember Learning Objective: 08-01 Determine a taxpayer's regular tax liability and identify tax issues associated with the process. Level of Difficulty: 1 Easy Topic: Regular Federal Income Tax Computation

65.

During 2016, 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?

A. $ 0 B. $2,20 0 C. $2,80 0 D. $1,75 0 $2,800 interest income minus $1,050 standard deduction for person claimed as a dependent on another's tax return.

AACSB: Analytical Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation Blooms: Analyze Blooms: Apply Learning Objective: 08-01 Determine a taxpayer's regular tax liability and identify tax issues associated with the process. Level of Difficulty: 2 Medium Topic: Regular Federal Income Tax Computation

66.

During 2016, Jasmine (age 12) received $2,400 from a corporate bond. She also received $600 from a savings account established for her by her parents. Jasmine lives with her parents and she is their dependent. Assuming her parents' marginal tax rate is 28%, what is Jasmine's gross tax liability?

A. $ 0 B. $10 5 C. $25 2 D. $35 7 Jasmine's taxable income is $1,950 ($3,000 minus $1,050 standard deduction). Her net unearned income is $900 ($3,000 gross unearned income minus $2,100). This is taxed at 28% ($252 tax). The remaining $1,050 of her taxable income ($1,950 minus 900 taxed at parents' rate) is taxed at 10% ($100 tax). Total tax is $357 ($252 + 105).

AACSB: Analytical Thinking AICPA: BB Critical Thinking Accessibility: Keyboard Navigation Blooms: Analyze Blooms: Apply Learning Objective: 08-01 Determine a taxpayer's regular tax liability and identify tax issues associated with the process. Level of Difficulty: 3 Hard

Topic: Regular Federal Income Tax Computation...