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Exam 8: Individual Income Tax Computation and Tax Credits

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Question 21

True/False

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Due to the alternative minimum tax rate structure, a taxpayer with a large amount of long-term capital gains may be susceptible to the alternative minimum tax.

A) True
B) False

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Question 22

Multiple Choice

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If there is not enough gross tax liability to use the foreign tax credit, ________.

A) it expires unused
B) it is carried back two years or forward 20 years
C) it is carried back three years or forward five years
D) it is carried back one year or forward 10 years

E) B) and C)
F) C) and D)

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Question 23

Multiple Choice

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Which of the following statements concerning tax credits is true?

Maria and Tony are married. They are preparing to file their 2019 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 2019? (Use Tax rate schedules.)

Maria and Tony are married. They are preparing to file their 2019 tax return. If they were to file as single taxpayers, Maria and Tony would report $40,000 and $60,000 of taxable income, respectively. On their joint tax return, their taxable income is $100,000. How much of a marriage penalty or benefit will Maria and Tony experience in 2019? (Use Tax rate schedules.)

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

In 2019, John (52 years old)files as a head of household with one 18-year old dependent (qualifying)child. John is eligible to claim a $700 American opportunity credit for the year. John did not have any taxes withheld by his employer during the year and he did not make any estimated tax payments. After taking credits into account, what is the amount of John's taxes payable or refund, assuming that his AGI is $26,000 (all from salary)and his taxable income is $8,000?

Which of the following statements concerning estimated tax payments and underpayment penalties for individuals is true?

Which of the following statements regarding FICA taxes is true?

Which of the following is not a taxpayer filing status for purposes of determining the appropriate tax rate schedule?

Baker is single and earned $225,000 of salary as an employee in 2019. How much should his employer have withheld from his paycheck for FICA taxes? (Round your answer to the nearest whole dollar amount.)

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

Pyrrha, a 12-year-old dependent of Epimetheus and Pandora, received $8,200 of interest income in 2019. What is Pyrrha's gross tax liability for the year?

Which of the following statements concerning a comparison between employees and independent contractors is most accurate?

In certain circumstances a child with very little income may have at least a portion of their income taxed at the trust and estate tax rates.

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

All else equal, taxpayers are more likely to be classified as employees rather than independent contractors if they are allowed to determine their own working hours and work without frequent oversight.

The wage base for which of the following taxes is capped?

For married couples, the additional Medicare tax is based on the couple's combined wages.

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