ch 7 tax problems

Problems

49. [LO 1] Whitney received $75,000 of taxable income in 2014. All of the income was salary from her employer. What is her income tax liability in each of the following alternative situations?

a. She files under the single filing status.

b. She files a joint tax return with her spouse. Together their taxable income is $75,000.

c. She is married but files a separate tax return. Her taxable income is $75,000.

d. She files as a head of household.

50. [LO 1] In 2014, Lisa and Fred, a married couple, have taxable income of $300,000. If they were to file separate tax returns, Lisa would have reported taxable income of $125,000 and Fred would have reported taxable income of $175,000. What is the couple’s marriage penalty or benefit?

51. [LO 1] In 2014, Jasmine and Thomas, a married couple, have taxable income of $150,000. If they were to file separate tax returns, Jasmine would have reported taxable income of $140,000 and Thomas would have reported taxable income of $10,000. What is the couple’s marriage penalty or benefit?

52. [LO 1] Lacy is a single taxpayer. In 2014, her taxable income is $38,000. What is her tax liability in each of the following alternative situations?

a. All of her income is salary from her employer.

53. [LO 1]. Henrich is a single taxpayer. In 2014, his taxable income is $425,000. What is his tax liability (including the net investment income tax) in each of the following alternative scenarios?

a. All of his income is salary from his employer.

b. His $425,000 of taxable income includes $2,000 of long-term capital gain that is taxed at preferential rates.

c. His $425,000 of taxable income includes $55,000 of long-term capital gain that is taxed at preferential rates.

d. Henrich has $195,000 of taxable income, which includes $50,000 of long-term capital gain that is taxed at preferential rates. Assume his modified AGI is $210,000.

54. [LO 1] In 2014, Sheryl is claimed as a dependent on her parent’s tax return. Her parents’ ordinary income marginal tax rate is 35%. Sheryl did not provide more than half her own support. What is Sheryl’s tax liability for the year in each of the following alternative circumstances?

a. She received $7,000 from a part-time job. This was her only source of income. She is 16 years old at year-end.

b. She received $7,000 of interest income from corporate bonds she received several years ago. This is her only source of income. She is 16 years old at year-end.

c. She received $7,000 of interest income from corporate bonds she received several years ago. This is her only source of income. She is 20 years old at year end and is a full time student.

d. She received $7,000 of qualified dividend income. This is her only source of income. She is 16 years old at year end.

Total tax

$750

(10) + (13)

55. [LO 1] In 2014, Carson is claimed as a dependent on his parent’s tax return. His parents’ ordinary income marginal tax rate is 28%. Carson’s parents provided most of his support. What is Carson’s tax liability for the year in each of the following alternative circumstances?

a. Carson is 17 years old at year end and earned $12,000 from his summer job and part-time job after school. This was his only source of income.

b. Carson is 23 years old at year end. He is a full-time student and earned $12,000 from his summer internship and part-time job. He also received $5,000 of qualified dividend income.

56. [LO 2] Brooklyn files as a head of household for 2014 and claims a total of three exemptions (3 × 3,950 = $11,850). She claimed the standard deduction of $9,100 for regular tax purposes. Her regular taxable income was $80,000. What is Brooklyn’s AMTI?

57. [LO 2] Sylvester files as a single taxpayer during 2014 and claims one personal exemption. He itemizes deductions for regular tax purposes. He paid charitable contributions of $7,000, real estate taxes of $1,000, state income taxes of $4,000 and interest on a home equity loan of $2,000. Sylvester’s regular taxable income is $100,000.

a. What is Sylvester’s AMTI if he used the home-equity proceeds to purchase a car?

b. What is Sylvester’s AMTI if he used the home-equity loan proceeds to build a new garage next to his home?

58. {Tax Forms} [LO 2] In 2014, Nadia has $100,000 of regular taxable income. She itemizes her deductions as follows: real property taxes of $1,500, state income taxes of $2,000, and mortgage interest expense of $10,000 (not a home equity loan). In addition, she receives tax exempt interest of $1,000 from a municipal bond (issued in 2006) that was used to fund a new business building for a (formerly) out-of-state employer. Finally, she received a state tax refund of $300 from the prior year.

a. What is Nadia’s AMTI this year if she deducted $15,000 of itemized deductions last year (she did not owe AMT last year)? Complete Form 6252 (through line 28) for Nadia.

b. What is Nadia’s AMTI this year if she deducted the standard deduction last year (she did not owe any AMT last year)? Complete Form 6252 (through line 28) for Nadia.

59. {Tax Forms} [LO 2] In 2014, Sven is single and has $120,000 of regular taxable income. He itemizes his deductions as follows: real property tax of $2,000, state income tax of $4,000, mortgage interest expense of $15,000 (not home-equity loan). He also paid $2,000 in tax preparation fees and has a positive AMT depreciation adjustment of $500. What is Sven’s alternative minimum taxable income (AMTI)? Complete Form 6251 (through line 28) for Sven.

60. [LO 2] Olga is married and files a joint tax return with her husband. What amount of AMT exemption may she deduct under the following alternative circumstances? (Use 2014 AMT exemption amounts.)

a. Her AMTI is $90,000.

b. Her AMTI is $180,000.

c. Her AMTI is $490,000.

61. [LO 2] Corbett’s AMTI is $130,000. What is his AMT exemption under the following alternative circumstances? (Use 2014 AMT exemption amounts.)

a. He is married and files a joint return.

b. He is married and files a separate return.

c. His filing status is single.

d. His filing status is head of household.

62. [LO 2] In 2014, Juanita is married and files a joint tax return with her husband. What is her tentative minimum tax in each of the following alternative circumstances?

a. Her AMT base is $100,000, all ordinary income.

b. Her AMT base is $250,000, all ordinary income.

c. Her AMT base is $100,000, which includes $10,000 of qualified dividends.

d. Her AMT base is $250,000, which includes $10,000 of qualified dividends.

63. [LO 2] Steve’s tentative minimum tax (TMT) for 2014 is $15,000. What is his AMT if

a. His regular tax is $10,000?

b. His regular tax is $20,000?

64. {Tax Forms} [LO 2] In 2014, Janet and Ray are married filing jointly. They have five dependent children under 18 years of age. Janet and Ray’s taxable income is $140,000, and they itemize their deductions as follows: real property taxes of $5,000, state income taxes of $9,000, and mortgage interest expense of $15,000 (not home-equity loan). What is Janet and Ray’s AMT? Complete Form 6251 for Janet and Ray. (Use 2014 AMT exemption amounts).

65. {Tax Forms} [LO 2] In 2014, Deon and NeNe are married filing jointly. They have three dependent children under 18 years of age. Deon and NeNe’s AGI is $805,050, their taxable income is $714,000, and they itemize their deductions as follows: real property taxes of $10,000, state income taxes of $40,000, miscellaneous itemized deductions of $4,000 (subject to but in excess of 2% AGI floor), charitable contributions of $11,050, and mortgage interest expense of $41,000 ($11,000 of which is attributable to a home-equity loan used to buy a new car). What is Deon and NeNe’s AMT? Complete Form 6251 for Deon and NeNe.

66. [LO 3] Brooke works for Company A for all of 2014, earning a salary of $50,000.

1. What is her FICA tax obligation for the year?

b. Assume Brooke works for Company A for half of 2014, earning $50,000 in salary and she works for Company B for the second half of 2014, earning $70,000 in salary. What is Brooke’s FICA tax obligation for the year?

67. [LO 3] Rasheed works for Company A, earning $350,000 in salary during 2014. Assuming he has no other sources of income, what amount of FICA tax will Rasheed pay for the year?

68. [LO 3]. Alice is self employed in 2014. Her net business profit on her Schedule C for the year is $140,000. What is her self-employment tax liability for 2014?