Please help me understand taxation.

1. In computing the foreign tax credit, the greater of the foreign income taxes paid or the overall limitation is allowed. ________ 2. An individual generally may claim a credit for adoption expenses in the year in which the expenses are paid. ________ 3. Madge’s tentative AMT is $112,000. Her regular income tax liability is $99,000. Madge’s AMT is $13,000. ________ 4. A physician recommends a private school for Ellen’s dependent child. Because of the physician’s recommendation, the cost of the private school will qualify as a medical expense deduction (subject to percentage limitations). ________ 5. A deduction for parking and other traffic violations incurred during business use of the automobile is allowed under the automatic mileage method. ________ 6. Statutory employees: a. Report their expenses on Form 2106. b. Include common law employees. c. Are subject to income tax withholdings. d. Claim their expenses as deductions for AGI. e. None of the above. 7. A worker may prefer to be classified as an employee (rather than an independent contractor) for which of the following reasons: a. To claim unreimbursed work-related expenses as a deduction for AGI. b. To avoid the self-employment tax. c. To avoid the cutback adjustment on unreimbursed business entertainment expenses. d. To avoid the 2%-of-AGI floor on unreimbursed work-related expenses. e. None of the above. 8. John and Mary are married, ages 33 and 32, and together have AGI of $140,000 in 2014. They have four dependents and file a joint return. They pay $5,000 for a high deductible health insurance policy and contribute $2,600 to a qualified Health Savings Account. During the year, they paid the following amounts for medical care: $12,200 in doctor and dentist bills and hospital expenses, and $4,000 for prescribed medicine and drugs. In October 2014, they received an insurance reimbursement of $5,400 for the hospitalization. They expect to receive an additional reimbursement of $1,000 in January 2015. Determine the maximum deduction allowable for medical expenses in 2014. a. $1,800. b. $3,400. c. $9,200. d. $12,800. e. None of the above. 9. Ericka, who is single and age 30, provides you with the following information from her financial records for 2014. Regular income tax liability $ 57,315 AMT positive adjustments 51,000 AMT preferences 25,000 Taxable income 203,000 Calculate his AMT exemption for 2014. a. $10,000. b. $23,450. c. $17,000. d. $51,900. e. None of the above.

10. Myles has generated general business credits over the years that have not been utilized. The amounts generated and not utilized follow:

2010	$3,500
2011	6,500
2012	6,000
2013	7,500

In the current year, 2014, his business generates an additional $17,000 general business credit. In 2014, based on his tax liability before credits,he can utilize a general business credit of up to $25,000. After utilizing the carry forwards and the current year credits, how much of the general business credit generated in 2014 is available for future years?

a.	$15,500.
b.	$1,000.
c.	$14,000.
d.	$15,000.

11. Bradley has two college-age children, Clint, a freshman at State University, and Abigail, a junior at Northwest University. Both Clint and Abigail are full-­time students. Clint’s expenses during the 2014 fall semester are as follows: $2,400 tuition, $250 books and course materials, and $1,600 room and board. Abigail’s expenses for the 2014 calendar year are as follows: $10,200 tuition, $1,200 books and course materials, and $3,600 room and board. Tuition and the applicable room and board costs are paid at the beginning of each semester. Bradley is married, files a joint tax return, claims both children as dependents, and has a combined AGI with his wife of $114,000 for 2014. Determine Bradley’s available education tax credit for 2014.

12. Susan generated $55,000 of net earnings from the conduct of a tax preparation business that she operated during the tax-filing season. She also received wages of $66,800 from her full-time job. Compute the self-employment taxes due for 2014.

13. Arlene, who is single, has taxable income for 2014 of $112,000. Calculate her alternative minimum tax, if any, given the following additional information.

AMT adjustments
Positive	$22,000
Negative	(25,000)
Tax preferences	46,000

14. Caroline and Clint are married, have no dependents, and file a joint return in 2014. Use the following selected data to calculate their Federal income tax liability.

AMTI	$285,000
Regular income tax liability	42,066
AMT tax preferences	90,000

15. George is single and age 56, has AGI of $265,000, and incurs the following expenditures in 2014.

Medical expenses (before 10% floor)	$27,000
Interest on home mortgage	15,500
State income tax	7,500
State sales tax	4,500
Real estate tax	8,600
Charitable contribution	6,500
What is the amount of itemized deductions George may claim?

16. Charles, who is single and age 61, had AGI of $400,000 during 2014. He incurred the following expenses and losses during the year.

Medical expenses before 10%-of-AGI limitation	$39,500
State and local income taxes	5,200
Real estate taxes	4,400
Home mortgage interest	5,400
Charitable contributions	4,800
Casualty loss before 10% limitation (after $100 floor)	47,000
Un-reimbursed employee expenses subject to 2%-of-AGI limitation	8,900
Gambling losses (Charles had $7,400 of gambling income)	9,800
Compute Charles’s total itemized deductions for the year.

17. Rocky has a full-time job as an electrical engineer for the city utility. In his spare time, Rocky repairs TV sets in the basement of his personal residence. Most of his business comes from friends and referrals from former customers,although occasionally he runs an ad in the local suburbia newspaper. Typically, the sets are dropped off at Rocky’s house and later picked up by the owner when notified that the repairs have been made.

The floor space of Rocky’s residence is 2,500 square feet, and he estimates that 20% of this is devoted exclusively to the repair business (i.e., 500 square feet). Gross income from the business is $13,000, while expenses (other than home office) are $5,000. Expenses relating to the residence are as follows:

Real property taxes	$4,500
Interest on home mortgage	8,000
Operating expenses of residence	3,000
Depreciation (based on 20% business use) What is Rocky’s net income from the repair business	1,000

a. If heuses theregular(actualexpense)methodof computingthededuction for office inthe home?

b. If heusesthesimplifiedmethod?

18. Jack and Jill are married, have three children, and have earnings during 2014 of $28,500.Do they qualify for the earned income credit? If so, calculate the amount of credit that is available to them.