Questions 1 thru 5 are True or False, 6 thru 11 are multiple choice
1) The marginal tax rate is useful in tax planning because it measures the tax effect of a proposed transaction.
2) If a taxpayer's total tax liability is $30,000, taxable income is $100,000; the average tax rate is 30 percent.
True. The average tax = total federal income tax divided by taxable income
3)S Corporations (pass thru entities) result in a single level of taxation. (Are not taxed twice)
True. The income of an S corporation is generally subject to just one level of tax.
4) Taxpayers have the choice of claiming either the personal and dependency exemption or the standard deduction.
False. The standard deduction vs. itemized deduction.
5) An individual who is claimed as a dependent by another person is not entitled to a personal exemption on his or her own return.
6) All of the following items are generally excluded from income except
A) child support payments.
B) interest on corporate bonds.
C) interest on state and local government bonds. (Municipal interest)
D) life insurance proceeds paid by reason of death.
7) All of the following items are included in gross income except
A) alimony received.
B) rental income. (from rental property you own)
C) interest earned on a bank account.
D) child support payments received.
8) All of the following items are deductions for adjusted gross income except
A) alimony paid.
B) moving expenses.
C) student loan interest.
D) real estate taxes.
9) All of the following items are deductions from adjusted gross income except
A) itemized deductions.
B) standard deduction.
Mariana Talos –exam1-01/02/2012
C) personal exemptions.
D) IRA deductions.
10) Edward, a widower whose wife died in 2008, maintains a household for himself and his daughter who qualifies as his dependent. Edward's most favorable filing status for 2011 is
B) surviving spouse.
C) head of household.
D) married filing jointly.
11) Helen, who is single, is considering purchasing a residence that will provide a $28,000 tax deduction for property taxes and mortgage interest. If her marginal tax rate is 25% and her effective tax rate is 20%, what is the amount of Helen's tax savings from purchasing the residence?
B) $7,000 28000x25%=7000
12) Kate is single and a homeowner. In 2011, she has property taxes on her home of $3,000, makes charitable contributions of $2,000, and pays home mortgage interest of $7,000. Kate's adjusted gross income for 2011 is $77,000.
REQUIRED:Calculate Kate’s taxable income for 2011
W-2 Wages $77,000 Adjusted gross income (AGI) Standard deduction: | $77,000 5,800 | | Itemized deductions:|
| Mortgage interest| $ 7000 |
| Real estate taxes| $ 3000 |
| Charitable contributions | $ 2000 |
| Total Itemized Deductions| $12,000 |
Personal and dependency exemptions ($3,700 x 1) $3,700 Taxable income $61,300
13) Brad and Angie are filing a joint tax return and had the following income and deductions during 2011:
Mariana Talos –exam1-01/02/2012
Interest income 10,000
Itemized deduction 16,000
Taxes withheld during year 14,000
REQUIRED: Calculate Brad and Angie's tax amount due or refund for 2011.
Interest income 10,000...