FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 10: Individuals: Income, deductions, and Credits

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 31

Multiple Choice

Review LaterAdd Note

Review Later

During the current year,Khalid was in an automobile accident and suffered physical injuries.The accident was caused by Rashad's negligence.Khalid threatened to file a lawsuit against Amber Trucking Company,Rashad's employer,claiming $50,000 for pain and suffering,$90,000 for loss of income,and $70,000 in punitive damages.Amber's insurance company will not pay punitive damages;therefore,Amber has offered to settle the case for $100,000 for pain and suffering,$90,000 for loss of income,and nothing for punitive damages.Khalid is in the 35% marginal tax bracket.What is the after-tax difference to Khalid between Khalid's original claim and Amber's offer?

A) Amber's offer is $20,000 less.($50,000 + $90,000 + $70,000 - $100,000 - $90,000) .
B) Amber's offer is $7,000 less.[($50,000 + $90,000 + $70,000 - $100,000 - $90,000) × .35) ].
C) Amber's offer is $4,500 more.{$190,000 - ($50,000 + $90,000) + [$70,000 × (1 - .35) ]}.
D) Amber's offer is $22,000 more.[($190,000 - $210,000) + ($120,000 × .35) ].
E) None of these.

F) All of the above
G) A) and D)

Correct Answer

verified

Show Answer

Question 32

True/False

Review LaterAdd Note

Review Later

A taxpayer may not deduct the cost of new curbing (relative to a personal residence),even if the construction is required by the city and the curbing provides an incidental benefit to the public welfare.

A) True
B) False

Correct Answer

verified

Show Answer

Question 33

Multiple Choice

Review LaterAdd Note

George and Martha are married and file a joint tax return claiming their two children,ages 10 and 8 as dependents.Assuming their AGI is $119,650,George and Martha's child tax credit is:

Byron owned stock in Blossom Corporation that he donated to a museum (a qualified charitable organization) on June 8 this year.What is the amount of Byron's deduction assuming that he had purchased the stock for $10,500 last year on August 7,and the stock had a fair market value of $13,800 when he made the donation?

Chad pays the medical expenses of his son,James.James would qualify as Chad's dependent except that he earns $7,500 during the year.Chad may claim James' medical expenses even if he is not a dependent.

Tim and Janet were divorced.Their only marital property was a personal residence with a value of $120,000 and cost of $50,000.Under the terms of the divorce agreement,Janet would receive the house and Janet would pay Tim $15,000 each year for 5 years,or until Tim's death,whichever should occur first.Tim and Janet lived apart when the payments were made to Tim.The divorce agreement did not contain the word "alimony."

Thelma and Mitch were divorced.The couple had a joint brokerage account that included stocks with a basis of $600,000 and a fair market value of $1,000,000.Under the terms of the divorce agreement,Mitch would receive the stocks and Mitch would pay Thelma $100,000 each year for 6 years,or until Thelma's death,whichever should occur first.Thelma and Mitch lived apart when the payments were made by Mitch.Mitch paid the $600,000 to Thelma over the six-year period.The divorce agreement did not contain the word "alimony." Then,Mitch sold the stocks for $1,300,000.Mitch's recognized gain from the sale is:

Ashley received a scholarship to be used as follows: tuition $6,000;room and board $9,000;and books and laboratory supplies $2,000.Ashley is required to include only $9,000 in her gross income.

If a scholarship does not satisfy the requirements for a gift,the scholarship must be included in gross income.

Jack received a court award in a civil libel and slander suit against National Gossip.He received $120,000 for damages to his professional reputation,$100,000 for damages to his personal reputation,and $50,000 in punitive damages.Jack must include in his gross income as a damage award:

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 2015 fall semester are as follows: $2,400 tuition,$250 books and course materials,and $1,600 room and board.Abigail's expenses for the 2015 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 reports a combined AGI with his wife Allie of $114,000 for 2015.Determine Bradley's available education tax credit for 2015.

In the current year,Jerry pays $8,000 to become a charter member of Mammoth University's Athletic Council.The membership ensures that Jerry will receive choice seating at all of Mammoth's home basketball games.Also this year,Jerry pays $2,200 (the regular retail price) for season tickets for himself and his wife.For these items,how much qualifies as a charitable contribution?

Letha incurred a $1,600 prepayment penalty to a lending institution because she paid off the mortgage on her home early.The $1,600 is deductible as interest expense.

The maximum child tax credit under current law is $1,500 per qualifying child.

Points paid by the owner of a personal residence to refinance an existing mortgage must be capitalized and amortized over the life of the new mortgage.

Both education tax credits are available for qualified tuition expenses,and in certain instances,also may be available for room and board.

Personal expenditures that are deductible as itemized deductions include medical expenses,Federal income taxes,state income taxes,property taxes on a personal residence,mortgage interest,and charitable contributions.

Under the terms of a divorce agreement,Lanny was to pay his wife Joyce $2,000 per month in alimony and $500 per month in child support.For a twelve-month period,Lanny can deduct from gross income (and Joyce must include in gross income) :

In December 2015,Emily,a cash basis taxpayer,received a $2,500 cash scholarship for the Spring semester of 2016.However,she did not use the funds to pay the tuition until January 2016.Emily can exclude the $2,500 from her gross income in 2015.

The alimony rules: