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TAX4001 - Exam 3 (FINAL).
TAX4001 - Exam 3 (FINAL).
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TAX4001 - Exam 3 (FINAL)A fixed stream of income for a future period of time, where the owner pays a series of
premiums that the insurance company invests on the owner's behalf, is a ___________.
- ANS-annuity contract
A married couple has 1 dependent child. The husband passed away this year. What is
the filing status for the wife for this year? What about the year afterwards? -
ANS-Married filing jointly for this year and next year.
=====Explanation=======
Surviving spouse for the first two taxable years.
This year = married filing jointly.
year after = married filing jointly.
A taxpayer paid $10 a share for 7,750 shares of ABC company stock. The next year,
ABC company declared they are bankrupt and can only pay 50% of their outstanding
debt. What is the tax consequences to the taxpayer of ABC Company's bankruptcy? -
ANS-$77,500 long-term capital loss
=====Explanation=======
7,750 x $10 = $77,500
Worthless security when company declares stock has no value and is bankrupt.
Considered a long-term capital loss.
An annual amount of foreign source earned income on which expatriates are not
required to pay federal income tax. - ANS-Foreign earned income exclusion.
An employee receives a form ________, and an independent contractor receives a form
_______. - ANS-W-2
1099
An individual who is unmarried on the last day of the year has a filing status of
_____________. - ANS-Single.
, Debra, an single taypayer with a 13-year-old son, Jake, who is a dependent. Below is
Debra's information:
Salary: $95,000
Interest and dividend income: $12,800
Capital gain from sale of investments: $11,000
Above-the-line deductions: $800
Itemized deductions: $6,900
What is Debra's adjusted gross income (AGI) and taxable income? - ANS-AGI $118,000
Taxable income = $99,650
=====Explanation=======
(Total income) - (Above the line Deductions) = AGI
($95,000 + $12,800 + $11,000) - ($800) = $118,000
(AGI) - (Standard Deduction, or Itemized Deduction, whichever is greater) - (QBI) =
Taxable income
($118,000) - ($18,350 head of household standard deduction because it's greater) =
$99,650
How do you calculate a taxpayer's AGI? - ANS-(Total income) - (Above the line
Deductions) = AGI
How do you calculate a taxpayer's taxable income? - ANS-(AGI) - (Standard Deduction,
or Itemized Deduction, whichever is greater) - (QBI) = Taxable income
How do you calculate the non-taxable return of an investment? - ANS-(Exclusion Ratio)
x (Payments) = Non-taxable return of investment
Marlo, a publicly held corporation with a 21% tax rate, has agreed to pay an annual
salary of $1.3 million to its employee, Mrs. Ryman. Compute Marlo's after-tax cost of the
salary if Mrs. Ryman is Marlo's Principal Executive Officer (PEO). - ANS-Answer:
$1,090,000
=====Explanation=======
$1,300,000 - ($1,000,000 * 0.21) = $1,090,000
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