Exam (elaborations)
TAX 503 CHAPTER 8 EXAM QUESTIONS AND ANSWERS
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TAX 503 CHAPTER 8 EXAM QUESTIONS AND ANSWERS...
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Each separate range of income subject to a different tax rate is referredto as a(n) _____ _____ - ANSWER tax bracket
When a married couple's tax liability is smaller using the married filing
jointly status than it would have been if both individuals were unmarried
and filed as single, the difference in the tax liability is called a(n) ____
_____ - ANSWER Marriage benefit
Which of the following taxpayers can use the tax rate schedule to
calculate the tax on all of his or her taxable income without having to
perform additional calculations to determine the tax on varying types of
income? - ANSWER Harold received income from a partnership where
he works full-time and interest from corporate bonds.
Darcy received $2,000 in qualified dividends this year. She has ordinary
income of $20,000. Darcy has no other taxable income. What tax rate
will be assessed on the $2,000, since it is a qualified dividend rather
than ordinary income? - ANSWER 0
Chris has taxable income of $123,000. A portion of this income is from
capital gains and should receive preferential tax treatment. List the steps
below in the order in which they should occur for Chris to be able to
determine his overall tax liability. - ANSWER 1. Split taxable income
into the portion taxed at preferential rates versus the portion taxed at
ordinary rates.
2. Compute the tax separately on each type of income, using the tax rate
schedule on the portion taxed at ordinary rates.
3. Add the tax on the income subject to preferential rates to the tax on
the income subject to ordinary rates.
The term tax bracket refers to the average tax rate that is applied to an
individual's taxable income. - ANSWER False
Which of the following individuals would NOT be subject to the kiddie
tax? - ANSWER Shelby is a 17 year old, full time student who does
, NOT provide half of her own support. She has $3,000 in babysitting
income.
Alex and Alecia used the married filing jointly filing status when they
prepared their tax return. During the current year, their joint tax liability
totaled $9,300. If they were not married and had both filed as single,
Alex would have had a $3,900 tax liability, and Alecia would have had a
$5,000 tax liability. What is the term used for the $400 difference in their
tax liability? - ANSWER Marriage penalty
How does the kiddie tax reduce the incentive to shift income from
parents to children? - ANSWER It mandates that children must pay tax
on most unearned income at the higher rate used by trusts and estates.
Which of the following types of income may be taxed at rates lower than
the tax rate schedule would dictate? (Check all that apply.) - ANSWER
- Qualified dividend income
- Long-term capital gain income
Which of the following tax provisions was implemented to insure that the
taxpayer pays some level of income tax, despite the disproportionate
use of tax preference items to reduce regular taxable income. -
ANSWER Alternative minimum tax
Christina's taxable income is $35,000, Charles' is $50,000, and Chris' is
$500,000. Each of these taxpayers additionally earned $1,000 of long
term capital gain income in 2019. All of the taxpayers file single. Which
of the following answers is correct regarding the amount of tax liability
assessed on the capital gain? - ANSWER Chris will pay $200 in tax.
Charlie's regular tax liability is $43,695. His tentative minimum tax is
$58,304. He doesn't have any tax credits. What is the amount of
Charlie's alternative minimum tax (AMT) and how much will he actually
pay in tax for the current year? - ANSWER AMT: $14,609; Tax:
$58,304
During the current year, Barry (single taxpayer) has taxable income of
$60,000. Of that amount, $10,000 is long-term capital gain. How will
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