1. Caroline is retired and receives income from a number of sources. The interest payments are from bonds that Caroline purchased over past years and a disability insurance policy that Caroline purchased.

Distributions from qualified pension plan	$5,400
Interest on bonds issued by City of Austin, Texas	2,500
Social Security benefits	8,200
Interest on U.S. Treasury Bills	2,300
Interest on bonds issued by Ford Motor Company	1,900
Interest on bonds issued by City of Quebec, Canada	2,750
Disability insurance benefits	9,500

How much must she include in gross income for each of the following items:

Amount of pension income included in gross income

Amount of interest income included in gross income

Amount of social security benefits included in gross income

Amount of disability insurance benefits included in gross income

2.

Karin and Chad (ages 30 and 31, respectively) are married and had the following income and expenses in 2018:

Salary income	$110,000
Gambling winnings	2,000
Gambling losses	3,000
Home mortgage interest (acquisition debt of $300,000)	16,640
Real estate taxes	5,400
State income taxes paid	6,300
Medical expenses (unreimbursed)	1,800
Employee business expenses (unreimbursed)	450
Charitable contributions (cash to their church)	760

Karin and Chad will file a joint tax return. Calculate the following amounts:

Adjusted gross income

Medical expense deduction on Schedule A

Taxes deduction on Schedule A

Interest deduction on Schedule A

Total itemized deductions or standard deduction

3.

Henry, a single taxpayer with a marginal tax rate of 32%, sold the following assets during the year:

Asset	Sale Price		Tax Basis			Gain/Loss			Holding Period
ABC Stock	$	50,000	$	25,000		$	25,000		More than 1 Year
XYZ Stock	$	12,000	$	9,000		$	3,000		Less than 1 Year
Stamp Collection	$	10,000	$	5,000		$	5,000		More than 1 Year
RST Stock	$	13,000	$	19,000		$	(6,000	)	Less than 1 Year

Compute the amount from the asset sales that will be taxed at each of the following tax rates:

Amount taxed at 32%

Amount taxed at 28%

Amount taxed at 15%

4.

Jamie is single. In 2018, she reported $100,000 of taxable income, including a long-term capital gain of $5,000. What is her gross tax liability, rounded to the nearest whole dollar amount? (Use the tax rate schedules)

Multiple Choice

$19,443

$18,290

$17,840

$15,000

5.

Kaelyn is single and she brings her four-year-old twins, Matthew and Madeline to daycare so Kaelyn can go to work. She pays the Daycare Center $6,300 for the year. What is the amount of Kaelyn's child and dependent care credit if her AGI for the year was $36,000? (Exhibit 8-9)

Multiple Choice

$1,440

$2,100

$6,000

$0

6.

In 2018 Clark leased a car to drive between his office and various work sites. He also drives the car for personal use. Clark carefully recorded that he drove the car 20,000 miles for business and paid $12,000 of operating expenses for the business use only. In addition, he drove the car 10,000 miles for personal use and paid $4,000 of operating expenses for personal use only. The total miles for 2018 was 30,000 miles, including 20,000 business miles and 10,000 personal miles. What is the maximum amount Clark may deduct as business expenses?

Multiple Choice

$10,900

$12,000

$16,000

$16,350

7.

Marilyn operates a day care center as a sole proprietorship using a calendar year. On August 1, 2018 Marilyn received a prepayment of $4,000 for child care services to be rendered evenly over the next 12 months. She paid rent of $12,000 for her day care center on November 1, 2018 for the next 12 months (the rent is $1,000 per month).

Compute the following amounts for 2018 under both the cash method and under the accrual method.

If she uses the cash method:

Amount of income recognized in 2018 under the cash method

Amount of rent expense deductible in 2018 under the cash method

If she uses the accrual method

Amount of income recognized in 2018 under the accrual method

Amount of rent expense deductible in 2018 under the accrual method

8.

Sheryls AGI is $250,000. Her current tax liability is $52,068. Last year, her tax liability was $48,722. She will not owe underpayment penalties if her total estimated tax payments are at least which of the following (rounded) amounts (assume she makes the required payments each quarter)?

Multiple Choice

$46,861

$48,722

$51,547

$53,594