Tax Credits and Payments

1. In late 2016, Randy and Rachel Erwin paid $8,750 in legal fees, adoption fees, and other expenses directly related to the adoption of an infant son, Jameson. The adoption becomes final in 2017, and the Erwins then pay an additional $10,063 in adoption fees. Their 2017 AGI amounts to $187,125.

a.Randy and Rachel are eligible for a $adoption credit in 2017.

b.If the Erwins' 2017 AGI is $218,000, adoption tax credit is $. (Round any division to three decimal places and round your final answer to the nearest dollar.)

2. Santiago and Amy are married and file a joint tax return, claiming as dependents their three children, ages 12, 14, and 18. Their AGI is $121,000.

Santiago and Amy's child tax credit is $.

3. Ivanna, who has three children under age 13, worked full-time while her husband, Sergio, was attending college for nine months during the year. Ivanna earned $39,525 and incurred $10,575 of child care expenses.

Click here to access thepercentage chartto us for this problem.

The amount of Ivanna and Sergio's credit for child and dependent care expenses is $.

4. Paolo and Isadora Shaw are married, file a joint tax return, and have one dependent child, Dante. The Shaws report modified AGI of $121,115. The couple paid $7,725 of tuition and $6,135 for room and board for Dante, a fulltime first-year student at Serene College.

For 2017, Paola and Isidora may claim an American Opportunity Credit of $

5. Joan is a self-employed consultant. What is her exposure to the Federal self-employment tax? What tax rates that apply to Joan's profits, and the income base amounts for the year?

Individuals withnetearnings of $or more from self-employment are subject to the self-employment tax. For 2017, the self-employment tax is12.4percent of self-employment earnings up to $for the Social Security portion plus2.9percent of the total amount of self-employment earnings for the Medicare portion. Self-employed taxpayers deduct a portion of the self-employment tax in determiningthe self-employment taxas well as a deductionforcomputing AGI.

Tax Research and Filling the Return

6.

Compute the 2017 Federal income tax liability and the marginal and effective tax rates in each of the following independent cases.

Click here to access the2017 tax rate schedule. If required, round the tax liability the nearest dollar. When required, round the average rates to three decimal places before converting to a percentage (i.e. .67073 would be rounded to .671 and entered as 67.1%).

a.Chandler is single and reports taxable income of $146,600.

Tax liability:

$

Marginal rate:

%

Average rate:

%

b.Lamar, a head of household, records taxable income of $84,600.

Tax liability:

$

Marginal rate:

%

Average rate:

%

7.

Standard Deduction Amount

Filing Status

2016

2017

Single

$6,300

$6,350

Married, filing jointly

12,600

12,700

Surviving spouse

12,600

12,700

Head of household

9,300

9,350

Married, filing separately

6,300

6,350

Morgan (age 45) is single and provides more than 50% of the support of Rosalyn (a family friend, age 36), Flo (a niece, age 18), and Jerold (a nephew, age 18). Both Rosalyn and Flo live with Morgan, but Jerold (a citizen of France) lives in Canada. Morgan earns a $95,000 salary, contributes $5,000 to a traditional IRA, and receives sales proceeds of $15,000 for an RV that cost $60,000 and was used only for vacations. She incurs $8,200 in itemized deductions.

The personal exemption amount for is $4,050. Click here to access thestandard deduction tableto use if required.

a.Who qualifies as a dependent of Morgan for the dependency exemption?

All three qualify

b.Morgan's taxable income is $.

c.Using the Tax Rate Schedules (click here), tax liability for Morgan is $for . (Do not round intermediate tax computation but if required, round your final answer to the nearest whole dollar.)

8.

Toby and Nancy are engaged and plan to get married. During 2017, Toby is a full-time student and earns $9,400 from a part-time job. With this income, student loans, savings, and nontaxable scholarships, he is self-supporting. For the year, Nancy is employed and reports $77,800 in wages. The personal exemption amount for 2017 is $4,050.

Click here to access thestandard deduction tableto use. Click here to access theTax Rate Schedules. If an amount is zero, enter, "0". Do not round your intermediate computations. Round your final answer to nearest whole dollar.

a.Compute the following:

Toby

Filing Single

Nancy

Filing Single

Gross income and AGI

$

$

Standard deduction

Personal exemption

Taxable income

$

$

Income tax

$

$

b.Assume that Toby and Nancy get married in 2017 and file a joint return. What is their taxable income and income tax? Round your final answer to nearest whole dollar.

Married

Filing Jointly

Gross income

$

Standard deduction

Personal exemptions

Taxable income

$

Income tax

$

Property and Asset Transactions

Euclid acquires a 7-year class asset on May 9, 2017, for $157,700. Euclid does not elect immediate expensing under 179. He does not claim any available additional first-year depreciation.

Click here to access thedepreciation tableto use for this problem.

If required, round your answers to the nearest dollar.

Euclid's cost recovery deduction is $for 2017 and $for 2018.

Lopez acquired a building on June 1, 2012, for $1,000,000. Compute the depreciation deduction assuming the building is classified as (a) residential and (b) non residential.

Click here to access thedepreciation tableto use for this problem.

If required, round your answers to the nearest dollar.

a.If the building is classified as residential rental real estate, Lopez's cost recovery deduction is $for 2017.

b.If the building is classified as nonresidential real estate, Lopez's cost recovery deduction is $for 2017.

Andre acquired a computer on March 3, 2017, for $2,800. He elects the straight-line method for cost recovery. Andre does not elect immediate expensing under 179. He does not claim any available additional first-year depreciation.

Click here to access thedepreciation tableto use for this problem.

His cost recovery deduction for the computer is $for 2017 and $for 2018.

For his business, McKenzie purchased qualifying equipment that cost $212,000 in 2017. The taxable income of the business for the year is $5,600 before consideration of any 179 deduction.

McKenzie's 179 expense deduction is $for 2017. His 179 carryover to 2018 is $.

On July 16, 2017, Logan acquires land and a building for $500,000 to use in his sole proprietorship. Of the purchase price, $400,000 is allocated to the building, and $100,000 is allocated to the land. Cost recovery of $4,708 is deducted in 2017 for the building (nonresidential real estate).

a.What is the adjusted basis for the land and the building at the acquisition date?

Land

$

Building

$

b.What is the adjusted basis for the land and the building at the end of 2017?

Land

$

Building

$

In 2017, Yesenia receives a gift of real estate with an adjusted basis of $283,000 and a fair market value of $313,000. No gift tax was paid on the transfer.

Yesenia's basis for a gain is $and her basis for a loss is $. If Yesenia later sells the property for $328,000, her recognizedgain

is $.

Complete the following statements regarding the appropriate tax treatment for each sale.

1.Tobo Company buys and sells computers. Any gains from the sale of the computer areordinary

gains.

2.Masahiko sells his personal computer at a $500 gain. Masahiko's gain isa capital

gain.

3.Picco Company has accounts receivable of $50,000. Because Picco needs immediate cash, it sells the receivables for $40,000 to a financial institution. If Picco is a cash basis taxpayer, it has $ofordinary

income.