The Tax Formula for Individuals (LO 1.3)

Leslie is a single taxpayer who is under age 65 and in good health. For 2016, she has a salary of $24,000 and itemized deductions of $1,000. Leslie is entitled to one exemption on her tax return.

Table for the standard deductionFiling Status2016 Standard DeductionSingle$ 6,300Married, filing jointly12,600Married, filing separately6,300Head of household9,300Qualifying widow(er)12,600

a.How much is Leslie's adjusted gross income?

$

b.In order to minimize taxable income, Leslie will

in the amount of $.

c.What is the amount of Leslie's taxable income?

$

2-Art is a self-employed installer of home entertainment systems, and he drives his car frequently to installation locations. Art drove his car 15,000 miles for business purposes and 20,000 miles in total. His actual expenses, including depreciation, for operating the auto are $10,000 since he had to have the car repaired several times. Art has always used the actual cost method in the past.

How much is Art's deductible auto expense for the year?

$

3-What is the maximum amount a 45-year-old taxpayer and 45-year-old spouse can put into a Traditional or Roth IRA for 2016 (assuming they have sufficient earned income, but do not have an income limitation and are not covered by another pension plan)?

$

4- Helen paid the following amounts of interest during the 2016 tax year:

Mortgage interest on Dallas residence (loan balance $50,000)$1,585Automobile loan interest (personal use only)440Mortgage interest on Vail residence (loan balance $50,000)3,050Visa and Mastercard interest165Calculate the amount of Helen's itemized deduction for interest for 2016.

$

5- Jennifer is divorced and files a head of household tax return claiming her children, ages 4, 7, and 17, as dependents. Her adjusted gross income for 2016 is $91,300. What is Jennifer's total child credit for 2016?

a.$2,000

b.$1,150

c.$1,650

d.$850

e.None of these are correct.

6- What is a Capital Asset?, Holding Period, and Calculation of Gain or Loss (LO 8.1, 8.2, 8.3)

Martin sells a stock investment for $26,000 on August 2, 2016. Martin's adjusted basis in the stock is $15,000.

a.If Martin acquired the stock on November 15, 2015, calculate the amount and the nature of the gain or loss.

$

b.If Martin had acquired the stock on September 11, 2014, calculate the amount and nature of the gain or loss.

$

7- Quince Corporation has taxable income of $450,000 for its calendar tax year.

Calculate the corporation's income tax liability for the year before tax credits.

Click here to access thetax schedule.

$

8- For each of the following situations, indicate the amount of the penalty that could be imposed on the tax return preparer:

a.A tax return preparer understates the taxpayer's tax liability with a frivolous position and does not disclose the position.

The greater of $orpercent of the income derived by the tax preparer for an undisclosed unrealistic position.

b.A tax return preparer fails to furnish his identifying number.

$

c.A tax return preparer aids a taxpayer in understating a tax liability.

$

d.A tax return preparer endorses and cashes a client's tax refund check.

$