Wilma is CEO of and owns 100 percent of WT Enterprises, a cash-basis, calendar-year corporation. The company has always been profitable but over the last five years Wilma's salary has increased from over $400,000 per year to over $1,000,000 and it has failed to pay dividends. Which of the following will not occur if the IRS determines that $500,000 of her salary is unreasonable?

Select one:

a. Wilma will be eligible for a refund of Medicare taxes.

b. Wilma will pay an additional tax on the $500,000 recharacterized as dividend.

c. WT will be eligible for a refund of a portion of FICA taxes it paid.

d. WT will lose a deduction for the $500,000 recharacterized as a dividend.

Holly and Ken (both age 46) are married and have two children living at home: Sara is 19 and earned $19,000 as a secretary. Claudia is 15 and is in high school. Claudia made $4,200 as a model this year, all of which was put into a trust account except for her managers fee. Ken made $67,200 as an engineer and Holly earned $7,000 as a substitute teacher. If they have $18,000 of itemized deductions, what is Holly and Kens tax liability on their joint return in 2018 after any allowable credits?

See the reference table(s) with individual income tax rates to answer this question.

Select one:

a. $1,643.00

b. $5,643.00

c. $6,287.50

d. $3,643.00

Vera and Jake (both age 45) are a married couple with AGI of $327,300 for 2018. They paid $20,000 of mortgage interest, $8,000 of unreimbursed medical expenses, $4,000 of property taxes, and $9,000 of charitable contributions for the year. How much may they claim for itemized deductions in 2018?

Select one:

a. $40,220

b. $25,000

c. $32,520

d. $33,000

Sebastian(age 46) and Kaitlin(age 45) are married and file a joint tax return. Their 2018 adjusted gross income is $390,000 and includes $2,600 in investment income ($2,000 in short-term capital gains and $600 of interest income). They provided 100% of the support for their daughter, Olivia, age 26,who lives with them, and earned $4,700 from her part-time job. They also provided 100 percent of the support for Sebastians mother, Emily, who is 67, blind, and lives in a nursing home. Emily received $4,000 in Social Security benefits and $450 of interest income. Sebastian and Kaitlinalso paid the following amounts in 2018: $38,500 interest on their home mortgage (acquisition debt) on their principal residence purchased in 1995. The principal amount of the mortgage is $1,250,000. They also paid $8,250 in real estate taxes on the home. $6,000 investment interest expense $7,600 unreimbursed employee business expenses (none for meal or entertainment expenses) $1,650 in state income taxes to the state of California where Sebastian worked for part of the year $1,400 in state and local general sales taxes $490 fee for preparation of their 2017 tax return, paid to their CPA in 2018 $2,500 contributed to the State University Athletic Booster Club (to allow them to purchase tickets in good seat locations for football games) and $1,000 contributed to the State University Business School Alumni Association for academic scholarships. They also donated a painting (purchased 11 years ago for $4,200) to the Salvation Army, which was then sold for its fair market value of $17,000 at its fundraising auction. How much can Sebastian and Kaitlin deduct for interest expense for 2018?

Select one:

a. $30,800

b. $2,600

c. $49,500

d. $33,400

Ikitos AGI was $68,000 in 2017 and 2018. His home was broken into and his TV, DVD, VCR and computer were all stolen. The properties had a basis of $15,000 and a current fair market value of $9,000. Later that year, his car was hit by a garbage truck. It cost Ikito $9,000 to have the car repaired. Ikito didnt believe in insurance, so he received no reimbursements. In addition, the garbage company filed for bankruptcy after the accident. How much may Ikito deduct as an itemized deduction if these events occurred in 2018 and if they instead happened in 2017, respectively??

Select one:

a. $10,200 in 2018; $0 in 2017

b. $17,800 in 2018; $0 in 2017

c. $0 in 2018; $11,000 in 2017

d. $11,000 in 2018; $0 in 2017