ACCOUNTING-Individual Income Taxation Take Home Quiz 1 Fall 2015

Individual Income
Taxation
Take Home Quiz 1
Fall 2015
PROBLEM 1

Jan, 38, is single and has AGI of $123,000 in 2015. Her potential itemized deductions before any
limitations for the year total $77,650 and consist of the following:

Medical expenses (before floor) $17,500
Interest on home mortgage ($580,000
acquisition debt) 31,900
State income tax 6.090
State sales tax 960
Real estate tax 7,700
Charitable contribution 13,500

What is the total amount of itemized deductions Jan may
claim on her tax return, what is Jan’s taxable income and tax liability?

PROBLEM 2

For each of the following situations determine the requested
amounts.

Situation 1

Beth (age 43) and Bart (age 48) are
married taxpayers who choose to file a joint tax return. They have three minor dependent children (Barbara,
Bonnie and Baxter). Bonnie and Baxter
are in elementary school. Barbara is 21
and a full-time college student. Barbara
earned $5,600 at a job and had $15 in interest income during 2015. Barbara did not provide more than ½ of her
own support. Beth’s step-mother (age 72) and one of her step-sisters (age 49),
also live with them and qualify as Beth and Bart’s dependents. Beth and Bart’s total gross income for 2015
is $172,000. They have $12,800 of for AGI deductions and their itemized
deductions (after any floors) total $30,900 and are comprised of the following:

Medical $3,200
Charitable Contributions 4,000
Mortgage interest
14,200
Real Estate taxes 8,000
Miscellaneous itemized 1,500

Filing status, number of
exemptions, taxable income and tax liability for Beth and Bart?

Filing status, number of
exemptions, taxable income and tax liability for Barbara?

Situation 2

Curt, age 65 and single, maintained
a home where his mother resided for the entire year. He earned a salary of $69,000. He paid all of the bills related to his
mother since she had no income for 2015.
Curt also incurred itemized deductions of $8,520 (none subject to any
AGI limitations)

Filing status, number of
exemptions, taxable income and tax liability for Curt?

PROBLEM 3

For each of the following situations, determine the amount
of Gross Income to be included by the taxpayer.

Situation 1

April received the following items in 2015

Salary $
35,800
Productivity bonus 3,000
Alimony 9,000
Child support 20,000
State tax refund (no deduction
taken in 2014) 1,530
Interest on Wayne County
school bonds 10,000
Worker’s compensation 11,000
Dental insurance premiums (paid by
employer) 1,700
Medical insurance premiums (paid by
employer) 6,000
Reimbursement for medical benefits
(not deducted) 500
Reimbursement for lost wages from
an employer
provided plan 1,000
Life insurance proceeds from
deceased uncle’s policy 15,000

Situation 2

John, age 23, is a full time student at Wayne State University
and a candidate for a bachelor’s degree in Accounting. During 2015, he received the following items:

Salary $
4,200
Sale of term papers 400
Loan from financial aid office 7,500
Cash prize from radio contest 700
Inheritance from aunt 30,000
Unemployment
compensation 1,000
Scholarship for room and board 4,000
Tuition Scholarship 2,000
Spring Break trip paid for by grandfather 950

PROBLEM 4

Courtney made the following contributions during 2015. Courtney
had purchased the stock and painting many years ago as investments.

Charity

Property

Cost

Fair Market Value

University

Cash

$15,000

$15,000

Red Cross

Cash

$14,500

$14,500

History
Museum

Painting

5,000

82,000

Medical
Center

Stock

28,000

17,000

Assume Courtney has AGI of $150,000 what is her maximum
charitable contribution for 2015?

Assume Courtney has AGI of $260,000 what is her maximum charitable
contribution for 2015?

PROBLEM 5

In 2015,
Georgia had the following insured personal casualty losses (arising from one
casualty). Georgia also had $20,000
adjusted gross income for the year.

Adjusted Fair Market Value Insurance
Asset Basis Before After Recovery
A 1,200 1,000 200 100
B 3,000 2,000 0 500
C
600 800 0 100

What is Georgia’s itemized deduction for her casualty
losses?

PROBLEM 6

Calculate the net income includible in taxable income for
the following hobby. Presume Val has AGI
of $69,000 before considering anything from the hobby activity.

Income

27,000

Mortgage interest and property taxes allocable to hobby

9,000

Depreciation

5,000

Supplies and fees

11,000

Telephone for hobby

2,800

Computer usage fees

2,000

In the alternative, what would be Val’s adjusted gross
income for the year if the activity were not considered a hobby?

PROBLEM 7

In 2014 Sara graduated from Wayne State University and got a
job in Detroit, where she lived. In
February of 2015 she got a job offer from a company headquartered in Atlanta,
Georgia. She accepted the job offer and
started work in Atlanta on March 1, 2015.
She is still employed at the company today and has no intention of
changing jobs anytime soon. After the
offer and prior to starting work, she traveled to Atlanta to look for suitable
housing. Her round trip flight cost $350
and she incurred $170 in rental car expenses, and $480 in costs for meals and
lodging. She successfully found a place
to live. Also prior to starting work she
hired a moving company to more her possessions to Atlanta for $1,100 and she
drove her own car the 723 miles to Atlanta.
She stayed two nights in motels along the way, incurring $366 in costs
for lodging and $118 in costs for meals along the way. (For 2015, the standard mileage rate for
using your vehicle to move to a new home is 23 cents per mile.) Her new
employer provided her, like its other new out of state hires, a moving
allowance of $750. What was the effect
on Sara’s AGI for 2015 from these transactions?

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