Questions -
Q1) Jack and Jill are married and have three dependent children, and they file a joint return in 2014. If they wish to minimize their federal income tax liability and have adjusted gross income (AGI) of $90,000 and their itemized deductions are $10,000, what is there taxable income?
Q2) Jean and Jim are married and file a joint return. The expect to have $415,000 of taxable income in the next year and are considering whether to purchase a personal residence that would provide additional tax deductions of $90,000 for mortgage interest and real estate taxes.
(a) What is their marginal tax rate for making this decision?
(b) What is their tax savings if they acquire the residence?
Q3) Based on the amounts of taxable income below, determine the federal income tax payable in 2014 on each amount assuming the taxpayers are married filing a joint return. Also, for each amount of taxable income, compute the average tax rate and the marginal tax rate.
(a) $30,000 (b) $100,000 (c) $375,000 (d) $600,000
Q4) If a single taxpayer has taxable income of $120,000, how much will he save in taxes if his CPA shows him that he qualifies for an additional deduction of $4,000?
Q5) A single taxpayer in the 25% tax bracket has the opportunity to earn additional taxable income of $10,000 without putting him into a higher tax bracket. How much of the additional income (after taxes) will the taxpayer get to keep?
Q6) Assume that a taxpayer has a marginal tax rate of 33%. How much of the income from a corporate bond earning interest at a 7% rate does the taxpayer keep after taxes are paid on the interest (i.e., what is the adjusted interest rate after taxes)?
Q7) If a taxpayer in the 28% tax bracket has the opportunity to invest in a taxable corporate bond that pays 4% interest or to invest in a tax-exempt municipal bond that pays 3% interest (assuming that all other elements of the two bonds, e.g., risk, are equal), which investment would generate the greater after-tax yield?
Q8) According to the AICPA's Statements on Standards for Tax Services, what belief must a CPA have before taking a pro-taxpayer position on a tax return?
Q9) Which of the following have the same value to all taxpayers: deductions and/or credits. Explain.
Q10) Locate Rev. Rul. 99-7 using the LexisNexis Academic database in the UMUC electronic library. Once you have located the revenue ruling, answer the following questions:
(a) What are the relevant IRC sections that the revenue ruling interprets? (b) What issue(s) does the revenue ruling address? (c) Briefly summarize the revenue ruling's holding.
(d) Identify the principal author of the revenue ruling.