SOLUTIONS MANUAL FOR

SOLUTIONS MANUAL FOR

Income Tax Fundamentals 2023, 41e Gerald Whittenburg, Steven Gill

QUESTIONS AND PROBLEMS 1 / 4

CHAPTER 1

THE INDIVIDUAL INCOME TAX RETURN

Group 1 – Multiple Choice Questions 1-1

• D The income tax includes elements of social

and economic policy (LO 1.1)

• C The income tax was authorized by the 16th

Amendment in 1913 (LO 1.1)

• C The 1040A and 1040-EZ no longer exist and

the 1120 is for corporations (LO 1.2)

• D Partnerships use Form 1065 to report

income tax information. A partner will report their share of income from a part- nership on a Form1040 (LO 1.2)

• D Capital gains and losses are reported

directly on the face of the Form 1040 (from Schedule D) (LO 1.2)

• D A partnership is not generally a tax-paying

entity (LO 1.2)

• C Student loan interest is a for AGI deduction.

The other responses are all itemized (from AGI) deductions (LO 1.3)

• B The deduction for IRA contributions is a

for AGI deduction (LO 1.3)

• D $98,000 – $13,000 (standard deduction is

less than itemized deductions) (LO 1.3)

• D For AGI adjustments are deducted to get

to AGI (LO 1.3)

• B The larger of the two may be deducted

(LO 1.3)

• A An exclusion reduces gross income (LO 1.3)
• B Filing thresholds generally are the same as

the standard deduction amount (LO 1.4)

• D Ben’s income would need to exceed the

standard deduction to require filing a tax return (LO 1.4)

15. D $25,900 + $1,400 (LO 1.4)

• C Single dependent over 65 and blind thresh-

old is $4,500 for unearned income (LO 1.4)

• C Joan qualifies as either single or head of

household; however, head of household is more advantageous (LO 1.5)

• D Although Dorothy does not live with

Glenda, since Dorothy is a parent that Glenda supports, Glenda may file as head of household (LO 1.5)

• D Taxpayer may file married filing jointly in

year of spouse’s death (LO 1.5)

• C Surviving spouse is preferred to head of

household (LO 1.5)

• E Either Margaret or her sister (but not both)

may claim the mother as a dependent under a multiple support agreement (LO 1.6)

• D The daughter fails the age test to be a

qualifying child and she fails the gross income test ($4,400 in 2022) to be a qualifying relative (LO 1.6)

• D The child tax credit in 2022 is $2,000

(LO 1.6)

• B The child tax credit for the 13-year-old child

is $2,000. The mother does not meet the support test and cannot be claimed (LO 1.6)

• B Must be age 16 or under for child tax credit

(LO 1.6)

• A Head of household standard deduction plus

additional standard deduction for age 65

($19,400 + $1,750) (LO 1.7)

• B Taxpayers age 65 or older are eligible

for an additional standard deduction amount (LO 1.7)

• B Taxpayers that are blind are eligible for

an additional standard deduction amount

(LO 1.7)

• D Earned income plus $400 (LO 1.7)
• E Standard deduction may not exceed typical

amount (LO 1.7)

• D Business inventory is not considered a

capital asset (LO 1.8)

• A Gain of $15,000 ($25,000 amount realized

less $10,000 adjusted basis) has been held for more than 12 months and is long-term

(LO 1.8)

33. C $10,000 = $240,000 – ($270,000 – $40,000)

(LO 1.8)

• A $43,000 – $3,000. Net capital losses of up

to $3,000 may be deducted from ordinary income for individual taxpayers (LO 1.8)

• C Line 7 is capital gain or (loss) (LO 1.9)
• B Preparers must get a signed authorization to

e-file from the taxpayer. (LO 1.10)

• B About 90% of returns are filed electronically

(LO 1.10) 2 / 4

Group 2 – Problems

• Raising revenue to operate the government.
• Furthering economic goals such as reducing unemployment.
• Furthering social goals such as encouraging contributions to charities. (LO 1.1)
• Form 1040
• Schedule B
• Schedule D
• Schedule A
• Schedule 2
• Schedule E
• Schedule 3
• Schedule C
• Schedule 1 (LO 1.2)
• $36,300 = $42,000 + $300 – $6,000.
• $25,900, the greater of itemized deductions or the standard deduction of $25,900.
• $10,400 = $36,300 – $25,900. (LO 1.3)
• $25,000.
• $12,950, the greater of total itemized deductions or the standard deduction amount.
• $12,050 = $25,000 – $12,950. (LO 1.3)
• $53,800 = $54,000 + $2,800 – $3,000 ($7,000 capital loss limited to $3,000).
• $12,950
• $40,850 = $53,800 – $12,950. (LO 1.3 and 1.8)
• $47,500 = $48,000 + $2,500 – $3,000.
• $25,900, the greater of itemized deductions or the standard deduction of $25,900.
• $21,600 = $47,500 – $25,900.
• $2,184 (Tax Table) (LO 1.3, 1.5, and 1.7)
• Adjusted gross income $18,000

Less: Itemized deductions –2,400

Taxable income $15,600 Marco’s tax liability from the Tax Table is $1,670. Note: because they are married and filing separately and Mar- co’s spouse Tatiana itemizes her deductions, Marco must also itemize his deductions, even though the itemized deductions total is less than the standard deduction he would be otherwise entitled to. (LO 1.3, 1.5, and 1.7)

• Adjusted gross income ($13,200 + $1,450) $14,650

Less: Standard deduction –12,950

Taxable income $ 1,700 (LO 1.3, 1.5, and 1.7) (Note: See Chapter 6 for the tax credit computation for dependent college students under age 24.)

• $34,050 = $47,000 – $12,950.
• Tax tables. Taxpayers with income up to $100,000 must use the tax tables.
• $3,884. (LO 1.3, 1.5, and 1.7)
• a. $66,000 = $50,000 + $8,000 + $5,000 + $3,000.
• $63,500 = $66,000 – $2,500.
• $27,000, the greater of itemized deductions or the standard deduction of $25,900.
• $36,500 = $63,500 – $27,000.
• $3,972 (LO 1.3, 1.5, and 1.7)

1-2 Chapter 1 – The Individual Income Tax Return 3 / 4

• a. $89,400 = $85,400 + $4,000.
• $0.
• $63,500 = $89,400 – $25,900 (standard deduction). (LO 1.3, 1.5, 1.6, and 1.7)
• Taxable income is: $28,050 = $41,000 – $12,950. Tax liability from the tax tables not the tax rate schedules:

$3,164. (LO 1.3, 1.5, and 1.7)

• Yes. Since Griffin owes Social Security taxes on the unreported tips (greater than $400), he must file an

income tax return. (LO 1.4)

• a. No. Income is less than the $19,400 standard deduction. Although not required to file, Helen is likely

to be eligible for refundable credits and should.

• Yes. Unearned income was more than $1,150. Also, gross income is more than the larger of $1,150

or $1,950 (earned income of $1,550 plus $400).

• No. Their income is under the $27,300 standard deduction [$25,900 + $1,400 (over 65 years old)].
• Yes. Gross income is greater than $25,900, the 2022 standard deduction.
• Yes. His earnings exceeded the $400 limit for self-employed persons.

( Note: All answers can be found in the figures in LO 1.4.)

• a. Allen $2,396. $34,600 – $12,950 = $21,650
• Boyd $2,702. $37,175 – $12,950 = $24,225
• Caldwell $4,008. $62,710 – $25,900 = $36,810
• Dell $3,322. $49,513 – $19,400 = $30,113
• Evans $5,391. $57,397 – $12,950 = $44,447 (LO 1.5)
• a. D The mother is a qualifying person for head of household.
• A The significant other is not a qualifying person as this individual is not one of the relatives

that can be considered a qualifying person for head of household.

• A The brother does not qualify as a dependent (support test).
• B or C MFJ can be claimed in the year of the spouse’s death and is probably preferable.
• A, D or E. Surviving spouse is likely to be preferable but single or head of household are also possible.

(LO 1.5 and 1.6)

• a. Because their income exceeds $100,000, the tax rate schedules must be used.
• $14,554 = $9,615 + 22% x ($106,000 – $83,550). (LO 1.5)
• Jonas could qualify as either a qualifying child or qualifying relative. The qualifying child tests should be

applied first:

1. Relationship test: Confirm Jonas’ relationship to Karl.

• Domicile test: Where did Jonas live during the tax year? Was it more than one-half of the year with Karl?

3. Age test: What is Jonas’ age and is he a full-time student?

• Joint return test: What type of tax return does Jonas file (if any)? If MFJ, is this only to obtain a refund?
• Citizenship test: Is Jonas a US citizen or a tax resident of the US, Canada, or Mexico?
• Support test: How much of Jonas’ support is provided by Jonas? Is it more than one-half?

If Jonas is a qualifying child, then he need not meet the citizenship test to be a qualifying person for head of household filing status. If Jonas is not a qualifying child, he might be a qualifying relative which would

prompt the following questions:

• Relationship or member of household test: If Jonas is Karl’s brother, this test has been confirmed in the

qualifying child questions. If Jonas is not one of the qualifying relatives, the remaining tests need not apply since a person that is a qualifying relative by living in the taxpayer’s household is not a qualifying person for purpose of the head of household test.Solutions for Questions and Problems – Chapter 1 1-3

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