THE INDIVIDUAL INCOME TAX RETURN

THE INDIVIDUAL INCOME TAX RETURN

Group 1 – Multiple Choice Questions 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)
• $36,300 = $42,000 + $300 – $6,000.
• $25,100, the greater of itemized deductions or the standard deduction of $25,100.
• $11,200 = $36,300 – $25,100. (LO 1.3)
• $25,000.
• $12,550, the greater of total itemized deductions or the standard deduction amount.
• $12,450 = $25,000 – $12,550. (LO 1.3)

1-1

• D 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 his or her share of income from a partnership 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)

• 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)

• C $98,000 – $12,550 (standard deduction

exceeds itemized deductions) (LO 1.3)

• C Ben’s income would need to exceed the

standard deduction to require filing a tax return (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)

• 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 ($4,300 in 2021) to be a qualifying relative (LO 1.6)

• E The child tax credit for a child age 6 or

over in 2021 is $3,000 (LO 1.6)

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

is $3,000. The mother does not meet the support test and cannot be claimed (LO 1.6)

• B You are not eligible for an EIP if you are

claimed as a dependent (LO 1.7)

• B The additional RRC of $1,400 for the

new child can be claimed as an additional refundable credit (LO 1.7)

• E Head of household standard deduction plus

additional standard deduction for age 65

($18,800 + $1,700) (LO 1.8)

• B Taxpayers age 65 or older are eligible

for an additional standard deduction amount (LO 1.8)

• B Taxpayers that are blind are eligible for

an additional standard deduction amount

(LO 1.8)

• D Business inventory is not considered a

capital asset (LO 1.9)

• 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 1.9)

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

(LO 1.9)

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

to $3,000 may be deducted from ordinary income for individual taxpayers (LO 1.9)

• A Line 5 is total 2021 payments (LO 1.10)
• B A revenue ruling is an official interpretation

by the IRS of the Internal Revenue Code

(LO 1.10)

• B About 94% of returns are filed electronically

(LO 1.11)

Chapter 1 (Income Tax Fundamentals 2022, 40e Gerald Whittenburg, Martha Altus-Buller, Steven Gill) (Solution Manual Latest Edition 2023-24, Grade A+, 100% Verified) (For Complete File, Download link at the end of this File) 1 / 4

• $53,800 = $54,000 + $2,800 – $3,000 ($7,000 capital loss limited to $3,000).
• $12,550
• $41,450 = $54,000 – $12,550. (LO 1.3 and 1.9)
• $47,500 = $48,000 + $2,500 – $3,000.
• $25,100, the greater of itemized deductions or the standard deduction of $25,100.
• $22,400 = $47,500 – $25,100.
• $2,293 (Tax Table) (LO 1.3, 1.5, and 1.8)
• Adjusted gross income $18,000

Less: Itemized deductions –2,400

Taxable income $15,600 Marco’s tax liability from the Tax Table is $1,676. 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 1.8)

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

Less: Standard deduction –12,550

Taxable income $ 2,100 (LO 1.3, 1.5, and 1.8) (Note: See Chapter 6 for the tax credit computation for dependent college students under age 24.)

• $34,450 = $47,000 – $12,550.
• Tax tables. Taxpayers with income up to $100,000 must use the tax tables.
• $3,938. (LO 1.3, 1.5, and 1.8)
• $66,000 = $50,000 + $8,000 + $5,000 + $3,000.
• $63,500 = $66,000 – $2,500.
• $25,100, the greater of itemized deductions or the standard deduction of $25,100.
• $38,400 = $63,500 – $25,100.
• $4,213 (LO 1.3, 1.5, and 1.8)
• a. $89,400 = $85,400 + $4,000.
• $0.
• $64,200 = $89,400 – $25,200. (LO 1.3, 1.5, 1.6, and 1.8)
• Taxable income is: $28,450 = $41,000 – $12,550. Tax liability from the tax tables not the tax rate schedules:

$3,218. (LO 1.3, 1.5, and 1.8)

• 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 $12,550 standard deduction.
• Yes. Unearned income was more than $1,100. Also, gross income is more than the larger of $1,100

or $1,900 (earned income of $1,550 plus $350).

• No. Their income is under the $26,450 standard deduction [$25,100 + $1,350 (over 65 years old)].
• Yes. Gross income is greater than $25,100, the 2021 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.)

• Allen $2,324.

Boyd $2,744.Caldwell $3,895.Dell $3,013.Evans $5,643. (LO 1.5) 1-2 Chapter 1 – The Individual Income Tax Return 2 / 4

• a. D
• D
• A
• A
• B or C (LO 1.5)
• a. Because their income exceeds $100,000, the tax rate schedules must be used.
• $14,817 = $9,328 + 22% x ($106,000 – $81,050). (LO 1.5)
• They may file either as married filing jointly or married filing separately. They must file married, since they

were married by year-end. (LO 1.5)

• Head of household. Maggie’s parents meet the tests to qualify as her dependents. Maggie is single. Addition-

ally, she provides a home for her parents. Parents are the only exception to the requirement that dependents must live in the same household as the taxpayer to qualify the taxpayer for head of household status. (LO 1.5)

• Single. Unmarried with no dependent.

Head of household. Single or abandoned spouse, with qualifying dependent.Qualifying widow(er). Spouse died within the past 2 years and has a qualifying dependent. (LO 1.5)

• a. Yes, his son qualifies as a dependent, meeting the tests of a qualifying relative.
• No. His son must live in the same household as Marquez, so Marquez cannot use the head of household

filing status. (LO 1.5 and 1.6)

• a. Yes $500 other dependent credit
• No (fails $4,300 gross income test) $0
• Yes $3,000 child tax credit
• Yes $500 other dependent credit
• No $0 (LO 1.6)
• $0. Exemptions were suspended for tax years 2018–2025. $6,000. Both children qualify for the $3,000 child

tax credit. (LO 1.6)

• No. Because Charles is self-supporting, his parents may not claim him as a dependent. The self-support test

is applied to both children and relatives who otherwise qualify, so Charles is disqualified either way. (LO 1.6)

• No. Phillip cannot be claimed as a dependent because he is not a U.S. citizen or a resident of the U.S.,

Canada, or Mexico. (LO 1.6)

• EIP $2,800. For Luke and Vanessa only.

RRC $4,200. Luke and Vanessa’s $2,800 EIP plus $1,400 for a qualifying dependent. (LO 1.7)

• The standard deduction is a specific dollar amount that varies with filing status, age and vision, but not

by type of individual deduction. Total itemized deductions depend on the amount and type of items, with some items having limitations based on AGI. They include medical expenses, certain taxes, certain interest expenses, charitable contributions and miscellaneous deductions.A taxpayer should claim the larger of the standard deduction or the total allowed itemized deductions to reduce the taxpayer’s income subject to tax as much as possible. (LO 1.8)

• The answer will vary depending on the date the problem is assigned and completed. The purpose of the prob-

lem is to familiarize the student with the IRS website. (LO 1.10)

• The blank forms are not reproduced here. By the time the student is assigned this problem, the current year’s

forms should be available. (LO 1.10)

• A number of articles in the blog indicate the limit for student loan interest deduction is $2,500. (LO 1.10)

Solutions for Questions and Problems – Chapter 1 1-3 3 / 4

Group 3 – Writing Assignments

1. Research Solution:

Whittenburg and Gill, CPAs San Diego, CA February 20, 20xx Mr. and Mrs. William Carson 3276 Lakeline Drive San Diego, CA Dear William and Sheila, Thank you for requesting my advice concerning the tax treatment of your brother Jerry. I have researched your question and am sorry to say that you cannot claim Jerry as a qualifying child.Although Jerry meets the domicile, age, joint return, citizenship, and self-support test, he does not meet the relationship test. Even though he is William’s brother, in order to be your qualifying child, he must be younger than at least one of you.Although you can’t claim him as a qualifying child, there is a possibility that you could claim Jerry as a qualifying relative if he earns less than $4,300.My conclusion is based upon the facts that you have provided me. I’m sorry that the news was not more favorable. If you have any questions or would like further explanation, please do not hesitate to call me.Sincerely, Trevor Malcolm for Whittenburg and Gill, CPAs

2. Ethics Solution:

To: [email protected]

Subject: Inquiry on filing status: single v. married filing jointly Jason and Mary, Thank you for your e-mail regarding your filing status for 2021. Let me also say, I really enjoyed your wedding ceremony and reception. Thank you for inviting me.Your e-mail stated that you had prepared your 2021 taxes as both single and married filing jointly and found that your refund would be larger if both of you filed as single. Unfortunately, the tax law is very clear on this issue. Individuals who are married as of the last day of the tax year are considered to be married. Married taxpayers have only two filing status options: married filing jointly or married filing separately. In order to file as single, taxpayers must be unmarried or legally separated from their spouse as of the last day of the tax year. Not only would it be unethical for you to file as single, it would be against the law.The additional tax that married couples sometimes encounter is known as the “marriage penalty.” Hope- fully you are finding that your wedded bliss outweighs the tax penalty! If you have any questions or would like further explanation, please do not hesitate to call me.Your friend, Trevor Malcolm For Whittenburg and Gill, CPAs Group 4 – Comprehensive Problems 1A. See page 1-5 and 1-6.1B. See page 1-7 and 1-9.2A. See pages 1-10 and 1-11.2B. See pages 1-12 and 1-13.Group 5 – Cumulative Software Problem Check Cumulative Software Problem SM folder 1-4 Chapter 1 – The Individual Income Tax Return

• / 4