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Group 1 – Multiple Choice Questions Group 2 – Problems 1. a. Raising revenue to operate the government. b. Furthering economic goals such as reducing unemployment. c. Furthering social goals such as encouraging contributions to charities. (LO 1.1) 2. a. $36,300 = $42,000 + $300 – $6,000. b. $25,100, the greater of itemized deductions or the standard deduction of $25,100. c. $11,200 = $36,300 – $25,100. (LO 1.3) 3. a. $25,000. b. $12,550, the greater of total itemized deductions or the standard deduction amount. c. $12,450 = $25,000 – $12,550. (LO 1.3) 4. a. $53,800 = $54,000 + $2,800 – $3,000 ($7,000 capital loss limited to $3,000). b. $12,550 c. $41,450 = $54,000 – $12,550. (LO 1.3 and 1.9) 5. a. $47,500 = $48,000 + $2,500 – $3,000. b. $25,100, the greater of itemized deductions or the standard deduction of $25,100. c. $22,400 = $47,500 – $25,100. d. $2,293 (Tax Table) (LO 1.3, 1.5, and 1.8) 6. 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 Marco’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) 7. 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.) 8. a. $34,450 = $47,000 – $12,550. b. Tax tables. Taxpayers with income up to $100,000 must use the tax tables. c. $3,938. (LO 1.3, 1.5, and 1.8) 9. a. $66,000 = $50,000 + $8,000 + $5,000 + $3,000. b. $63,500 = $66,000 – $2,500. c. $25,100, the greater of itemized deductions or the standard deduction of $25,100. d. $38,400 = $63,500 – $25,100. e. $4,213 (LO 1.3, 1.5, and 1.8) 10. a. $89,400 = $85,400 + $4,000. b. $0. c. $64,200 = $89,400 – $25,200. (LO 1.3, 1.5, 1.6, and 1.8) 11. 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) 12. Yes. Since Griffin owes Social Security taxes on the unreported tips (greater than $400), he must file an income tax return. (LO 1.4) 13. a. No. Income is less than the $12,550 standard deduction. b. 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). c. No. Their income is under the $26,450 standard deduction [$25,100 + $1,350 (over 65 years old)]. d. Yes. Gross income is greater than $25,100, the 2021 standard deduction. e. Yes. His earnings exceeded the $400 limit for self-employed persons. (Note: All answers can be found in the figures in LO 1.4.) 14. Allen $2,324. Boyd $2,744. Caldwell $3,895. Dell $3,013. Evans $5,643. (LO 1.5)
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