Taxation in the United States and Income Tax Return
Solutions for Questions and Problems – Chapter 1 25
SOLUTIONS FOR
QUESTIONS AND PROBLEMS
26 Chapter 1 – The Individual Income Tax Return
Solutions for Questions and Problems – Chapter 1 27
CHAPTER 1
THE INDIVIDUAL INCOME TAX RETURN
Group 1 - Multiple Choice Questions
1. D (LO 1.1) 7. C (LO 1.5) 15. A (LO 1.8)
2. D (LO 1.2) 8. E (LO 1.6) 16. E $25,000 = $275,000 –
3. A (LO 1.3) 9. C (LO 1.6) ($285,000 – $35,000) (LO 1.8)
4. C (LO 1.3) 10. C (LO 1.6) 17. C $45,000 = $48,000 – $3,000
5. B $98,000 – $19,000 – $3,800 11. B (LO 1.6) (LO 1.8)
= $75,200 (LO 1.3) 12. B (LO 1.7) 18. D (LO 1.10)
6. C $5,950 + $3,800 = $9,750 13. B (LO 1.7)
(LO 1.4) 14. E (LO 1.8)
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. $36,500 = $41,000 + 500 – 5,000.
b. $11,900, the greater of itemized deductions or the standard deduction of $11,900.
c. $17,000 = $36,500 – 11,900 – (2 x $3,800). (LO 1.3)
3. a. $23,000.
b. $5,950, the greater of total itemized deductions or the standard deduction amount.
c. $13,250 = $23,000 – 5,950 – 3,800. (LO 1.3)
4. a. $52,700 = $54,000 + 1,700 – 3,000 ($7,000 capital loss limited to $3,000)
b. $5,950
c. $3,800
d. $42,950 = $52,700 – 5,950 – 3,800 (LO 1.3)
5. Gross income
– Deductions for adjusted gross income
= Adjusted gross income
– Greater of itemized deductions or standard deduction
– Exemptions
= Taxable income (LO 1.3)
6. a. $48,079 = $46,479 + 3,500 – 1,900.
b. $11,900, the greater of itemized deductions or the standard deduction of $11,900.
c. $28,579 = $48,079 – 11,900 – (2 x 3,800).
d. $3,416 (Tax Table) (LO 1.3 and 1.5)
7. Adjusted gross income $17,400
Less: Itemized deductions –2,250
One exemption –3,800
Taxable income $11,350
Ulysses’ tax liability from the Tax Table is $1,271. (LO 1.3 and 1.5)
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28 Chapter 1 – The Individual Income Tax
SOLUTIONS FOR
QUESTIONS AND PROBLEMS
26 Chapter 1 – The Individual Income Tax Return
Solutions for Questions and Problems – Chapter 1 27
CHAPTER 1
THE INDIVIDUAL INCOME TAX RETURN
Group 1 - Multiple Choice Questions
1. D (LO 1.1) 7. C (LO 1.5) 15. A (LO 1.8)
2. D (LO 1.2) 8. E (LO 1.6) 16. E $25,000 = $275,000 –
3. A (LO 1.3) 9. C (LO 1.6) ($285,000 – $35,000) (LO 1.8)
4. C (LO 1.3) 10. C (LO 1.6) 17. C $45,000 = $48,000 – $3,000
5. B $98,000 – $19,000 – $3,800 11. B (LO 1.6) (LO 1.8)
= $75,200 (LO 1.3) 12. B (LO 1.7) 18. D (LO 1.10)
6. C $5,950 + $3,800 = $9,750 13. B (LO 1.7)
(LO 1.4) 14. E (LO 1.8)
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. $36,500 = $41,000 + 500 – 5,000.
b. $11,900, the greater of itemized deductions or the standard deduction of $11,900.
c. $17,000 = $36,500 – 11,900 – (2 x $3,800). (LO 1.3)
3. a. $23,000.
b. $5,950, the greater of total itemized deductions or the standard deduction amount.
c. $13,250 = $23,000 – 5,950 – 3,800. (LO 1.3)
4. a. $52,700 = $54,000 + 1,700 – 3,000 ($7,000 capital loss limited to $3,000)
b. $5,950
c. $3,800
d. $42,950 = $52,700 – 5,950 – 3,800 (LO 1.3)
5. Gross income
– Deductions for adjusted gross income
= Adjusted gross income
– Greater of itemized deductions or standard deduction
– Exemptions
= Taxable income (LO 1.3)
6. a. $48,079 = $46,479 + 3,500 – 1,900.
b. $11,900, the greater of itemized deductions or the standard deduction of $11,900.
c. $28,579 = $48,079 – 11,900 – (2 x 3,800).
d. $3,416 (Tax Table) (LO 1.3 and 1.5)
7. Adjusted gross income $17,400
Less: Itemized deductions –2,250
One exemption –3,800
Taxable income $11,350
Ulysses’ tax liability from the Tax Table is $1,271. (LO 1.3 and 1.5)
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28 Chapter 1 – The Individual Income Tax