Assignment

Problem 1

Rex and Donna are married and have two children, Michelle (age 7) and Nancy (age 5). During 2016, Rex earned a salary of $24,500, recieved interest income of $300, and filed a joint income tax return with Dena. Dena had $0 gross income. Their earned income for the year is:

a. $0

b. $5,222

c. $5,412

d. $5,572

Problem 2

George and Martha are married and file a joint return claiming their two children, ages 10 and 8 as dependents. Assuming their AGI is $119,650, George and Martha's 2016 child tax credit will be:

a. $0

b. $1,000

c. $1,500

d. $2,000

Problem 3

Wills and Kate are married and file a joint income tax return. One their tax return, they report $44,000 for AGI ($20,000 salary earned by Wills and $24,000 salary earned by Kate) and claim two exemptions for their dependent children. During the year, they pay the following amounts to care for their three year-old son George, and one year-old daughter Charlotte while they both work.

$3,200 to HRH Day Care Center

$2,000 to Royalty Housekeeping Services

$1,000 to Mrs. Middleton (Kate's mother)

Wills and Kate may claim a credit for child and dependent care expense of:

$840

$1,040

$1,200

$1,240

Problem 4

Jermaine and Kesha are married, file a joint tax return, have AGI of $82,500, and have two children. Devona is beginning her freshman year at State University during Fall 2016, and Arethia is beginning her senior year at Northeast University during Fall 2016 after having completed her junior year during the spring of that year. Both Devona and Arethia are claimed as dependents on their parents' tax return.

Devona's qualifying tuition expenses and fees total $4,000 for the fall semester, while Arethia's qualifying tuition expenses and fees total $6,200 for each semester during 2016. Full payment is made for the tuition and related expenses for both children during each semester. The American Opportunity credit available to Jermaine and Kesha for 2016 is:

$2,500

$3,000

$5,000

$6,000

Problem 5

Bob and Sally are married, file a joint tax return, report AGI of $115,000, and have two children. Del is beginning her freshman year at State College during Fall 2016, and Owen is beginning his senior year at Southwest University during Fall 2016. Owen completed his junior year during the Spring semester of 2015 (i.e., he took a "leave of absence" during the 2015-2016 school year). Both Del and Owen are claimed as dependents on their parents' tax return.

Del's qualifying tuition expenses and fees total $5,000 for the Fall semester, while Owen's qualifying tuition expenses were $6,100 for the Fall 2016 semester. Del's room and board costs were $3,200 for the Fall semester. Owen did not incur room and board costs, as he lived with his aunt and uncle during the year.

Full payment is made for the tuition and related expenses for both children at the beginning of each semester. In addition to the children's college expenses, Bob also spent $3,000 on professional education seminars during the year in order to maintain his license as a practicing dentist. Bob attended the seminars during July and August 2016. Compute the available education tax credits for Bob and Sally for 2016.

$3,100

$5,000

$5,480

$5,600