Morgan (age 45) is single and provides more than 50% of the support of Rosalyn (a family friend), Flo (a niece, age 18), and Jerold (a nephew, age 18). Both Rosalyn and Flo live with Morgan, but Jerold (a citizen of France) lives in Canada. Morgan earns a $95,000 salary, contributes $5,000 to a traditional IRA, and receives sales proceeds of $15,000 for an RV that cost $60,000 and was used only for vacations. She has $8,200 in itemized deductions.
The personal exemption amount for 2013 is $3,900. Click here to access the standard deduction table to use if required.
a. Who qualifies as a dependent of Morgan for the dependency exemption?
b. Morgan's taxable income is $ .
c. Using the Tax Rate Schedules (click here), tax liability for Morgan is $ for 2013. (Do not round intermediate tax computation but if required, your final answer to the nearest whole dollar.)
Unearned Income of Child under Age 19 (LO. 1, 3, 6, 7)
Taylor, age 18, is claimed as a dependent by her parents. For 2013, she records the following income: $4,000 wages from a summer job, $1,800 interest from a money market account, and $2,000 interest from City of Boston bonds. If an amount is zero, enter "0".
Taylor's standard deduction is $ .
Taylor's personal exemption is $ .
Taylor's taxable income is $ .
Compute Taylor's "net unearned income" for the purpose of the kiddie tax. $
Assume that Taylor's tax rate is 10% and her parents' tax rate is 28%. If Taylor's parents file a joint return and have taxable income of $130,000, then Taylor's tax is $ .
Capital Transactions - Determination of Tax (LO. 6, 8)
During the year, Chester incurred the following transactions involving capital assets.
Gain on the sale of an arrowhead collection (acquired as an investment at different times but all pieces have been held for more than one year) $6,000
Loss on the sale of IBM Corporation stock (purchased 11 months ago as an investment) (4,000)
Gain on the sale of a city lot (acquired 5 years ago as an investment) 2,000
a. Indicate the tax treatment for each item.
Gain on the sale of an arrowhead collection
Loss on the sale of IBM Corporation stock
Gain on the sale of a city lot
Overall, Chester has of $ . However, $ of this gain is from collectibles, which are taxed at a maximum rate of .
b. If Chester is in the 33% Federal income tax bracket, how much results?
$
c. If Chester is in the 15% bracket?
$