Solutions Manual
Income Tax Fundamentals
By Gerald Whittenburg, Steven Gill
43rd edition
,Table of content
• chapter 1. The individual income tax return
• Chapter 2. Gross income and exclusions
• Chapter 3. Business income and expenses
• Chapter 4. Additional income and the qualified business income deduction
• Chapter 5. Deductions for and from agi
• Chapter 6. Accounting periods and other taxes
• Chapter 7. Tax credits
• Chapter 8. Depreciation and sale of business property
• Chapter 9. Employment taxes, estimated payments, and retirement plans
• Chapter 10. Partnership taxation
• Chapter 11. The corporate income tax
• Chapter 12. Tax administration and tax planning
, Chapter 1
The individual income tax return
Group 1 – multiple choice questions
1. D the income tax includes elements of social 20. C surviving spouse is preferred to head of
and economic policy (lo 1.1) household (lo 1.5)
2. C the income tax was authorized by the 16th 21. E either margaret or her sister (but not both)
amendment in 1913 (lo 1.1) may claim the mother as a dependent under
3. C the 1040a and 1040-ez no longer exist and a multiple support agreement (lo 1.6)
the 1120 is for corporations (lo 1.2) 22. D the daughter fails the age test to be a
4. D partnerships use form 1065 to report qualifying child and she fails the gross
income tax information. A partner will income test ($4,400 in 2022) to be a
report their share of income from a part- qualifying relative (lo 1.6)
nership on a form1040 (lo 1.2) 23. D the child tax credit in 2022 is $2,000
5. D capital gains and losses are reported (lo 1.6)
directly on the face of the form 1040 24. B the child tax credit for the 13-year-old child
(from schedule d) (lo 1.2) is $2,000. The mother does not meet the
6. D a partnership is not generally a tax-paying support test and cannot be claimed (lo 1.6)
entity (lo 1.2) 25. B must be age 16 or under for child tax credit
7. C student loan interest is a for agi deduction. (lo 1.6)
The other responses are all itemized (from 26. A head of household standard deduction plus
agi) deductions (lo 1.3) additional standard deduction for age 65
8. B the deduction for ira contributions is a ($19,400 + $1,750) (lo 1.7)
for agi deduction (lo 1.3) 27. B taxpayers age 65 or older are eligible
9. D $98,000 – $13,000 (standard deduction is for an additional standard deduction
less than itemized deductions) (lo 1.3) amount (lo 1.7)
10. D for agi adjustments are deducted to get to 28. B taxpayers that are blind are eligible for
agi (lo 1.3) an additional standard deduction amount
11. B the larger of the two may be deducted (lo 1.7)
(lo 1.3) 29. D earned income plus $400 (lo 1.7)
12. A an exclusion reduces gross income (lo 1.3) 30. E standard deduction may not exceed typical
13. B filing thresholds generally are the same as amount (lo 1.7)
the standard deduction amount (lo 1.4) 31. D business inventory is not considered a
14. D ben’s income would need to exceed the capital asset (lo 1.8)
standard deduction to require filing a tax 32. A gain of $15,000 ($25,000 amount realized
return (lo 1.4) less $10,000 adjusted basis) has been held
15. D $25,900 + $1,400 (lo 1.4) for more than 12 months and is long-term
(lo 1.8)
16. C single dependent over 65 and blind thresh-
old is $4,500 for unearned income (lo 1.4) 33. C $10,000 = $240,000 – ($270,000 – $40,000)
(lo 1.8)
17. C joan qualifies as either single or head of
household; however, head of household 34. A $43,000 – $3,000. Net capital losses of up
is more advantageous (lo 1.5) to $3,000 may be deducted from ordinary
income for individual taxpayers (lo 1.8)
18. D although dorothy does not live with
glenda, since dorothy is a parent that 35. C line 7 is capital gain or (loss) (lo 1.9)
glenda supports, glenda may file as head 36. B preparers must get a signed authorization to
of household (lo 1.5) e-file from the taxpayer. (lo 1.10)
19. D taxpayer may file married filing jointly in 37. B about 90% of returns are filed electronically
year of spouse’s death (lo 1.5) (lo 1.10)
1-1
, 1-2 Chapter 1 – The Individual Income Tax Return
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. Form 1040
b. Schedule b
c. Schedule d
d. Schedule a
e. Schedule 2
f. Schedule e
g. Schedule 3
h. Schedule c
i. Schedule 1 (lo 1.2)
3. A. $36,300 = $42,000 + $300 – $6,000.
b. $25,900, the greater of itemized deductions or the standard deduction of $25,900.
c. $10,400 = $36,300 – $25,900. (lo 1.3)
4. A. $25,000.
b. $12,950, the greater of total itemized deductions or the standard deduction amount.
c. $12,050 = $25,000 – $12,950. (lo 1.3)
5. A. $53,800 = $54,000 + $2,800 – $3,000 ($7,000 capital loss limited to $3,000).
b. $12,950
c. $40,850 = $53,800 – $12,950. (lo 1.3 and 1.8)
6. A. $47,500 = $48,000 + $2,500 – $3,000.
b. $25,900, the greater of itemized deductions or the standard deduction of $25,900.
c. $21,600 = $47,500 – $25,900.
d. $2,184 (tax table) (lo 1.3, 1.5, and 1.7)
7. Adjusted gross income $18,000
less: itemized deductions –2,400
Taxable income $15,600
Marco’s tax liability from the tax table is $1,670. 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 1.7)
8. Adjusted gross income ($13,200 + $1,450) $ 14,650
less: standard deduction –12,950
Taxable income $ 1,700
(lo 1.3, 1.5, and 1.7)
(note: see chapter 6 for the tax credit computation for dependent college students under age 24.)
9. A. $34,050 = $47,000 – $12,950.
b. Tax tables. Taxpayers with income up to $100,000 must use the tax tables.
c. $3,884. (lo 1.3, 1.5, and 1.7)
10. A. $66,000 = $50,000 + $8,000 + $5,000 + $3,000.
b. $63,500 = $66,000 – $2,500.
c. $27,000, the greater of itemized deductions or the standard deduction of $25,900.
d. $36,500 = $63,500 – $27,000.
e. $3,972 (lo 1.3, 1.5, and 1.7)
Income Tax Fundamentals
By Gerald Whittenburg, Steven Gill
43rd edition
,Table of content
• chapter 1. The individual income tax return
• Chapter 2. Gross income and exclusions
• Chapter 3. Business income and expenses
• Chapter 4. Additional income and the qualified business income deduction
• Chapter 5. Deductions for and from agi
• Chapter 6. Accounting periods and other taxes
• Chapter 7. Tax credits
• Chapter 8. Depreciation and sale of business property
• Chapter 9. Employment taxes, estimated payments, and retirement plans
• Chapter 10. Partnership taxation
• Chapter 11. The corporate income tax
• Chapter 12. Tax administration and tax planning
, Chapter 1
The individual income tax return
Group 1 – multiple choice questions
1. D the income tax includes elements of social 20. C surviving spouse is preferred to head of
and economic policy (lo 1.1) household (lo 1.5)
2. C the income tax was authorized by the 16th 21. E either margaret or her sister (but not both)
amendment in 1913 (lo 1.1) may claim the mother as a dependent under
3. C the 1040a and 1040-ez no longer exist and a multiple support agreement (lo 1.6)
the 1120 is for corporations (lo 1.2) 22. D the daughter fails the age test to be a
4. D partnerships use form 1065 to report qualifying child and she fails the gross
income tax information. A partner will income test ($4,400 in 2022) to be a
report their share of income from a part- qualifying relative (lo 1.6)
nership on a form1040 (lo 1.2) 23. D the child tax credit in 2022 is $2,000
5. D capital gains and losses are reported (lo 1.6)
directly on the face of the form 1040 24. B the child tax credit for the 13-year-old child
(from schedule d) (lo 1.2) is $2,000. The mother does not meet the
6. D a partnership is not generally a tax-paying support test and cannot be claimed (lo 1.6)
entity (lo 1.2) 25. B must be age 16 or under for child tax credit
7. C student loan interest is a for agi deduction. (lo 1.6)
The other responses are all itemized (from 26. A head of household standard deduction plus
agi) deductions (lo 1.3) additional standard deduction for age 65
8. B the deduction for ira contributions is a ($19,400 + $1,750) (lo 1.7)
for agi deduction (lo 1.3) 27. B taxpayers age 65 or older are eligible
9. D $98,000 – $13,000 (standard deduction is for an additional standard deduction
less than itemized deductions) (lo 1.3) amount (lo 1.7)
10. D for agi adjustments are deducted to get to 28. B taxpayers that are blind are eligible for
agi (lo 1.3) an additional standard deduction amount
11. B the larger of the two may be deducted (lo 1.7)
(lo 1.3) 29. D earned income plus $400 (lo 1.7)
12. A an exclusion reduces gross income (lo 1.3) 30. E standard deduction may not exceed typical
13. B filing thresholds generally are the same as amount (lo 1.7)
the standard deduction amount (lo 1.4) 31. D business inventory is not considered a
14. D ben’s income would need to exceed the capital asset (lo 1.8)
standard deduction to require filing a tax 32. A gain of $15,000 ($25,000 amount realized
return (lo 1.4) less $10,000 adjusted basis) has been held
15. D $25,900 + $1,400 (lo 1.4) for more than 12 months and is long-term
(lo 1.8)
16. C single dependent over 65 and blind thresh-
old is $4,500 for unearned income (lo 1.4) 33. C $10,000 = $240,000 – ($270,000 – $40,000)
(lo 1.8)
17. C joan qualifies as either single or head of
household; however, head of household 34. A $43,000 – $3,000. Net capital losses of up
is more advantageous (lo 1.5) to $3,000 may be deducted from ordinary
income for individual taxpayers (lo 1.8)
18. D although dorothy does not live with
glenda, since dorothy is a parent that 35. C line 7 is capital gain or (loss) (lo 1.9)
glenda supports, glenda may file as head 36. B preparers must get a signed authorization to
of household (lo 1.5) e-file from the taxpayer. (lo 1.10)
19. D taxpayer may file married filing jointly in 37. B about 90% of returns are filed electronically
year of spouse’s death (lo 1.5) (lo 1.10)
1-1
, 1-2 Chapter 1 – The Individual Income Tax Return
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. Form 1040
b. Schedule b
c. Schedule d
d. Schedule a
e. Schedule 2
f. Schedule e
g. Schedule 3
h. Schedule c
i. Schedule 1 (lo 1.2)
3. A. $36,300 = $42,000 + $300 – $6,000.
b. $25,900, the greater of itemized deductions or the standard deduction of $25,900.
c. $10,400 = $36,300 – $25,900. (lo 1.3)
4. A. $25,000.
b. $12,950, the greater of total itemized deductions or the standard deduction amount.
c. $12,050 = $25,000 – $12,950. (lo 1.3)
5. A. $53,800 = $54,000 + $2,800 – $3,000 ($7,000 capital loss limited to $3,000).
b. $12,950
c. $40,850 = $53,800 – $12,950. (lo 1.3 and 1.8)
6. A. $47,500 = $48,000 + $2,500 – $3,000.
b. $25,900, the greater of itemized deductions or the standard deduction of $25,900.
c. $21,600 = $47,500 – $25,900.
d. $2,184 (tax table) (lo 1.3, 1.5, and 1.7)
7. Adjusted gross income $18,000
less: itemized deductions –2,400
Taxable income $15,600
Marco’s tax liability from the tax table is $1,670. 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 1.7)
8. Adjusted gross income ($13,200 + $1,450) $ 14,650
less: standard deduction –12,950
Taxable income $ 1,700
(lo 1.3, 1.5, and 1.7)
(note: see chapter 6 for the tax credit computation for dependent college students under age 24.)
9. A. $34,050 = $47,000 – $12,950.
b. Tax tables. Taxpayers with income up to $100,000 must use the tax tables.
c. $3,884. (lo 1.3, 1.5, and 1.7)
10. A. $66,000 = $50,000 + $8,000 + $5,000 + $3,000.
b. $63,500 = $66,000 – $2,500.
c. $27,000, the greater of itemized deductions or the standard deduction of $25,900.
d. $36,500 = $63,500 – $27,000.
e. $3,972 (lo 1.3, 1.5, and 1.7)
