Adam Attended College for Much of 2014,during Which Time He

question 58

Essay

Adam attended college for much of 2014,during which time he was supported by his parents.Erin married Adam in December 2014.They live in a common law state.Adam graduated and will commence work in January 2015.Erin worked during 2014 and earned $20,000.Adam's only income was interest of $1,100.Adam's parents are in the 28% tax bracket.Thus,claiming Adam as a dependent would save them $1,106 ($3,950 × .28).
a.What is Erin and Adam's tax liability if they file a joint return?
b.What is Erin and Adam's total tax liability if they file separate returns and Adam's parents claim him as a dependent?

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Definitions:

Capital Expenditure

Capital deployed by a corporation to buy, improve, and upkeep tangible assets like land, factories, or machinery.

NPV

Net Present Value, a calculation used to determine the present value of a series of future cash flows minus the initial investment, utilized in capital budgeting to assess the profitability of an investment.

Least-Cost Decision

A decision-making process focused on selecting the option that requires the lowest financial outlay while still achieving the desired result.

Economic Profit-Maximising

The strategy of adjusting the output and pricing of goods or services to achieve the highest possible profit, taking both explicit and implicit costs into account.