After We Went to Press
Updates to Income Tax Fundamentals - 2007 Edition
The following are updates to the text. Please check back often since we will add changes as we
go. As Albert Einstein famously said, “The hardest thing in the world to understand is the
income tax”. The authors of this text prove this statement true and fall short at times despite our
best efforts to make the text correct and error free. We apologize for your inconvenience and
thank you for your help in making the text as good as it can be.Please let us know about anything
you find that should be listed here or suggested improvements by writing to Martha Altus-Buller
at firstname.lastname@example.org .
QUICK TAX REFERENCE 2006 (Back page of text)
The tax rate schedule for single taxpayers should be changed as follows: The $36,675.50 in
column three should be changed to $37,675.50.
The tax rate schedule in Appendix A should be changed as follows (similar to the change above):
The $36,675.50 in column three should be changed to $37,675.50.
Section 1.4 The answer to Self-Study Problem 1.4, number 2 is “Yes”
Section 1.5 Please add a clarifying sentence to the end of the Head of Household subsection on
page 1-11 as follows: “In all cases other than dependent parents, who may maintain a
separate residence, the dependent must actually live in the same household as the taxpayer
for the taxpayer to qualify for head of household filing status.”
Section 1.6 Please move the final half of the sentence in point 5 on page 1-15, “as discussed
above, unless it is only to claim a refund of taxes due”, to point 4.
Section 1.7 On page 1-19, the final calculation in the example at the bottom of the page should
read: “$850 (the greater of $850 or $700 ($400 + $300)).
Section 1.8 The law changed in 2006 for the phase out of itemized deductions. We did not
have the IRS worksheet as we went to press. The worksheet we created has one error in it which
caused the incorrect answer to the second example on page 1-20 and the worksheet for that
example on page 1-21. The effect of the change in the worksheet is rarely seen in tax returns and
does not affect the answers to any of the tax return forms problems in the text. The discussion
related to itemized deduction and exemption phase-outs will be moved to Chapter Five in next
year’s text in order to make Chapter One less complex.
The text should be adjusted as follows:
Section 1.8 Paragraph 2, line 6, should read “limited to 80% multiplied by two thirds (2/3)
of itemized deductions other than”...
Line 4 of the worksheet on the top of page 1-21 should read “Multiply line 3 by
80% (.80) and then by two thirds (2/3)” The answer to the example will be
$18,933 of allowed itemized deductions instead of $18,400.
The answer to Self Study Problem 1.8 stays the same. However, the final
calculation at S-2 should be “or $2,667 (80% x 2/3 x $5,000)”.
Section 5.3 The list of deductible interest items should include “mortgage prepayment
Chapter 7 End of Chapter Multiple Choice Question 8 should end with “assuming she elects
to expense the entire $12,000 purchase”.