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For Students 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 email@example.com . 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. APPENDIX A 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. CHAPTER ONE 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 penalties”. Chapter 7 End of Chapter Multiple Choice Question 8 should end with “assuming she elects to expense the entire $12,000 purchase”.
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