Exam 2: Determination of Tax

All of the following items are included in gross income except

Carter dies on January 1, 2013. A joint return election is made in 2013 and Marjorie properly qualifies as a surviving spouse for the two following years. Marjorie has one child that she claims as a dependent for this same period. The number of personal and dependency exemptions allowed Marjorie in 2013 and in 2014 is, respectively

The standard deduction may not be claimed by one married taxpayer filing a separate return if the other spouse itemizes deductions.

Deborah, who is single, is claimed as a dependent on her parents' tax return. She had a part-time job during 2014 and earned $850 during the year, which was her only income. What is her standard deduction?

Annisa, who is 28 and single, has adjusted gross income of $55,000 and itemized deductions of $5,000. In 2014, Annisa will have taxable income of

Kelly is age 23 and a full-time student with interest and dividend income of $2,600 in the current year. The total cost of her support for the year is $19,000. She is not subject to the kiddie tax.

Mia is a single taxpayer with projected AGI of $250,000 in 2014. She is considering selling a long-term investment before year-end. She expects to realize a gain of $25,000. If Mia sells the investment by December 31, her 2014 taxable income will increase by $25,000.

Lewis, who is single, is claimed as a dependent on his parents' tax return. He received $2,000 during the year in dividends, which was his only income. What is his standard deduction?

Which of the following is not considered support for the dependent support test?

You may choose married filing jointly as your filing status if you are married and both you and your spouse agree to file a joint return. Which of the following facts would prevent you from being considered married for filing purposes?

Lester, a widower qualifying as a surviving spouse, has $209,000 of salary, five personal and dependency exemptions and itemizes deductions. Lester must use which form to report his taxable income?

Mary Ann pays the costs for her Aunt Hazel to live in a nursing home. Aunt Hazel receives Social Security benefits of $7,000 a year which are turned over to the nursing home. Mary Ann pays the remaining cost of $33,000. Hazel has no other income. Mary Ann visits Hazel twice a week and meets with doctors and nurses regarding Hazel's medical care. What tax issues should Mary Ann consider?

The following information for 2014 relates to Emma Grace, a single taxpayer, age 18: a. Compute Emma Grace's taxable income assuming she is self-supporting. b. Compute Emma Grace's taxable income assuming she is a dependent of her parents.

Discuss why Congress passed the innocent spouse provision and detail the requirements to be met in order to qualify as an innocent spouse and be relieved of liability for tax on unreported income.

Indicate for each of the following the most favorable filing status for the 2014 tax year. a. Kenny died on March 2, 2013. Marge, his wife, and Bart, their son, survive. Marge filed a joint return in 2013. Bart, age 18 in 2014, is a part-time college student and continues to live at home with his mother. He works part-time, earning $6,200. What is Marge's filing status in 2014? b. Alan Spaulding is single and provides over 50% support of his niece Alicia who lives with him all year long. Alan maintains the household and claims Alicia as a dependent. Alicia makes $3,600 at a part-time job. She is a full-time student, age 18. What is Alan's filing status? c. Lily, who was divorced on July 27, 2013, provides 100% of the support for her parents who live in a nursing home in Kansas and have no income. What is Lily's filing status? d. Holly was abandoned by her husband Fletcher in September of the current year. She has not seen or communicated with him since then. What is Holly's filing status? e. Rick, whose wife died in December 2011, filed a joint tax return for 2011. He did not remarry, but has continued to maintain his home in which his two dependent children live. What is Rick's filing status for 2014?

One requirement for claiming a dependent other than a qualifying child is that the taxpayer provides more than 50 percent of the dependent's support (assuming it is not a multiple support agreement situation).

Julia provides more than 50 percent of the support for three individuals: Theresa, an unrelated child who lives with Julia all year long; Margaret, Julia's cousin, who lives in another city; and Emma, Julia's daughter who lives in her own home. Each of the potential dependents earned less than $3,950. How many dependency exemptions can Julia claim on her 2014 tax return?

Alexis and Terry have been married five years and file joint tax returns. Alexis began embezzling funds from her employer during the third year of their marriage. Last year, Alexis suddenly left the country and Terry does not know where she is. In the current year, Terry learned that the IRS had assessed him $27,000 in unpaid taxes due to Alexis's embezzlement. What tax issue(s)are present in Terry's situation? What questions would you ask Terry to determine his appropriate response to the IRS?

Michelle, age 20, is a full-time college student with earned income from wages of $5,200 and interest income of $700. Michelle's parents provide more than half of Michelle's support. Michelle's taxable income is

For 2014, unearned income in excess of $2,000 of a child under age 18 is generally taxed at the parents' rate.