Exam 17: Determination of Tax

Eliza Smith's father, Victor, lives with Eliza who is a single taxpayer. During the year, Eliza purchased clothing for her father costing $1,200 and provided him with a room that could have been rented for $6,000. In addition, Eliza spent $4,000 for groceries she shared with her father. Eliza purchased a new television for $900 which she placed in the living room for both her father and her use. What is the amount of support provided by Eliza to her father?

Nate and Nikki have three dependent children ages 12, 15, and 17. Their modified AGI is $120,000. What is the amount of the child credit to which they are entitled?

For purposes of the dependency exemption, a qualifying child may not provide more than one-half of his or her own support during the year.

Married couples will normally file jointly. Identify a situation where a married couple may prefer to file separately.

In 2016, Brett and Lashana (both 50 years old) file a joint tax return claiming as a dependent their son who is blind. Their standard deduction is

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

The only business entity that pays federal income taxes is the C corporation.

A married taxpayer may file as head of household under the abandoned spouse provisions if all of the following are met except

In 2015, Sam is single and rents an apartment for which he pays $800 per month and makes charitable contributions of $1,000. Sam's adjusted gross income is $47,000. Required: Compute his taxable income. Show all calculations.

Juanita's mother lives with her. Juanita purchased clothing for her mother costing $1,000 and provided her with a room that Juanita estimates she could have rented for $4,000. Juanita spent $5,000 on groceries she shared with her mother. Juanita also paid $700 for her mother's health insurance coverage. How much of these costs is considered support?

Although exclusions are usually not reported on an individual's income tax return, interest income on state and local government bonds must be reported on the tax return.

Blaine Greer lives alone. His support comes from the following sources: Buddy (his son) \ 2,600 Ken (his brother) 4,200 Martha (his daughter) 2,300 Natalie (a friend) 1,000 Total support \ 10,100 Assuming a multiple support declaration exists, which of the individuals may claim Blaine as a dependent?

Sally divorced her husband three years ago and has not remarried. Since the divorce she has maintained her home in which she and her now sixteen-year-old daughter reside. The daughter is a qualified child. Sally signed the dependency exemption over to her ex-spouse by filing the appropriate IRS form. What is Sally's filing status for the current year and how many exemptions may she claim?

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?

The term "gross income" means the total of all income from any source, but after reduction for exclusions.

Tony supports the following individuals during the current year: Miranda, his former mother-in-law who lives in her own home and has no gross income; his cousin, Jeff, age 23, who is a full-time student, earns $7,000 during the year, and lives with Tony all year long; and Matt, age 22, who is Tony's brother, is a full-time student living on campus and earns $8,000 during the year. How many dependency exemptions may Tony claim?

Paul and Hannah, who are married and file a joint return, are in the process of adopting a child who is born in December 2016. The child, a son, comes to live with them a week after his birth on December 12. The adoption is not finalized until February of 2017. What tax issues are present in this situation?

Satish, age 11, is a dependent of his parents. His only source of income in 2016 is $3,000 of interest income on bonds given him by his grandparents. Satish's marginal rate is 10%, and his parent's marginal rate is 28%. Satish's tax is

Rob is a taxpayer in the top tax bracket, with over a million in taxable income. He plans to sell stock held long-term for a $100,000 gain. This sale will result in an increase to his tax liability of

All of the following items are deductions for adjusted gross income except