Exam 16: Introduction to the Taxation of Individuals

The Deweys are expecting to save on their taxes for 2013.Not only have both incurred large medical expenses,but both reached age 65.During the year,they also recognized a $30,000 loss on some land they sold which was purchased as an investment several years ago.Are the Deweys under a mistaken understanding regarding their tax position? Explain.

Interest paid or accrued during the tax year on aggregate acquisition indebtedness of $2 million or less ($1 million or less for married persons filing separate returns)is deductible as qualified residence interest.

Derek,age 46,is a surviving spouse.If he has itemized deductions of $12,500 for 2013,Derek should not claim the standard deduction.

In 2013,Boris pays a $3,800 premium for high-deductible medical insurance for himself and his family.In addition,he contributes $3,400 to a Health Savings Account.Which of the following statements is true?

Tony,age 15,is claimed as a dependent by his grandmother.During 2013,Tony had interest income from Boeing Corporation bonds of $1,000 and earnings from a part-time job of $700.Tony's taxable income is:

The filing status of a taxpayer (e.g.,single,head of household)must be identified before the applicable standard deduction is determined.

Georgia had AGI of $100,000 in 2013.She donated Heron Corporation stock with a basis of $8,500 to a qualified charitable organization on July 5,2013.

Travis and Andrea were divorced.Their only marital property consisted of a personal residence (fair market value of $400,000,cost of $200,000),and publicly-traded stocks (fair market value of $800,000,cost basis of $500,000).Under the terms of the divorce agreement,Andrea received the personal residence and Travis received the stocks.In addition,Andrea was to receive $50,000 for eight years.

In determining the filing requirement based on gross income received,both additional standard deductions (i.e.,age and blindness)are taken into account.

Jack received a court award in a civil libel and slander suit against National Gossip.He received $120,000 for damages to his professional reputation,$100,000 for damages to his personal reputation,and $50,000 in punitive damages.Jack must include in his gross income as a damage award:

The maximum child tax credit under current law is $1,500 per qualifying child.

Jena is a full-time undergraduate student at State University and is claimed by her parents as a dependent.Her only source of income is a $10,000 athletic scholarship ($1,000 for books,$5,500 tuition,$500 student activity fee,and $3,000 room and board).Jena's gross income for the year is:

Mr.Lee is a citizen and resident of Hong Kong,while Mr.Anderson is a citizen and resident of the U.S.In the taxation of income,Hong Kong uses a territorial approach,while the U.S.follows the global system.In terms of effect,explain what this means to Mr.Lee and Mr.Anderson.

Lucas,age 17 and single,earns $6,000 during 2013.Lucas's parents cannot claim him as a dependent if he does not live with them.

Which,if any,of the following is a deduction for AGI?

Bob and Sally are married,file a joint tax return,have AGI of $108,000,and have two children.Del is beginning her freshman year at State College during Fall 2013,and Owen is beginning his senior year at Southwest University during Fall 2013.Owen completed his junior year during the Spring semester of 2011 (i.e.,he took a "leave of absence" during the 2012-2013 school year).Both Del and Owen are claimed as dependents on their parents' tax return.Del's qualifying tuition expenses and fees total $5,000 for the Fall semester,while Owen's qualifying tuition expenses were $6,100 for the Fall 2013 semester.Del's room and board costs were $3,200 for the Fall semester.Owen did not incur room and board costs since he lived with his aunt and uncle during the year.Full payment is made for the tuition and related expenses for both children at the beginning of each semester.In addition to the children's college expenses,Bob also spent $3,000 on professional education seminars during the year in order to maintain his license as a practicing dentist.Bob attended the seminars during July and August 2013.Compute the available education tax credits for Bob and Sally for 2013.

In which,if any,of the following situations may the individual not be claimed as a dependent of the taxpayer?

Lee,a citizen of Korea,is a resident of the U.S.Any rent income Lee receives from land he owns in Korea is not subject to the U.S.income tax.

Jermaine and Kesha are married,file a joint tax return,have AGI of $82,500,and have two children.Devona is beginning her freshman year at State University during Fall 2013,and Arethia is beginning her senior year at Northeast University during Fall 2013 after having completed her junior year during the spring of that year.Both Devona and Arethia are claimed as dependents on their parents' tax return.Devona's qualifying tuition expenses and fees total $4,000 for the fall semester,while Arethia's qualifying tuition expenses and fees total $6,200 for each semester during 2013.Full payment is made for the tuition and related expenses for both children during each semester.The American Opportunity credit available to Jermaine and Kesha for 2013 is:

During 2013,Marvin had the following transactions: Marvin's AGI is: