Exam 16: Introduction to the Taxation of Individuals

Buddy and Hazel are ages 72 and 71 and file a joint return.If they have itemized deductions of $14,300 for 2013,they should not claim the standard deduction.

Marilyn,age 38,is employed as an architect.For calendar year 2013,she had AGI of $204,000 and paid the following medical expenses: Peter and Esther would qualify as Marilyn's dependents except that they file a joint return.Marilyn's medical insurance policy does not cover them.Marilyn filed a claim for reimbursement of $6,000 of her own expenses with her insurance company in December 2013 and received the reimbursement in January 2014.What is Marilyn's maximum allowable medical expense deduction for 2013?

Paula transfers stock to her former spouse,Fred.The transfer is pursuant to a divorce agreement.Paula's cost of the stock was $75,000 and its fair market value on the date of the transfer is $95,000.Fred later sells the stock for $100,000.Fred's recognized gain from the sale of the stock is $5,000.

In April 2013,Bertie,a calendar year cash basis taxpayer,had to pay the state of Michigan additional income tax for 2012.Even though it relates to 2012,for Federal income tax purposes the payment qualifies as a tax deduction for tax year 2013.

A decrease in a taxpayer's AGI could increase the amount of medical expenses that can be deducted.

Kevin and Sue have two children,ages 8 and 14.They spend $6,200 per year on eligible employment related expenses for the care of their children after school.Kevin earned a salary of $20,000 and Sue earned a salary of $18,000.What is the amount of the credit for child and dependent care expenses?

Ellen,age 39 and single,furnishes more than 50% of the support of her parents,who do not live with her.Ellen practices as a self-employed interior decorator and has gross income in 2013 of $120,000.Her deductions are as follows: $30,000 business and $8,100 itemized.

In 2013,Jerry pays $8,000 to become a charter member of Mammoth University's Athletic Council.The membership ensures that Jerry will receive choice seating at all of Mammoth's home basketball games.Also in 2013,Jerry pays $2,200 (the regular retail price)for season tickets for himself and his wife.For these items,how much qualifies as a charitable contribution?

Which of the following items would be an itemized deduction on Schedule A of Form 1040 not subject to the 2%-of-AGI floor?

Olaf was injured in an automobile accident and received $25,000 for his physical injury,$50,000 for his loss of income,and $10,000 punitive damages.As a result of the award,the amount Olaf must include in gross income is:

An individual generally may claim a credit for adoption expenses in the year in which the expenses are paid.

During 2013,Hugh,a self-employed individual,paid the following amounts: What is the maximum amount Hugh can claim as taxes in itemizing deductions from AGI?

After Ellie moves out of the apartment she had rented as her personal residence,she recovers her damage deposit of $1,000.The $1,000 is not income to Ellie.

Sergio was required by the city to pay $2,000 for the cost of new curbing installed by the city in front of his personal residence.The new curbing was installed throughout Sergio's neighborhood as part of a street upgrade project.Sergio may not deduct $2,000 as a tax,but he may add the $2,000 to the basis of his property.

Pedro is married to Consuela,who lives with him.Both are U.S.citizens and residents of Nebraska.Pedro furnishes all of the support of his parents,who are citizens and residents of Mexico.He also furnishes all of the support of Consuela's parents,who are citizens and residents of El Salvador.Consuela has no gross income for the year.If Pedro files as a married person filing separately,how many personal and dependency exemptions can he claim on his return?

Since an abandoned spouse is treated as single and has one or more dependent children,he or she qualifies for the standard deduction available to head of household.

Thelma and Mitch were divorced.The couple had a joint brokerage account that included stocks with a basis of $600,000 and a fair market value of $1,000,000.Under the terms of the divorce agreement,Mitch would receive the stocks and Mitch would pay Thelma $100,000 each year for 6 years,or until Thelma's death,whichever should occur first.Thelma and Mitch lived apart when the payments were made by Mitch.Mitch paid the $600,000 to Thelma over the six-year period.The divorce agreement did not contain the word "alimony." Then,Mitch sold the stocks for $1,300,000.Mitch's recognized gain from the sale is:

As an executive of Cherry,Inc.,Ollie receives a fringe benefit in the form of annual tuition scholarships of $10,000 to each of his three children.The scholarships are paid by the company directly to each child's educational institution and are payable only if the student maintains a B average.

In terms of the tax formula applicable to individual taxpayers,which,if any,of the following statements is correct?

Brad,who would otherwise qualify as Faye's dependent,had gross income of $9,000 during the year.Faye,who had AGI of $120,000,paid the following medical expenses in 2013: Assuming Faye is age 45,she has a medical expense deduction of: