Exam 4: Individual Income Tax Overview, Dependents, and Filing Status

Taxpayers are allowed to deduct a specific amount for each of their dependents.

Jeremy and Annie are married. During the year Jeremy dies. When Annie files her tax return for the year in which her husband dies, she may file under the married filing jointly filing status even if she does not remarry.

For purposes of the qualifying child residence test, a child's temporary absence from the taxpayer's home to attend school full time is counted as though the child lived in the taxpayer's home during the absence.

Which of the following relationships does NOT pass the relationship test for a qualifying child?

The relationship test for qualifying relative requires the potential qualifying relative to have a family relationship with the taxpayer.

Taxpayers are generally allowed to claim deductions for expenditures unless a specific tax provision indicates the expenditure is not deductible.

In Year 1, the Bennetts' 25-year-old daughter, Jane, is a full-time student at an out-of-state university but she plans to return home after the school year ends. In previous years, Jane has never worked and her parents have always been able to claim her as a dependent. In Year 1, a kind neighbor offers to pay for all of Jane's educational and living expenses. Which of the following statements is most accurate regarding whether Jane's parents would be allowed to claim Jane as a dependent for Year 1, assuming the neighbor pays for all of Jane's support?

The standard deduction amount varies by filing status.

Tax credits are generally more valuable than tax deductions because tax credits reduce a taxpayer's gross tax liability dollar for dollar while tax deductions do not.

Lydia and John Wickham filed jointly in Year 1. They divorced in Year 2. Late in Year 2, the IRS discovered that the Wickhams underpaid their Year 1 taxes by $2,000. Both Lydia and John worked in Year 1 and received equal income but John had $2,000 less tax withheld than Lydia did. Who is legally liable for the tax underpayment?

In 2019, Brittany, who is single, cares for her father, Raymond. Brittany pays the bills relating to Raymond's home. She also buys groceries and provides the rest of his support. Raymond has no gross income. Brittany received $45,000 of salary from her employer during the year. Brittany reports $3,000 of itemized deductions. What is Brittany's taxable income?

Jamison's gross tax liability is $7,000. Jamison had $2,000 of available credits and he had $4,000 of taxes withheld by his employer. What are Jamison's taxes due (or taxes refunded)with his tax return?

All of the following are tests for determining qualifying relative status except ________.

All of the following are tests for determining qualifying child status except the ________.

In June of Year 1, Jake's wife, Darla, died. The couple did not have any children and Jake did not remarry in Year 1 or Year 2. Which is the most favorable filing status for Jake in Year 2?

Jan is unmarried and has no children, but she provides all of the financial support for her mother, who lives in an apartment across town. Jan's mother qualifies as Jan's dependent. Which is the most advantageous filing status available to Jan?

Catherine de Bourgh has one child, Anne, who is 18 years old at the end of the year. Anne lived at home for seven months during the year before leaving home to attend State University for the remaining five months of the year. During the year, Anne earned $6,000 while working part time. Catherine provided 80 percent of Anne's support and Anne provided the rest. Which of the following statements regarding whether Anne is Catherine's qualifying child for the current year is correct?

The Dashwoods have calculated their taxable income to be $88,000 for 2019, which includes $2,000 of long-term capital gains. Using the appropriate tax rate schedule, calculate the Dashwoods' income tax liability assuming they are married and file a joint return.

William and Charlotte Collins divorced in November of Year 1. William moved out and Charlotte remained in their house with their 10-month-old daughter, Autumn. Diana, Charlotte's mother, lived in the home and acted as Autumn's nanny for all of Year 1. William provided 70 percent of Autumn's support, Diana provided 20 percent, and Charlotte provided 10 percent. When the time came to file their tax returns for Year 1, William, Charlotte, and Diana each wanted to claim Autumn as a dependent. Their respective AGIs for Year 1 were $50,000, $35,000, and $52,000. Who has priority to claim Autumn as a dependent?

Certain types of income are taxed at a lower rate than ordinary income.