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

Taxpayers need not include an income item in gross income unless there is a specific tax provision requiring the taxpayer to include the income item in gross income.

If an unmarried taxpayer is eligible to claim another as a dependent, the taxpayer is automatically eligible for the head of household filing status.

Earl and Lawanda Jackson have been married for 15 years. They have no children. Ned, who is an old friend from high school, has been living with the Jacksons during the current year. Which of the following is a true statement regarding whether the Jacksons can claim Ned as a dependent for the current year?

Sally received $60,000 of compensation from her employer and she received $500 of interest from a corporate bond. What is the amount of Sally's gross income from these items?

Jane and Ed Rochester are married with a 2-year-old child, who lives with them and whom they support financially. In 2019, Ed and Jane realized the following items of income and expense: They also qualified for a $2,000 child tax credit. Their employers withheld $5,800 in federal income taxes from their paychecks (in the aggregate). Finally, the 2019 standard deduction amount for MFJ taxpayers is $24,400. What is the couple's adjusted gross income?

Which of the following statements is true?

It is generally more advantageous from a tax perspective for a married couple to file separately than it is for them to file jointly.

Taxpayers who file as qualifying widows/widowers use a different tax rate schedule than taxpayers who are married filing jointly for tax purposes.

Jasmine and her husband, Arty, have been married for 25 years. In May of this year, the couple divorced. During the year, Jasmine provided all the support for herself and her 22-year-old child, Dexter, who lived in the same home as Jasmine for the entire year. Dexter is employed full time, earning $29,000 this year. What is Jasmine's most favorable filing status for the year?

A taxpayer may not qualify for the head of household filing status if she does not have any dependent children.

Jennifer and Stephan are married at year-end and they file separate tax returns. If Jennifer itemizes deductions on her return, Stephan must also itemize deductions on his return even if his itemized deductions don't exceed his standard deduction.

Inventory is a capital asset.

Char and Russ Dasrup have one daughter, Siera, who is 16 years old. In November of last year, the Dasrups took in Siera's 16-year-old friend Angela, who has lived with them ever since. The Dasrups have not legally adopted Angela but Siera often refers to Angela as her "sister." The Dasrups provide all of the support for both girls, neither girl receives any income during the year, and both girls live at the Dasrups' residence. Which of the following statements is true regarding whom Char and Russ may claim as dependents for the current year?

Which of the following statements regarding for AGI tax deductions is true?

For filing status purposes, the taxpayer's marital status is determined at what point during the year?

By the end of Year 1, Harold and Jamie Allred had been married for 30 years and have filed a joint return every year of their marriage. Their three sons, Jacob, Larry, and Andi, are ages 13, 16, and 23, respectively, and all live at home and are fully supported by their parents. Andi is employed full time, earning $17,000 in Year 1. Whom can the Allreds claim as dependents?

Charles, who is single, pays all of the costs of maintaining a home for himself and Damarcus. Charles and Damarcus have no family relationship but Damarcus lives with Charles for the entire year. Damarcus qualifies as a qualifying relative of Charles. (Charles claims Damarcus as a dependent on his tax return.)Charles qualifies for head of household filing status.

Itemized deductions and the standard deduction are deductions from AGI but the deduction for qualified business income is a deduction for AGI.

Which of the following series of inequalities is generally most accurate?

Which of the following statements regarding the difference between the requirements for a qualifying child and the requirements for a qualifying relative is false?