Exam 3: Tax Formula and Tax Determination an Overview of Property Transactions

Monique is a resident of the U.S. and a citizen of France. If she files a U.S. income tax return, Monique cannot claim the standard deduction.

A child who is married cannot be subject to the kiddie tax.

Kim, a resident of Oregon, supports his parents who are residents of Canada but citizens of Korea. Kim can claim a dependent tax credit for his parents.

Benjamin, age 16, is claimed as a dependent by his parents. During 2018, he earned $850 at a car wash. Benjamin's standard deduction is $1,400 $1,050 + $350).

Claude's deductions from AGI exceed the standard deduction allowed for the current year. Under these circumstances, Claude cannot claim the standard deduction.

The filing status of a taxpayer

Once they reach age 65, many taxpayers will switch from itemizing their deductions from AGI and start claiming the standard deduction.

Gain on the sale of collectibles held for more than 12 months always is subject to a tax rate of 28%.

The deduction for personal and dependency exemptions has been suspended from 2018 through 2025.

In order to claim someone other than a qualifying child as a dependent, a taxpayer must meet the support test. Generally, this is done by furnishing more than 50% of a dependent's support. What exceptions exist, if any, where the support furnished need not be more than 50%?

When the kiddie tax applies, the child need not file an income tax return because the child's income will be reported on the parents' return.

In terms of income tax consequences, abandoned spouses are treated the same way as married persons filing separate returns.

Since an abandoned spouse is treated as not married and has one or more dependent children, he or she qualifies for the standard deduction available to head of household.

Once a child reaches age 19, the kiddie tax no longer applies.

Hannah, age 70 and single, is claimed as a dependent by her daughter. During 2018, she had interest income of $2,550 and $800 of earned income from babysitting. Hannah's taxable income is:

As opposed to itemizing deductions from AGI, the majority of individual taxpayers choose the standard deduction.

The additional standard deduction for age and blindness is greater for married taxpayers than for single taxpayers.

Evan and Eileen Carter are husband and wife and file a joint return for 2018. Both are under 65 years of age. They provide more than half of the support of their daughter, Pamela age 25), who is a full-time medical student. Pamela receives a $5,000 scholarship covering her tuition at college. They furnish all of the support of Belinda Evan's grandmother), who is age 80 and lives in a nursing home. They also support Peggy age 66), who is a friend of the family and lives with them. How many dependents may the Carters claim?

Frank sold his personal use automobile for a loss of $9,000. He also sold a personal coin collection for a gain of $10,000. As a result of these sales, $10,000 is subject to income tax.

The Martins have a teenage son who has become an accomplished bagpiper. With proper promotion and scheduling, the son has good income potential by charging for his services at special events particularly funerals). However, the Martins are fearful that the income could generate a kiddie tax and cause them the loss of a dependent tax credit. Are the Martins' concerns justified? Explain.