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

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

Jane and Ed Rochester are married with a 2-year-old child, who lives with them and whom they support financially. In 2020, 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 2020 standard deduction amount for MFJ taxpayers is $24,800. What is the couple's gross income?

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?

Inventory is a capital asset.

Lebron received $50,000 of compensation from his employer and he received $400 of interest from a municipal bond. What is the amount of Lebron's gross income from these items?

To be considered a qualifying child of a taxpayer, the individual must be the son or daughter of the taxpayer.

The relationship requirement is more broadly defined (includes more relationships)for a qualifying relative than for a qualifying child.

To determine filing status, a taxpayer's marital status is determined based on the number of days the taxpayer was married during the year compared to the number of days they were not married.

If a taxpayer does not provide more than half the support of a child, that child cannot qualify as the taxpayer's qualifying child.

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

Charlotte is the Lucas family's 22-year-old daughter. She is a full-time student at an out-of-state university but plans to return home when the school year ends. During the year, Charlotte earned $4,000 of income working part time. Her support totaled $30,000 for the year. Of this amount, Charlotte paid $7,000 with her own funds, her parents paid $14,000, and Charlotte's grandparents paid $9,000. Which of the following statements most accurately describes whether Charlotte's parents can claim Charlotte as a dependent?

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?

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?

Sam andTracy have been married for 25 years. They have filed a joint return every year of their marriage. They have two sons, Christopher and Zachary. Christopher is 19 years old and Zachary is 14 years old. Christopher lived in his parents' home from January through August and he lived in his own apartment from September through December. During the year, Christopher attended college for one month before dropping out. Christopher's living expenses totaled $12,000 for the year. Of that, Christopher paid $5,000 from income he received while working a part-time job. Sam and Tracy provided the remaining $7,000 of Christopher's support. Zachary lived at home the entire year and did not earn any income. Whom are Sam and Tracy allowed to claim as dependents?

Mason and his wife, Madison, have been married for five years. Jaxon, who is 18 years old and unrelated to Mason and Madison, has been living with Mason and Madison for the last two years. In May of Year 1, Mason and Madison divorced. Mason and Jaxon stayed in the home and Madison moved out. During Year 2, Mason provided all of Jaxon's support, and Jaxon lived in the home for all of Year 2. Jaxon did not earn any income during Year 2. What is Mason's most favorable filing status for Year 2?

Which of the following statements regarding tax deductions is false?

In February of 2019, Lorna and Kirk were married. During 2020, Lorna received $40,000 of compensation from her employer and Kirk received $30,000 of compensation from his employer. The couple together reported $2,000 of itemized deductions. Lorna and Kirk filed separately in 2020. What is Lorna's taxable income and what is her tax liability? (tax rate schedules.)Use the applicable tax rate schedule. (Round your answers to the nearest whole number.)

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.

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.

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 adjusted gross incomes for Year 1 were $50,000, $35,000, and $52,000. Who has priority to claim Autumn as a dependent?