Exam 3: Computing the Tax

Match the statements that relate to each other. Note: Some choices may be used more than once. a. Not available to 65-year old taxpayer who itemizes. b. Exception for U.S. citizenship or residency test (for dependency exemption purposes). c. Largest basic standard deduction available to a dependent who has no earned income. d. Considered for dependency purposes. e. Qualifies for head of household filing status. f. A child (age 15) who is a dependent and has only earned income. g. Considered in applying gross income test (for dependency exemption purposes). h. Not considered in applying the gross income test (for dependency exemption purposes). i. Unmarried taxpayer who can use the same tax rates as married persons filing jointly. j. Exception to the support test (for dependency exemption purposes). k. A child (age 16) who is a dependent and has only unearned income of $4,500. l. No correct match provided. -$1,050

If an individual does not spend funds that have been received from another source (e.g., interest on municipal bonds), the unexpended amounts are not considered for purposes of the support test.

Under what circumstances, if any, may an ex-spouse be claimed as a dependent?

Jeremy is married to Amy, who abandoned him in 2017. He has not seen or communicated with her since April of that year. He maintains a household in which their son, Evan, lives. Evan is age 25 and earns over $6,000 each year. For tax year 2018, Jeremy's filing status is:

Under the Federal income tax formula for individuals, a choice must be made between claiming deductions for AGI and itemized deductions.

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.

Ed is divorced and maintains a home in which he and a dependent friend live. Ed does not qualify for head of household filing status.

Match the statements that relate to each other. Note: Some choices may be used more than once. a. Not available to 65-year old taxpayer who itemizes. b. Exception for U.S. citizenship or residency test (for dependency exemption purposes). c. Largest basic standard deduction available to a dependent who has no earned income. d. Considered for dependency purposes. e. Qualifies for head of household filing status. f. A child (age 15) who is a dependent and has only earned income. g. Considered in applying gross income test (for dependency exemption purposes). h. Not considered in applying the gross income test (for dependency exemption purposes). i. Unmarried taxpayer who can use the same tax rates as married persons filing jointly. j. Exception to the support test (for dependency exemption purposes). k. A child (age 16) who is a dependent and has only unearned income of $4,500. l. No correct match provided. -Kiddie tax does not apply

The basic and additional standard deductions both are subject to an annual adjustment for inflation.

Match the statements that relate to each other. Note: Some choices may be used more than once. a. Not available to 65-year old taxpayer who itemizes. b. Exception for U.S. citizenship or residency test (for dependency exemption purposes). c. Largest basic standard deduction available to a dependent who has no earned income. d. Considered for dependency purposes. e. Qualifies for head of household filing status. f. A child (age 15) who is a dependent and has only earned income. g. Considered in applying gross income test (for dependency exemption purposes). h. Not considered in applying the gross income test (for dependency exemption purposes). i. Unmarried taxpayer who can use the same tax rates as married persons filing jointly. j. Exception to the support test (for dependency exemption purposes). k. A child (age 16) who is a dependent and has only unearned income of $4,500. l. No correct match provided. -Surviving spouse

Regarding classification as a dependent, classify each statement in one of the four categories: a. Could be a qualifying child. b. Could be a qualifying relative. c. Could be either a qualifying child or a qualifying relative. d. Could be neither a qualifying child nor a qualifying relative. -An uncle who lives with taxpayer.

Regarding the tax formula and its relationship to Form 1040, which, if any, of the following statements is correct?

Perry is in the 32% tax bracket. During 2018, he had the following capital asset transactions: Perry's tax consequences from these gains are as follows:

Adjusted gross income (AGI) sets the ceiling or the floor for certain deductions. Explain and illustrate what this statement means.

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%?

Kohsei had the following transactions for 2018:

Helen, age 74 and a widow, is claimed as a dependent by her daughter. For 2018, she had income as follows: $2,500 interest on municipal bonds? $3,200 Social Security benefits? $3,000 income from a part-time job? and $2,800 dividends on stock investments. What is Helen's taxable income for 2018?

In terms of timing as to any one year, the Tax Tables are available before the Tax Rate Schedules.

Mandeep's parents live in another state and she cannot claim them as her dependents. If Mandeep pays their medical expenses, can she derive any tax benefit from doing so? Explain.

Derek, age 46, is a surviving spouse. If he has itemized deductions of $26,250 for 2018, Derek should not claim the standard deduction.