Exam 18: Determination of Tax

For each of the following taxpayers indicate the applicable filing status,the number of personal and dependency exemptions available,and the number of children who qualify for the child credit. a.Jeffrey is a widower,age 71,who receives a pension of $10,000,nontaxable social security benefits of $12,000,and interest of $2,000.He has no dependents. b.Selma is a single,full-time college student,age 20,who earned $6,800 working part-time.She has $1,700 of interest income and received $1,000 support from her parents. c.Olivia is married,but her husband left her three years ago and she has not seen or heard from him since.She supports herself and her six-year-old daughter.She paid all the household expenses.Her income consists of salary of $18,500 and interest of $800. d.Ruben is a single,full-time college student,age 20,who earned $6,800 working part-time.He has $250 of interest income and received $10,000 support from his parents. e.Cathy is divorced and received $12,000 alimony from her former husband and earned $35,000 working as an administrative assistant.She also received $2,500 of child support for her daughter who lives with her.Cathy filed the appropriate IRS form and gave up the dependency exemption to her former husband.

A corporation has revenue of $350,000 and deductible business expenses of $240,000.What is the federal income tax,before credits?

Elise,age 20,is a full-time college student with earned income from wages of $4,400 and interest income of $500.Elise's parents provide more than half of her support.Elise's 2017 taxable income is

The standard deduction may not be claimed by one married taxpayer filing a separate return if the other spouse itemizes deductions.

An individual who is claimed as a dependent by another person is not entitled to a personal exemption on his or her own return.

Blaine Greer lives alone.His support comes from the following sources: Assuming a multiple support declaration exists,which of the individuals may claim Blaine as a dependent?

Tom and Alice were married on December 31 of last year.What is their filing status for last year?

Form 4868,a six-month extension of time to file,allows a taxpayer to

What options are available for reporting and paying tax on the unearned income of a child under age 24?

Parents must provide more than half the support of their child under the age of 19 in order to claim her as a dependent qualifying child.

In order to shift the taxation of dividend income from a parent to a child

Ivan Trent,age five,receive $2,900 of dividends per year from a mutual fund he owns; it is his only source of taxable income.Ivan's parents plan to gift a corporate bond they currently own to him.The bond pays $2,100 of interest income per year.The Trent family overall will save taxes if the bond is transferred to the child.

Anita,who is divorced,maintains a home in which she and her 16-year-old daughter live.Anita provides the majority of the support for her daughter and for a son,age 23,who is enrolled part-time at the university and lives in the dorm.The son also works in the campus bookstore and earns spending money of $4,500.How many personal and dependency exemptions may Anita claim?

Alexis and Terry have been married five years and file joint tax returns.Alexis began embezzling funds from her employer during the third year of their marriage.Last year,Alexis suddenly left the country and Terry does not know where she is.In the current year,Terry learned that the IRS had assessed him $27,000 in unpaid taxes due to Alexis's embezzlement.What tax issue(s)are present in Terry's situation? What questions would you ask Terry to determine his appropriate response to the IRS?

In 2017,Sam is single and rents an apartment for which he pays $800 per month and makes charitable contributions of $1,000.Sam's adjusted gross income is $47,000. Required: Compute his taxable income.Show all calculations.

Mary Ann pays the costs for her Aunt Hazel to live in a nursing home.Aunt Hazel receives Social Security benefits of $7,000 a year which are turned over to the nursing home.Mary Ann pays the remaining cost of $33,000.Hazel has no other income.Mary Ann visits Hazel twice a week and meets with doctors and nurses regarding Hazel's medical care.What tax issues should Mary Ann consider?

For each of the following independent cases,indicate the total number of exemptions (personal and dependents)that may be claimed by the taxpayer in 2017. a.Cassie is a single mother providing the sole support of her three children,who all live with her.Her 16-year-old daughter,Tammy,earned $15,200 modeling during the year and her two sons,R.J.and Will,ages 10 and 8,have no income. b.Olivia,35 years old,provided eighty percent of the support of her grandmother who lived in another state.Her grandmother's only income was from non-taxable social security of $9,500. c.Vanessa and Matt Reardon are married and under 65 years of age.During 2017,they furnish more than half of the support of their 25-year-old son,Bill,who lives with them.Bill earns $2,000 from a part-time job,most of which he sets aside for future college expenses.Bill is not currently a student.Vanessa's father,Henry,who died on January 3,2017,at age 80,had for many years qualified as their dependent. d.Douglas and Marjorie are husband and wife and file a joint return.Both are under 65 years of age.They provide more than half of the support of their daughter,Ellen (age 23),who is a full-time medical student.Ellen receives a $3,400 taxable scholarship covering her room and board at college.They furnish all of the support of Henry (Douglas's grandfather),who is age 85 and lives in a nursing home.They also support Meg (age 69),who is a friend of the family and lives with them. e.Blair,who is divorced,maintains a home in which she,her twin sons,and her baby daughter live all year.The children's father,Ross,provides over half their support.No special arrangements exist between Blair and Ross.

Foreign exchange student Yung lives with Harold and Betty while he studies in the United States.He moved into their home January 5,2017,and has resided with them for the remainder of the year.Yung does not pay anything for his room and board.Harold and Betty provide all of Yung's meals.Yung receives a scholarship to pay for his tuition,books and fees.He works on campus,earning $4,000 a year.What tax issues should Harold and Betty consider?

Cheryl is claimed as a dependent on her parents' tax return.She had a part-time job during 2017 and earned $4,900 during the year,in addition to $600 of interest income.What is her standard deduction?

Gina Lewis,age 12,is claimed as a dependent on her parent's return.She is their only child.She earned $2,300 from a summer job.She also earned interest of $2,750.Her parents' marginal tax rate is 28 percent. Required: a.Compute the amount of Gina's tax liability for 2017. b.Can Gina's parents take a child tax credit for her?