Exam 3: Computing the Tax

Lena is 66 years of age,single,and blind and is not claimed as a dependent.How much gross income must she have before she is required to file a Federal income tax return for 2015?

When separate income tax returns are filed by married taxpayers,one spouse cannot claim the other spouse as an exemption.

During 2015,Sarah had the following transactions: Salary $ 80,000 Interest income on City of Baltimore bonds 1,000 Damages for personal injury (car accident) 100,000 Punitive damages (same car accident) 200,000 Cash dividends from Chevron Corporation stock 7,000 Sarah's AGI is:

Regarding dependency exemptions, 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 ex-husband (divorce occurred last year) who lives with taxpayer.

In terms of the tax formula applicable to individual taxpayers,which,if any,of the following statements is correct?

After Ellie moves out of the apartment she had rented as her personal residence,she recovers her damage deposit of $1,000.The $1,000 is not income to Ellie.

Debby,age 18,is claimed as a dependent by her mother.During 2015,she earned $1,100 in interest income on a savings account.Debby's standard deduction is $1,450 ($1,100 + $350).

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

An "above the line" deduction refers to a deduction for AGI.

For the past few years,Corey's filing status has been as follows: 2011 (married/joint);2012 (married/separate);2013 (surviving spouse);2014 (surviving spouse);and 2015 (head of household).Explain what probably has happened.

Katelyn is divorced and maintains a household in which she and her daughter,Crissa,live.Crissa,age 22,earns $11,000 during 2015 as a model.Katelyn does not qualify for head of household filing status.

Match the statements that relate to each other.Note: Choice l.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 exemption 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 applies

The major advantage of being classified as an abandoned spouse is that the taxpayer is treated for tax purposes as being single and not married.This means that an abandoned spouse can use the more favorable tax rates available to single persons than those available to married persons filing separately.Comment on the accuracy of this conclusion.

Regarding dependency exemptions, 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. -A daughter-in-law who lives with taxpayer.

Which,if any,of the following statements relating to the standard deduction is correct?

Deductions for AGI are often referred to as "above-the-line" or "page 1" deductions.Explain.

During the year,Irv had the following transactions: Long-term loss on the sale of business use equipment $7,000 Long-term loss on the sale of personal use camper 6,000 Long-term gain on the sale of personal use boat 3,000 Short-term loss on the sale of stock investment 4,000 Long-term loss on the sale of land investment 5,000 How are these transactions handled for income tax purposes?

DeWayne is a U.S.citizen and resident.He spends much of each year in the United Kingdom on business.He is married to Petula,a U.K.citizen and resident of London.DeWayne has heard that it is possible that he can file a joint income tax return for U.S.purposes.If this is so,what are the constraints he should consider in making any such decision?

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

Wilma,age 70 and single,is claimed as a dependent on her daughter's tax return.During 2015,she had interest income of $2,500 and $800 of earned income from babysitting.Wilma's taxable income is: