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

Merle is a widow,age 80 and blind,who is claimed as a dependent by her son.During 2016,she received $4,800 in Social Security benefits,$2,500 in bank interest,and $1,800 in cash dividends from stocks.Merle's taxable income is:

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.

For the current year,David has wages of $80,000 and the following property transactions: Stock investment sales- Long-term capital gain $ 9,000 Short-term capital loss (12,000) Loss on sale of camper (purchased 4 years ago and used for family vacations) (2,000) What is David's AGI for the current year?

Dan and Donna are husband and wife and file separate returns for the year.If Dan itemizes his deductions from AGI,Donna cannot claim the standard deduction.

Sarah furnishes more than 50% of the support of her son and daughter-in-law who live with her.If the son and daughter-in-law file a joint return,Sarah cannot claim them as dependents.

Ellen,age 39 and single,furnishes more than 50% of the support of her parents,who do not live with her;their only source of income are Social Security benefits.Ellen practices as a self-employed interior decorator and has gross income in 2016 of $120,000.Her deductions are as follows: $30,000 business and $8,100 itemized. a.Can Ellen qualify for head of household filing status? Explain. b.What is Ellen's taxable income for 2016?

A dependent cannot claim a personal exemption on his or her own return.

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

When filing their Federal income tax returns,the Youngs always claimed the standard deduction.After they purchased a home,however,they started to itemize their deductions from AGI. a.Explain the reason for the change. b.Suppose they purchased the home in November 2015,but did not start itemizing until tax year 2016.Why the delay as to itemizing?

Kim,a resident of Oregon,supports his parents who are residents of Canada but citizens of Korea.Kim can claim his parents as dependents.

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

In determining the filing requirement based on gross income received,both additional standard deductions (i.e. ,age and blindness)are taken into account.

In meeting the criteria of a qualifying child for dependency exemption purposes,when if ever,might the child's income become relevant?

Nelda is married to Chad,who abandoned her in early June of 2016.She has not seen or communicated with him since then.She maintains a household in which she and her two dependent children live.Which of the following statements about Nelda's filing status in 2016 is correct?

Stealth taxes are directed at lower income taxpayers.

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

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

In satisfying the support test and the gross income test for claiming a dependency exemption,a scholarship received by the person being claimed is handled the same way for each test.Do you agree or disagree with this statement? Why?

In which,if any,of the following situations will the kiddie tax not apply?

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.