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

Sylvia, age 17, is claimed by her parents as a dependent. During 2017, she had interest income from a bank savings account of $2,000 and income from a part-time job of $4,200. Sylvia's taxable income 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. -A half-brother who lives with taxpayer.

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

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

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

Ellen, age 12, lives in the same household with her father, grandfather, and uncle. The cost of maintaining the household is provided by her grandfather (40%) and her uncle (60%). Disregarding tie-breaker rules, Ellen is a qualifying child as to:

During 2017, Esther had the following transactions: Esther's AGI is:

Jayden and Chloe Harper are husband and wife and use the calendar year for tax purposes. a.If the Harpers file a joint return for 2017, can they later switch to separate returns for 2017? b.If the Harpers file separate returns for 2017, can they later switch to a joint return for 2017?

Butch and Minerva are divorced in December of 2017. Since they were married for more than one-half of the year, they are considered as married for 2017.

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.

Darren, age 20 and not disabled, earns $4,100 during 2017. Darren's parents cannot claim him as a dependent unless he is a full-time student.

Stealth taxes are directed at lower income taxpayers.

List at least three exceptions to the application of the kiddie 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 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. -Additional standard deduction

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

The filing status of a taxpayer (e.g., single, head of household) must be identified before the applicable standard deduction is determined.

Jason and Peg are married and file a joint return. Both are over 65 years of age and Jason is blind. Their standard deduction for 2017 is $16,450 ($12,700 + $1,250 + $1,250 + $1,250).

Under the income tax formula, a taxpayer must choose between deductions for AGI and the standard deduction.

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 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. -Scholarship funds for room and board

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