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

Claude's deductions from AGI slightly exceed the standard deduction allowed for 2012.Under these circumstances,Claude cannot claim the standard deduction.

Ethan had the following transactions during 2012: What is Ethan's AGI for 2012?

The Dargers have itemized deductions that exceed the standard deduction.However,when they file their joint return,they choose the standard deduction option.

In 2012,Warren sold his personal use automobile for a loss of $9,000.He also sold a personal coin collection for a gain of $10,000.As a result of these sales,$1,000 is subject to income tax.

Roy and Linda were divorced in 2011.The divorce decree awards custody of their children to Linda but is silent as to who is entitled to claim them as dependents.If Roy furnished more than half of their support,he can claim them as dependents in 2012.

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 2012 is $15,350 ($11,900 + $1,150 + $1,150 + $1,150).

In order to claim a dependency exemption for other than a qualifying child,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%?

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

Ellen,age 39 and single,furnishes more than 50% of the support of her parents,who do not live with her.Ellen practices as a self-employed interior decorator and has gross income in 2012 of $120,000.Her deductions are as follows: $30,000 business and $8,100 itemized.

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.

Surviving spouse filing status begins in the year in which the deceased spouse died.

In 2012,Ed is 66 and single.If he has itemized deductions of $7,300,he should claim the standard deduction alternative.

Derek,age 46,is a surviving spouse.If he has itemized deductions of $12,100 for 2012,Derek should not claim the standard deduction.

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 dependency exemption deduction.Are the Martins' concerns justified? Explain.

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

Stealth taxes are directed at higher income taxpayers.

Which,if any,of the following is a deduction for AGI?

Meg,age 23,is a full-time law student and is claimed by her parents as a dependent.During 2012,she received $1,400 interest income from a bank savings account and $5,800 from a part-time job.What is Meg's taxable income for 2012?

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

Mel is not quite sure whether an expenditure he made is a deduction for AGI or a deduction from AGI.Since he plans to choose the standard deduction option for the year,does the distinction matter? Explain.