Exam 3: Computing the Tax

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 who does not live with taxpayer.

Match the statements that relate to each other. a.Available to a 70-year-old father claimed as a dependent by his son. b.Equal to tax liability divided by taxable income. c.The highest income tax rate applicable to a taxpayer. d.Not eligible for the standard deduction. e.No one qualified taxpayer meets the support test. f.Taxpayer's ex-husband does not qualify. g.A dependent child (age 18) who has only unearned income. h.Highest applicable rate is 39.6%. i.Applicable rate could be as low as 0%. j.Maximum rate is 28%. k.Income from foreign sources is not subject to tax. l.No correct match provided. -Relationship test (for dependency exemption purposes)

Clara,age 68,claims head of household filing status.If she has itemized deductions of $10,500 for 2017,she should claim the standard deduction.

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

Benjamin,age 16,is claimed as a dependent by his parents.During 2017,he earned $850 at a car wash.Benjamin's standard deduction is $1,400 ($1,050 + $350).

During 2017,Lisa (age 66) furnished more than 50% of the support of the following persons: Presuming all other dependency tests are met,on a separate return how many personal and dependency exemptions may Lisa claim?

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?

Heloise,age 74 and a widow,is claimed as a dependent by her daughter.For 2017,she had income as follows: $2,500 interest on municipal bonds; $3,200 Social Security benefits; $3,000 income from a part-time job; and $2,800 dividends on stock investments.What is Heloise's taxable income for 2017?

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?

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

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.

Contrast the tax consequences resulting from the following filing status situations: a.​Married filing jointly versus married filing separately. b.​Married filing separately versus single. c.Married filing separately versus abandoned spouse status.

During 2017,Trevor has the following capital transactions: After the netting process,the following results:

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. -A daughter-in-law who lives with taxpayer.

After her divorce,Hope continues to support her ex-husband's sister,Cindy,who does not live with her.Hope can claim Cindy as a dependent.

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

Taylor had the following transactions for 2017: What is Taylor's AGI for 2017?

Warren,age 17,is claimed as a dependent by his father.In 2017,Warren has dividend income of $1,500 and earns $400 from a part-time job. a.​What is Warren's taxable income for 2017? b.​Suppose Warren earned $1,200 (not $400) from the part-time job. What is Warren's taxable income for 2017?

When can a taxpayer not use Form 1040EZ? Form 1040A?