Exam 3: Computing the Tax

In 2010,Ed is 66 and single.If he has itemized deductions of $6,200,he should claim the standard deduction alternative.

The filing status of a taxpayer (e.g. ,single,head of household)need not be identified until after taxable income is determined.

Roy and Linda were divorced in 2009.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 2010.

Kim,a resident of Oregon,supports his parents who are residents of Canada but citizens of Korea.Kim cannot claim his parents as dependents.

Currently,the top Federal income tax rate in effect is the highest it has ever been.

The kiddie tax does not apply as to a child whose earned income is more than one-half of his or her support.

When the kiddie tax applies and the parents are divorced,the applicable parent (for determining the parental tax)is the one with the greater taxable income.

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

When the kiddie tax applies,the child need not file an income tax return because the child's income will be reported on the parents' return.

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.

In 2010,Sylvia had the following transactions: Sylvia's AGI is:

Emma had the following transactions during 2010: What is Emma's AGI for 2010?

The additional standard deduction for age and blindness is the same amount for single as for married taxpayers.

For the past few years,Corey's filing status has been as follows: 2006 (married/joint);2007 (married/separate);2008 (surviving spouse);2009 (surviving spouse);and 2010 (head of household).Explain what probably has happened.

In 2010,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.

Which of the following taxpayers may file as a head of household in 2010? Ron provides all the support for his mother,Betty,who lives by herself in an apartment in Fort Lauderdale.Ron pays the rent and other expenses for the apartment and properly claims his mother as a dependent. Tammy provides over one-half the support for her 18-year old brother,Dan.Dan earned $4,200 in 2010 working at a fast food restaurant and is saving his money to attend college in 2011.Dan lives in Tammy's home. Joe's wife left him late in December of 2009.No legal action was taken and Joe has not heard from her in 2010.Joe supported his 6-year-old son,who lived with him throughout 2010.

Katelyn is divorced and maintains a household in which she and her daughter,Crissa,live.Crissa,age 22,earns $11,000 during 2010 as a model.Katelyn does not qualify for head of household filing status.

A qualifying child cannot include:

Butch and Minerva are divorced in December of 2010.Since they were not married at the end of the year,they are considered not married for 2010.

Evan and Eileen Carter are husband and wife and file a joint return for 2010.Both are under 65 years of age.They provide more than half of the support of their daughter,Pamela (age 25),who is a full-time medical student.Pamela receives a $5,000 scholarship covering her room and board at college.They furnish all of the support of Belinda (Evan's grandmother),who is age 70 and lives in a nursing home.They also support Peggy (age 66),who is a friend of the family and lives with them.How many personal and dependency exemptions may the Carters claim?