Exam 4: Individual Income Tax Overview, Dependents, and Filing Status

Jane and Ed Rochester are married with a two-year-old child who lives with them and whom they support financially. In 2018, Ed and Jane realized the following items of income and expense: They also qualified for a $2,000 child tax credit. Their employers withheld $5,800 in federal income taxes from their paychecks (in the aggregate). Finally, the 2018 standard deduction amount for MFJ taxpayers is $24,000. What is the couple's taxable income?

When determining whether a child meets the qualifying child support test for the child's grandparents, scholarships earned by the child do not count as self-support provided by the child.

Which of the following statements regarding dependents is true?

The Dashwoods have calculated their taxable income to be $88,000 for 2018, which includes $2,000 of long-term capital gains. Using the appropriate tax rate schedule, calculate the Dashwood's income tax liability assuming they are married and file a joint return.

All of the following are for AGI deductions except:

Which of the following is not an itemized deduction?

The standard deduction amount varies by filing status.

Doug and Lisa have determined that their tax liability on their joint return is $3,700. They have made prepayments of $1,000 and also are entitled to a $2,000 child tax credit. What is the amount of their tax refund or taxes due?

If no one qualifies as the dependent of an unmarried taxpayer, the unmarried taxpayer may still be able to qualify for the head of household filing status.

In year 1, Harold Weston's wife died. Since her death, he has maintained a household for their son Frank (age 3), his qualifying child. Which is the most advantageous filing status available to Harold in year 4?

For filing status purposes, the taxpayer's marital status is determined at what point during the year?

Sheri and Jake Woodhouse have one daughter, Emma, who is 16 years old. They also have taken in Emma's friend, Harriet, who has lived with them since February of the current year and is also 16 years of age. The Woodhouses have not legally adopted Harriet but Emma often refers to Harriet as "her sister." The Woodhouses provide all of the support for both girls, and both girls live at the Woodhouse residence. Which of the following statements is true regarding whom Sheri and Jake may claim as dependents for the current year?

The Inouyes filed jointly in 2018. Their AGI is $78,000. They reported $2,000 of qualified business income and $22,000 of itemized deductions. They have two children, one of whom qualifies as their dependent as a qualifying child. The 2018 standard deduction amount for MFJ taxpayers is $24,000. What is the total amount of from AGI deductions they are allowed to claim on their 2018 tax return?

Tax credits reduce taxable income dollar for dollar.

From AGI deductions are generally more valuable to taxpayers than for AGI deductions.

Tax credits are generally more valuable than tax deductions because tax credits reduce a taxpayer's gross tax liability dollar for dollar while tax deductions do not.

John Maylor is a self-employed plumber of John's John Service, his sole proprietorship. In the current year, John's John Service had revenue of $120,000 and $40,000 of business expenses. John also received $2,000 of interest income from corporate bonds. What is John's adjusted gross income assuming he had no other income or expenses (ignore any deduction for self-employment tax)

Jane is unmarried and has no children, but provides more than half of her mother's financial support. Jane's mother lives in an apartment across town and has a part-time job earning $5,000 a year. Which is the most advantageous filing status available to Jane?

The Tanakas filed jointly in 2018. Their AGI is $120,000. They reported $10,000 of qualified business income and $26,000 of itemized deductions. They also have two dependent qualifying children. The 2018 standard deduction amount for MFJ taxpayers is $24,000. What is the total amount of from AGI deductions they are allowed to claim on their 2018 tax return?

Charlotte is the Lucas family's 22-year-old daughter. She is a full-time student at an out-of-state university but plans to return home when the school year ends. During the year, Charlotte earned $4,000 of income working part-time. Her support totaled $30,000 for the year. Of this amount, Charlotte paid $7,000 with her own funds, her parents paid $14,000, and Charlotte's grandparents paid $9,000. Which of the following statements most accurately describes whether Charlotte's parents can claim Charlotte as a dependent?