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

Taxpayers are generally allowed to claim deductions for expenditures unless a specific tax provision indicates the expenditure is not deductible.

William and Charlotte Collins divorced in November of year 1. William moved out and Charlotte remained in their house with their 10-month-old daughter Autumn. Diana, Charlotte's mother, lived in the home and acted as Autumn's nanny for all of year 1. William provided 70% of Autumn's support, Diana provided 20%, and Charlotte provided 10%. When the time came to file their tax returns for year 1, William, Charlotte, and Diana each wanted to claim Autumn as a dependent. Their respective AGIs for year 1 were $50,000, $35,000, and $52,000. Who has priority to claim Autumn as a dependent?

To be considered a qualifying child of a taxpayer, the individual must be the son or daughter of the taxpayer.

For AGI deductions are commonly referred to as deductions "above the line."

For purposes of the qualifying child residence test, a child's temporary absence from the taxpayer's home for attending school full-time is counted as though the child lived in the taxpayer's home during the absence.

By the end of year 1, Harold and Jamie Allred had been married for 30 years and have filed a joint return every year of their marriage. Their three sons, Jacob, Larry, and Andi, are ages 13, 16, and 23 respectively and all live at home and are fully supported by their parents. Andi is employed full time, earning $17,000 in year 1. Who can the Allreds claim as dependents?

Lebron received $50,000 of compensation from his employer and he received $400 of interest from a municipal bond. What is the amount of Lebron's gross income from these items?

In addition to the individual income tax, individuals may be required to pay taxes imposed on tax bases other than the individual's regular taxable income.

If an unmarried taxpayer provides more than half the support for a cousin who lives in the taxpayer's home for the entire year, the taxpayer will qualify for head of household filing status.

In February of 2017, Lorna and Kirk were married. During 2018, Lorna received $40,000 of compensation from her employer and Kirk received $30,000 of compensation from his employer. The couple together reported $2,000 of itemized deductions. Lorna and Kirk filed separately in 2018. What is Lorna's taxable income and what is her tax liability (use the applicable tax rate schedule and round your answer to the nearest whole number)?

Katy has one child, Dustin, who is 18 years old at the end of the year. Dustin lived at home for three months during the year before leaving home to work full-time in another city. During the year, Dustin earned $15,000. Katy provided more than half of Dustin's support for the year. Which of the following statements regarding whether Katy may claim Dustin as a dependent for the current year is accurate?

Anna is a 21-year-old full-time college student (she plans on returning home at the end of the school year). Her total support for the year was $34,000 (including $8,000 of tuition). Anna covered $12,000 of her support costs out of her own pocket (from savings, she did not work) and she received an $8,000 scholarship that covered all of her tuition costs. Which of the following statements regarding who is allowed to claim Anna as an exemption is true?

It is generally more advantageous for liability protection purposes for a married couple to file separately than it is for them to file jointly.

In certain circumstances, a taxpayer who provides less than half the support of another may still be able to claim that person as a dependent as a qualifying relative.

In April of year 1, Martin left his wife Marianne. While the couple was apart, they were not legally divorced. Marianne found herself having to financially provide for the couple's only child (who qualifies as Marianne's dependent) and to pay all the costs of maintaining the household. When Marianne filed her tax return for year 1, she filed a return separate from Martin. What is Marianne's most favorable filing status for year 1?

Which of the following statements regarding tax deductions is false?

In certain circumstances, a married taxpayer who does not file a joint tax return with her spouse may qualify for the head of household filing status.

Kabuo and Melinda got married on December 15, year 1. Kabuo's salary for the year was $54,000, and Melinda's was $62,000. In addition, Kabuo received $250 of interest income, ($100 of which was from municipal bonds), and Melinda received $10,000 of alimony from a former spouse (pre 2018 divorce decree). If Kabuo and Melinda choose to file jointly, what is their year 1 gross income?

Eric and Josephine were married in year 1. In year 2, Eric dies. The couple did not have any children. Assuming Josephine does not remarry, she may file as a qualifying widow in year 3.

Earl and Lawanda Jackson have been married for 15 years. They have no children. Ned, who is an old friend from high school, has been living with the Jacksons during the current year. Which of the following is a true statement regarding whether the Jacksons can claim Ned as a dependent for the current year?