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

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Question 71

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During 2014,Lisa (age 66) furnished more than 50% of the support of the following persons: -Lisa's current husband who has no income and is not claimed by someone else as a dependent. -Lisa's stepson (age 19) who lives with her and earns $6,000 as a dance instructor.He dropped out of school a year ago. -Lisa's ex­husband who does not live with her.The divorce occurred two years ago. -Lisa's former brother­in­law who does not live with her. Presuming all other dependency tests are met,on a separate return how many personal and dependency exemptions may Lisa claim?

A) Two
B) Three
C) Four
D) Five
E) None of these

F) All of the above
G) B) and C)

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Question 72

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Lucas,age 17 and single,earns $6,000 during 2014.Lucas's parents cannot claim him as a dependent if he does not live with them.

A) True
B) False

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Question 73

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After paying down the mortgage on their personal residence,the Hills have found that their itemized deductions for each year are always slightly less than the standard deduction option. a.Explain what has happened. b.What remedy do you suggest?

Wilma,age 70 and single,is claimed as a dependent on her daughter's tax return.During 2014,she had interest income of $2,500 and $800 of earned income from babysitting.Wilma's taxable income is:

Under the Federal income tax formula for individuals,a choice must be made between claiming deductions for AGI and itemized deductions.

Which,if any,of the statements regarding the standard deduction is correct?

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%?

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

Match the statements that relate to each other.Note: Choice L may be used more than once. -Relationship test (for dependency exemption purposes)

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

In determining the filing requirement based on gross income received,both additional standard deductions (i.e. ,age and blindness)are taken into account.

Evan and Eileen Carter are husband and wife and file a joint return for 2014.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 tuition at college.They furnish all of the support of Belinda (Evan's grandmother) ,who is age 80 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 dependency exemptions may the Carters claim?

Regarding dependency exemptions,classify each statement in one of the four categories: -A daughter-in-law who lives with taxpayer.

Howard,age 82,dies on January 2,2014.On Howard's final income tax return,the full amount of the basic and additional standard deductions will be allowed even though Howard lived for only 2 days during the year.

A taxpayer who itemizes must use Form 1040,and cannot use Form 1040EZ or Form 1040A.

When separate income tax returns are filed by married taxpayers,one spouse cannot claim the other spouse as an exemption.

Edgar had the following transactions for 2014:

Many taxpayers who previously itemized will start claiming the standard deduction when they purchase a home.

In terms of income tax consequences,abandoned spouses are treated the same way as married persons filing separate returns.

Maude's parents live in another state and she cannot claim them as her dependents.If Maude pays their medical expenses,can she derive any tax benefit from doing so? Explain.