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Exam 9: Individuals As the Taxpayers

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Question 41

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

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Form 1040EZ cannot be used when the taxp...

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Question 42

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Evan and Eileen Carter are husband and wife and file a joint return for 2017.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?

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

F) B) and D)
G) A) and E)

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Question 43

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Match the statements that relate to each other.Note: Some choices may be used more than once. -Kiddie tax applies

Taylor had the following transactions for 2017: $\begin{array}{lc}\text { Salary } & \$ 85,000 \\\text { Moving expenses incurred to change jobs } & (12,000) \\\text { Inheritance received from deceased uncle } & 300,000 \\\text { Life insurance proceeds from policy on uncle's life (Taylor was named the beneficiary) } & 200,000 \\\text { Cash prize from church raffle } & 3,000 \\\text { Payment of church pledge } & (4,500)\end{array}$ What is Taylor's AGI for 2017?

Mr.Lee is a citizen and resident of Hong Kong, while Mr.Anderson is a citizen and resident of the U.S.In the taxation of income, Hong Kong uses a territorial approach, while the U.S.follows the global system.In terms of effect, explain what this means to Mr.Lee and Mr.Anderson.

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.

Match the statements that relate to each other. -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.

In January 2017, Jake's wife dies and he does not remarry.For tax year 2017, Jake may not be able to use the filing status available to married persons filing joint returns.

Which, if any, of the following is a deduction for AGI?

Regarding the tax formula and its relationship to Form 1040, which, if any, of the following statements is correct?

The Martins have a teenage son who has become an accomplished bagpiper.With proper promotion and scheduling, the son has good income potential by charging for his services at special events (particularly funerals).However, the Martins are fearful that the income could generate a kiddie tax and cause them the loss of a dependency exemption deduction.Are the Martins' concerns justified? Explain.

Arnold is married to Sybil, who abandoned him in 2016.He has not seen or communicated with her since April of that year.He maintains a household in which their son, Evans, lives.Evans is age 25 and earns over $6,000 each year.For tax year 2017, Arnold's filing status is:

Ed is divorced and maintains a home in which he and a dependent friend live.Ed does not qualify for head of household filing status.

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.

Using borrowed funds from a mortgage on her home, Leah provides 52% of her own support, while her sons furnished the rest.Leah can be claimed as a dependent under a multiple support agreement.

Mel is not quite sure whether an expenditure he made is a deduction for AGI or a deduction from AGI.Since he plans to choose the standard deduction option for the year, does the distinction matter? Explain.

Albert buys his mother a TV.For purposes of meeting the support test, Albert cannot include the cost of the TV.

Sarah furnishes more than 50% of the support of her son and daughter-in-law who live with her.If the son and daughter-in-law file a joint return, Sarah cannot claim them as dependents.

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?