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

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Question 31

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During 2012,Madison had salary income of $80,000 and the following capital transactions: How are these transactions handled for income tax purposes?

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Combining the long-term transactions yie...

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Question 32

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In satisfying the support test and the gross income test for claiming a dependency exemption,a scholarship received by the person being claimed is handled the same way for each test.Do you agree or disagree with this statement? Why?

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Disagree.For purposes of the s...

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Question 33

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Butch and Minerva are divorced in December of 2012.Since they were married for more than one-half of the year,they are considered asmarried for 2012.

During the current year,Doris received a large gift from her parents and a sizeable inheritance from an uncle.She also paid premiums on an insurance policy on her life.Doris is confused because she cannot find any place on Form 1040 to report these items.Explain.

During 2012,Trevor has the following capital transactions: After the netting process,the following results:

Adjusted gross income (AGI)appears at the bottom of page 1 and at the top of page 2 of Form 1040.

Regarding the Tax Tables applicable to the Federal income tax,which of the following statements is correct?

Pedro is married to Consuela,who lives with him.Both are U.S.citizens and residents of Nebraska.Pedro furnishes all of the support of his parents,who are citizens and residents of Mexico.He also furnishes all of the support of Consuela's parents,who are citizens and residents of El Salvador.Consuela has no gross income for the year.If Pedro files as a married person filing separately,how many personal and dependency exemptions can he claim on his return?

Once they reach age 65,many taxpayers will switch from itemizing their deductions from AGI and start claiming the standard deduction.

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.

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.

Lee,a citizen of Korea,is a resident of the U.S.Any rent income Lee receives from land he owns in Korea is not subject to the U.S.income tax.

A dependent cannot claim a personal exemption on his or her own return.

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.

Millie,age 80,is supported during the current year as follows: During the year,Millie lives in an assisted living facility.Under a multiple support agreement,indicate which parties can qualify to claim Millie as a dependent.

Deductions for AGI are often referred to as "above-the-line" or "page 1" deductions.Explain.

When the kiddie tax applies and the parents are divorced,the applicable parent (for determining the parental tax)is the one who has custody.

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

In January 2012,Jake's wife dies and he does not remarry.For tax year 2012,Jake may not be able to use the filing status available to married persons filing joint returns.

Taylor had the following transactions for 2012: What is Taylor's AGI for 2012?