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Exam 3: Computing the Tax

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Question 31

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Match the statements that relate to each other. Note: Some choices may be used more than once. a.Not available to 65-year old taxpayer who itemizes. b.Exception for U.S. citizenship or residency test (for dependency exemption purposes). c.Largest basic standard deduction available to a dependent who has no earned income. d.Considered for dependency exemption purposes. e.Qualifies for head of household filing status. f.A child (age 15) who is a dependent and has only earned income. g.Considered in applying gross income test (for dependency exemption purposes). h.Not considered in applying the gross income test (for dependency exemption purposes). i.Unmarried taxpayer who can use the same tax rates as married persons filing jointly. j.Exception to the support test (for dependency exemption purposes). k.A child (age 16) who is a dependent and has only unearned income of $4,500. l.No correct match provided. -Kiddie tax applies

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Question 32

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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.

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Gifts and inheritances are exclusions fr...

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Question 33

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In terms of the tax formula applicable to individual taxpayers,which,if any,of the following statements is correct?

In 2017,Hal furnishes more than half of the support of his ex-wife and her father,both of whom live with him.The divorce occurred in 2016.Hal may claim the father-in-law and the ex-wife as dependents.

In meeting the criteria of a qualifying child for dependency exemption purposes,when if ever,might the child's income become relevant?

Match the statements that relate to each other. Note: Some choices may be used more than once. a.Not available to 65-year old taxpayer who itemizes. b.Exception for U.S. citizenship or residency test (for dependency exemption purposes). c.Largest basic standard deduction available to a dependent who has no earned income. d.Considered for dependency exemption purposes. e.Qualifies for head of household filing status. f.A child (age 15) who is a dependent and has only earned income. g.Considered in applying gross income test (for dependency exemption purposes). h.Not considered in applying the gross income test (for dependency exemption purposes). i.Unmarried taxpayer who can use the same tax rates as married persons filing jointly. j.Exception to the support test (for dependency exemption purposes). k.A child (age 16) who is a dependent and has only unearned income of $4,500. l.No correct match provided. -Resident of Canada or Mexico

Which of the following items,if any,is deductible?

Tony,age 15,is claimed as a dependent by his grandmother.During 2017,Tony had interest income from Boeing Corporation bonds of $1,000 and earnings from a part-time job of $800.Tony's taxable income is:

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.

Under the Federal income tax formula for individuals,the determination of adjusted gross income (AGI) precedes that of taxable income (TI).

As opposed to itemizing deductions from AGI,the majority of individual taxpayers choose the standard deduction.

Katrina,age 16,is claimed as a dependent by her parents.During 2017,she earned $5,600 as a checker at a grocery store.Her standard deduction is $5,950 ($5,600 earned income + $350).

For the current year,David has wages of $80,000 and the following property transactions: What is David's AGI for the current year?

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

During the year,Kim sold the following assets: business auto for a $1,000 loss,stock investment for a $1,000 loss,and pleasure yacht for a $1,000 loss.Presuming adequate income,how much of these losses may Kim claim?

In terms of the tax formula applicable to individual taxpayers,which,if any,of the following statements is correct?

Stuart has a short-term capital loss,a collectible long-term capital gain,and a long-term capital gain from land held as investment.The short-term loss is first applied to the collectible capital gain.

During 2017,Esther had the following transactions: Esther's AGI is:

The Deweys are expecting to save on their taxes for 2017.Not only have both incurred large medical expenses,but both reached age 65.During the year,they also recognized a $30,000 loss on some land they sold which was purchased as an investment several years ago.Are the Deweys under a mistaken understanding regarding their tax position? Explain.

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