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Exam 3: Computing the Tax

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Question 61

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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.

A) True
B) False

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Question 62

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Match the statements that relate to each other.Note: Choice l.may be used more than once. a.Available to a 70-year-old father claimed as a dependent by his son.b.Equal to tax liability divided by taxable income.c.The highest income tax rate applicable to a taxpayer.d.Not eligible for the standard deduction.e.No one qualified taxpayer meets the support test.f.Taxpayer's ex-husband does not qualify.g.A dependent child (age 18) who has only unearned income.h.Highest applicable rate is 39.6%.i.Applicable rate could be as low as 0%.j.Maximum rate is 28%.k.Income from foreign sources is not subject to tax.l.No correct match provided. -Nonresident alien

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Question 63

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

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

For the current year,David has wages of $80,000 and the following property transactions: Stock investment sales- Long-term capital gain $ 9,000 Short-term capital loss (12,000) Loss on sale of camper (purchased 4 years ago and used for family vacations) (2,000) What is David's AGI for the current year?

Ellen,age 39 and single,furnishes more than 50% of the support of her parents,who do not live with her;their only source of income are Social Security benefits.Ellen practices as a self-employed interior decorator and has gross income in 2015 of $120,000.Her deductions are as follows: $30,000 business and $8,100 itemized. a.Can Ellen qualify for head of household filing status? Explain. b.What is Ellen's taxable income for 2015?

Adjusted gross income (AGI) sets the ceiling or the floor for certain deductions.Explain and illustrate what this statement means.

Lucas,age 17 and single,earns $6,000 during 2015.Lucas's parents cannot claim him as a dependent if he does not live with them.

Match the statements that relate to each other.Note: Choice l.may be used more than once. a.Available to a 70-year-old father claimed as a dependent by his son.b.Equal to tax liability divided by taxable income.c.The highest income tax rate applicable to a taxpayer.d.Not eligible for the standard deduction.e.No one qualified taxpayer meets the support test.f.Taxpayer's ex-husband does not qualify.g.A dependent child (age 18) who has only unearned income.h.Highest applicable rate is 39.6%.i.Applicable rate could be as low as 0%.j.Maximum rate is 28%.k.Income from foreign sources is not subject to tax.l.No correct match provided. -Additional standard deduction

In 2015,Ashley earns a salary of $55,000,has capital gains of $3,000,and receives interest income of $5,000.Her husband died in 2014.Ashley has a dependent son,Tyrone,who is age 8.Her itemized deductions are $9,000. a.What is her filing status? b.Calculate Ashley's taxable income for 2015.

In resolving qualified child status for dependency exemption purposes,why are tiebreaker rules necessary? Can these rules be waived?

In determining whether the gross income test is met for dependency exemption purposes,only the taxable portion of a scholarship is considered.

Tony,age 15,is claimed as a dependent by his grandmother.During 2015,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:

Regarding head of household filing status,comment on the following: a.A taxpayer qualifies even though he maintains a household which he and the dependent do not share. b.A taxpayer does not qualify even though the person sharing the household is a dependent. c.The usual eventual filing status of a surviving spouse.

Derek,age 46,is a surviving spouse.If he has itemized deductions of $12,900 for 2015,Derek should not claim the standard deduction.

Match the statements that relate to each other.Note: Choice l.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. -Additional standard deduction

During 2015,Marvin had the following transactions: Salary $50,000 Bank loan (proceeds used to buy personal auto) 10,000 Alimony paid 12,000 Child support paid 6,000 Gift from aunt 20,000 Marvin's AGI is:

The Dargers have itemized deductions that exceed the standard deduction.However,when they file their joint return,they choose the standard deduction option. a.Is this proper procedure? b.Aside from a possible misunderstanding as to the tax law,what might be the reason for the Darger's choice?

If an individual does not spend funds that have been received from another source (e.g. ,interest on municipal bonds),the unexpended amounts are not considered for purposes of the support test.

During 2015,Madison had salary income of $80,000 and the following capital transactions: LTCG $13,000 LTCL 15,000 STCG 13,000 STCL 6,000 ​ How are these transactions handled for income tax purposes?