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Exam 16: Introduction to the Taxation of Individuals

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Question 21

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Emily,whose husband died in December 2012,maintains a household in which her dependent mother lives.Which (if any) of the following is her filing status for the tax year 2013? (Note: Emily is the executor of her husband's estate.)

A) Single.
B) Married,filing separately.
C) Surviving spouse.
D) Head of household.
E) Married,filing jointly.

F) A) and E)
G) B) and C)

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Question 22

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Both education tax credits are available for qualified tuition expenses,and in certain instances,also may be available for room and board.

A) True
B) False

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Question 23

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For tax purposes,married persons filing separate returns are treated the same as single taxpayers.

Jacob and Emily were co-owners of a personal residence.As part of their divorce agreement,Emily paid Jacob cash for his interest in the personal residence.This cash payment results in a taxable gain to Jacob if he receives more cash than his share of the cost of the residence.

Adrienne sustained serious facial injuries in a motorcycle accident.To restore her physical appearance,Adrienne had cosmetic surgery.She cannot deduct the cost of this procedure as a medical expense.

A taxpayer pays points to obtain financing to purchase a second residence.At the election of the taxpayer,the points can be deducted as interest expense for the year paid.

Agnes receives a $5,000 scholarship which covers her tuition at Parochial High School.She may not exclude the $5,000 because the exclusion applies only to scholarships to attend college.

Sylvia,age 17,is claimed by her parents as a dependent.During 2013,she had interest income from a bank savings account of $2,000 and income from a part-time job of $4,200.Sylvia's taxable income is:

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

Phyllis,a calendar year cash basis taxpayer who itemized deductions,overpaid her 2012 state income tax and is entitled to a refund of $400.Phyllis chooses to apply the $400 overpayment toward her state income taxes for 2013.She is required to recognize that amount as income in 2013.

In the year of her death,Maria made significant charitable contributions of capital gain property.In fact,the amount of the contributions exceeds 30% of her AGI.Maria's executor can elect to deduct charitable contributions of up to 50% of Maria's AGI on Maria's final income tax return.

Clara,age 68,claims head of household filing status.If she has itemized deductions of $10,100 for 2013,she should not claim the standard deduction.

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

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

Workers' compensation benefits are included in gross income if the employer also pays the employee while the employee is recovering from his or her injury.

The basic and additional standard deductions both are subject to an annual adjustment for inflation.

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.

In December 2013,Emily,a cash basis taxpayer,received a $2,500 cash scholarship for the Spring semester of 2014.However,she did not use the funds to pay the tuition until January 2014.Emily can exclude the $2,500 from her gross income in 2013.

Sarah's employer pays the hospitalization insurance premiums for a policy that covers all employees and retired former employees.After Sarah retires,the hospital insurance premiums paid for her by her employer can be excluded from her gross income.

Harry and Wilma are married and file a joint income tax return.On their tax return,they report $44,000 of adjusted gross income ($20,000 salary earned by Harry and $24,000 salary earned by Wilma) and claim two exemptions for their dependent children.During the year,they pay the following amounts to care for their 16-year old son and 6-year old daughter while they work. Harry and Wilma may claim a credit for child and dependent care expenses of: