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Exam 3: Computing the Tax

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Question 51

True/False

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Derek, age 46, is a surviving spouse.If he has itemized deductions of $12,100 for 2012, Derek should not claim the standard deduction.

A) True
B) False

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Question 52

Multiple Choice

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Wilma, age 70 and single, is claimed as a dependent on her daughter's tax return.During 2012, she had interest income of $2,400 and $800 of earned income from baby sitting.Wilma's taxable income is:

A) $700.
B) $850.
C) $1,800.
D) $2,250.
E) None of the above.

F) All of the above
G) B) and E)

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Question 53

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Homer (age 68) and his wife Jean (age 70) file a joint return.They furnish all of the support of Luther (Homer's 90-year old father), who lives with them.For 2012, they received $6,000 of interest income on city of Chicago bonds and interest income on corporate bonds of $48,000.Compute Homer and Jean's taxable income for 2012.

Which, if any, of the following is a correct statement relating to the kiddie tax?

Kirby is in the 15% tax bracket and had the following capital asset transactions during 2012: Kirby's tax consequences from these gains are as follows:

Warren, age 17, is claimed as a dependent by his father.In 2012, Warren has dividend income of $1,500 and earns $400 from a part-time job.

In terms of income tax consequences, abandoned spouses are treated the same way as married persons filing separate returns.

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

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

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

Married taxpayers who file separately cannot later change to a joint return.

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.

Roy and Linda were divorced in 2011.The divorce decree awards custody of their children to Linda but is silent as to who is entitled to claim them as dependents.If Roy furnished more than half of their support, he can claim them as dependents in 2012.

Buddy and Hazel are ages 72 and 71 and file a joint return.If they have itemized deductions of $14,000 for 2012, they should not claim the standard deduction.

In early 2012, Ben sold a yacht, held for 9 months and for pleasure, for a $5,000 gain.Concerned about offsetting the gain before year-end, Ben is considering selling one of the following-each of which would yield a $5,000 loss: · Houseboat used for recreation. · Truck used in business. · Stock investment held for 13 months. Evaluate each choice.

Which of the following taxpayers may file as a head of household in 2012? Ron provides all the support for his mother, Betty, who lives by herself in an apartment in Fort Lauderdale.Ron pays the rent and other expenses for the apartment and properly claims his mother as a dependent. Tammy provides over one-half the support for her 18-year old brother, Dan.Dan earned $4,200 in 2012 working at a fast food restaurant and is saving his money to attend college in 2013.Dan lives in Tammy's home. Joe's wife left him late in December of 2011.No legal action was taken and Joe has not heard from her in 2012.Joe supported his 6-year-old son, who lived with him throughout 2012.

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

During the year, Irv had the following transactions: How are these transactions handled for income tax purposes?

A decrease in a taxpayer's AGI could decrease the amount of charitable contribution that can be claimed.

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