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

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Question 21

Multiple Choice

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Match the statements that relate to each other.Note: Choice L may be used more than once. -Nonresident alien

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 ex­husband 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.

M) D) and H)
N) G) and J)

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Question 22

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

A) True
B) False

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Question 23

Multiple Choice

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

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.

The Hutters filed a joint return for 2014.They provide more than 50% of the support of Carla,Melvin,and Aaron.Carla (age 18) is a cousin and earns $2,800 from a part-time job.Melvin (age 25) is their son and is a full-time law student.He received from the university a $3,800 scholarship for tuition.Aaron is a brother who is a citizen of Israel but resides in France.Carla and Melvin live with the Hutters.How many personal and dependency exemptions can the Hutters claim on their Federal income tax return?

Match the statements that relate to each other.Note: Choice L may be used more than once. -Average income tax rate

Katelyn is divorced and maintains a household in which she and her daughter,Crissa,live.Crissa,age 22,earns $11,000 during 2014 as a model.Katelyn does not qualify for head of household filing status.

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.

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.

Albert buys his mother a TV.For purposes of meeting the support test,Albert cannot include the cost of the TV.

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.

A qualifying child cannot include:

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.

List at least three exceptions to the application of the kiddie tax.

Which of the following characteristics correctly describes the procedure for the phaseout of exemptions?

Which of the following taxpayers may file as a head of household in 2014? 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 2014 working at a fast food restaurant and is saving his money to attend college in 2015.Dan lives in Tammy's home. Joe's wife left him late in December of 2013.No legal action was taken and Joe has not heard from her in 2014.Joe supported his 6-year-old son,who lived with him throughout 2014.

Match the statements that relate to each other.Note: Choice L may be used more than once. -Additional standard deduction

Deductions for AGI are often referred to as "above­the­line" or "page 1" deductions.Explain.

For the year a spouse dies,the surviving spouse is considered married for the entire year for income tax purposes.

Regarding dependency exemptions,classify each statement in one of the four categories: -An ex-husband (divorce occurred last year) who lives with taxpayer.