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Exam 9: Individuals As the Taxpayer

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Question 1

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Kyle and Liza are married and under 65 years of age.During 2015,they furnish more than half of the support of their 19-year old daughter,May,who lives with them.She graduated from high school in May 2014.May earns $15,000 from a part-time job,most of which she sets aside for future college expenses.Kyle and Liza also provide more than half of the support of Kyle's cousin who lives with them.Liza's father,who died on January 3,2015,at age 90,has for many years qualified as their dependent.How many personal and dependency exemptions should Kyle and Liza claim?

A) Two
B) Three
C) Four
D) Five
E) None of these

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

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C

Question 2

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

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∙ Unearned income of $2,100 or less.
∙...

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Question 3

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

Claude's deductions from AGI exceed the standard deduction allowed for 2015.Under these circumstances,Claude cannot claim the standard deduction.

A taxpayer who itemizes must use Form 1040,and cannot use Form 1040EZ or Form 1040A.

The Martins have a teenage son who has become an accomplished bagpiper.With proper promotion and scheduling,the son has good income potential by charging for his services at special events (particularly funerals).However,the Martins are fearful that the income could generate a kiddie tax and cause them the loss of a dependency exemption deduction.Are the Martins' concerns justified? Explain.

Since an abandoned spouse is treated as not married and has one or more dependent children,he or she qualifies for the standard deduction available to head of household.

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

Butch and Minerva are divorced in December of 2015.Since they were married for more than one-half of the year,they are considered as married for 2015.

Kim,a resident of Oregon,supports his parents who are residents of Canada but citizens of Korea.Kim can claim his parents as dependents.

The Deweys are expecting to save on their taxes for 2015.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.

Lena is 66 years of age,single,and blind and is not claimed as a dependent.How much gross income must she have before she is required to file a Federal income tax return for 2015?

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.

Clara,age 68,claims head of household filing status.If she has itemized deductions of $10,500 for 2015,she should not claim the standard deduction.

Pedro is married to Consuela,who lives with him.Both are U.S.citizens and residents of Nebraska.Pedro furnishes all of the support of his parents,who are citizens and residents of Mexico.He also furnishes all of the support of Consuela's parents,who are citizens and residents of El Salvador.Consuela has no gross income for the year.If Pedro files as a married person filing separately,how many personal and dependency exemptions can he claim on his return?

Under what circumstances,if any,may an ex-spouse be claimed as a dependent?

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.

Which of the following taxpayers may file as a head of household in 2015? 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 2015 working at a fast food restaurant and is saving his money to attend college in 2016.Dan lives in Tammy's home. Joe's wife left him late in December of 2014.No legal action was taken and Joe has not heard from her in 2015.Joe supported his 6-year-old son,who lived with him throughout 2015.

Married taxpayers who file a joint return cannot later (i.e. ,after the filing due date)switch to separate returns for that year.

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