Exam 4: Individual Income Tax Overview dependents and Filing Status

Correct Answer:

Verified

$73,800,see calculations below.   $\begin{array}{l}\begin{array}{lll}&\text { Description }\\(1)& \text { Ed's salary}\\(2)& \text { Jane's salary}\\(3) & \text {Qualified business income}\\(4)& \text { Municipal bond interest}\\&\text { income}\\(5)& \text { Gross income}\\(6) & \text {Alimony paid}\\(7) & \text {Adjusted gross income}\\(8)& \text { Standard deduction}\\(9)& \text { Itemized deductions}\\\\(10)& \text {Greater of (8) or (9)}\\\\(11) & \text {Deduction for qualified }\\&\text { business income}\\(12) & \text {Total deductions from AGI}\\(13) & \text {Taxable income}\\\end{array}\begin{array}{lll}\text { Amount } \\\$ \quad 35,000 \\70,000 \\1,000 \\0 \\\\106,000 \\(7,000) \\99,000 \\(24,000) \\(25,000) \\\\(25,000) \\\\(200) \\\\(25,200) \\\$ \quad 73,800\end{array}\begin{array}{lll}\text { Explanation }\\\\\\\\ \text {Municipal bond interest is }\\ \text {excluded from gross income }\\Sum(1)-(3)\\ \text {For AGI deduction}\\ (5)+(6)\\ \text {Married filing joint filing}\\ \text {Real property tax and charitable}\\ \text {contributions}\\ \text {Itemized deductions exceed the}\\ \text {standard deduction}\\\$ 10,000 QBI x20 \%\\\\ (10)+(11) \\ (7)+(12) \\\end{array}\end{array}$


 

Correct Answer:

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They can claim Zachary as a dependent qualifying child but they are not allowed to claim Christopher as a dependent.He does not qualify as either a qualifying child or qualifying relative.See analysis below. Qualifying child test $\begin{array} { l l l } \text { Test } & { \text { Curistopher } } & { \text { Zachary } } \\\text { Relationship } & \text { Yes, son } & \text { Yes, son } \\\text { Age } & \text { No, not under 19 years of age and } & \text { Yes, under age } 19 \text { at end of } \\& \text { not a full-time student.}&\text { year.}\\\text { Residence } & \text { Yes, lived in parent's home for } & \text { Yes, lived at home entire year. } \\& \text { more thar half the year. } & \\\text { Support } & \text { Yes. Did not provide rnore thar } & \text { Yes. Did not provide More } \\& \text { half of own support. } & \text { than helf of own support. }\end{array}$ Qualifying relative test: $\text { Test }$ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Christopher }$

$\text { Relationship}$ $\quad$ $\text { Yes, son}$
$\text { Age}$ $\quad$ $\quad$$\quad$$\quad$$\quad$$\text { Not applicable to qualifying relative.}$
$\text { Residence }$ $\quad$ $\quad$ $\text { Not applicable to qualifying relative.}$
$\text { Support }$ $\quad$$\quad$$\quad$ $\text { Yes. Sam and Tacy provided more than half of Christopher's}$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { support \( (\$ 7,000 / \$ 12,000) \).}$
$\text { Gross income No, Christopher's gross income is not less than \( \$ 4,150 \).}$