Exam 4: Individual Income Tax Overview, Exemptions, and Filing Status

Katy has one child, Dustin, who is 18 years old at the end of the year. Dustin lived at home for three months during the year before leaving home to work full-time in another city. During the year, Dustin earned $15,000. Katy provided more than half of Dustin's support for the year. Which of the following statements regarding whether Katy may claim Dustin as a dependent for the current year is accurate?

For purposes of the qualifying child residence test, a child's temporary absence from the taxpayer's home for attending school full-time is counted as though the child lived in the taxpayer's home during the absence.

Certain types of income are taxed at a lower rate than ordinary income.

An individual with gross income of $5,000 could qualify as a qualifying child of another taxpayer but could not qualify as a qualifying relative of another taxpayer.

Which of the following is NOT a from AGI deduction?

In addition to the individual income tax, individuals may be required to pay taxes imposed on tax bases other than the individual's regular taxable income.

Which of the following is not a filing status?

What is the couple's gross income?

Tom Suzuki's tax liability for the year is $2,450. He had $2,050 of federal income taxes withheld from his paycheck during the year by his employer and has $2,000 in tax credits. What are Tom's taxes due or tax refund for the year?

In certain circumstances, a taxpayer who provides less than half the support of another may still be able to claim a dependency exemption for that person as a qualifying relative.

Charles, who is single, pays all of the costs of maintaining a home for himself and Damarcus. Charles and Damarcus have no family relationship but Damarcus lives with Charles for the entire year. Damarcus qualifies as a qualifying relative for Charles (Charles claims a dependency exemption for Damarcus on his tax return). Charles qualifies for head of household filing status.

Sam and Tacy have been married for 25 years. They have filed a joint return every year of their marriage. They have two sons Christopher and Zachary. Christopher is 19 years old and Zachary is 14 years old. Christopher lived in his parents' home from January through August and he lived in his own apartment from September through December. During the year, Christopher attended college for one month before dropping out. Christopher's living expenses totaled $12,000 for the year. Of that, Christopher paid $5,000 from income he received while working a part time job. Sam and Tacy provided the remaining $7,000 of Christopher's support. Zachary lived at home the entire year and did not earn any income. How many personal and dependency exemptions are Sam and Tacy entitled to claim for the year and for whom are they allowed to claim the exemption(s)?

The relationship requirement for qualifying relative requires the potential qualifying relative to have a family relationship with the taxpayer.

Sally received $50,000 of compensation from her employer and she received $400 of interest from a corporate bond. What is the amount of Sally's gross income from these items?

Jasmine and her husband Arty have been married for 25 years. In May of this year, the couple divorced. During the year, Jasmine provided all the support for herself and her 22-year-old child Dexter who lived in the same home as Jasmine for the entire year. Dexter is employed full-time, earning $29,000 this year. What is the Jasmine's most favorable filing status for the year?

In certain circumstances, a married taxpayer who files separately may qualify for the head of household filing status.

What is the couple's adjusted gross income?

The Tanakas filed jointly in 2014. Their AGI is $120,000. They reported $10,000 of itemized deductions and they have two dependent children. The 2014 standard deduction amount is $12,400 and each exemption is $3,950. What is the total amount of from AGI deductions they are allowed to claim on their 2014 tax return?

Which of the following statements regarding the difference between the requirements for a qualifying child and the requirements for a qualifying relative is false?

John Maylor is a self-employed plumber of John's John Service, his sole proprietorship. In the current year, John's John Service had revenue of $120,000 and $40,000 of business expenses. John also received $2,000 of interest income from corporate bonds. What is John's adjusted gross income assuming he had no other income or expenses (ignore any deduction for self-employment tax)?