Exam 3: Computing the Tax

In 2012, Hal furnishes more than half of the support of his ex-wife and her father, both of whom live with him.The divorce occurred in 2011.Hal may claim the father-in-law and the ex-wife as dependents.

Many taxpayers who previously itemized will start claiming the standard deduction when they purchase a home.

During 2012, Jackson had the following capital gains and losses:

During 2012, Madison had salary income of $80,000 and the following capital transactions: How are these transactions handled for income tax purposes?

Kyle and Liza are married and under 65 years of age.During 2012, 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 2011. 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, 2012, at age 90, has for many years qualified as their dependent.How many personal and dependency exemptions should Kyle and Liza claim?

Darren, age 20 and not disabled, earns $4,000 during 2012.Darren's parents cannot claim him as a dependent unless he is a full-time student.

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.

Contrast the tax consequences resulting from the following filing status situations:

As opposed to itemizing deductions from AGI, the majority of individual taxpayers choose the standard deduction.

When filing their Federal income tax returns, the Youngs always claimed the standard deduction.After they purchased a home, however, they started to itemize their deductions from AGI.