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?

All of the following are tests for determining qualifying relative status except _____.

If no one qualifies as the dependent of an unmarried taxpayer, the unmarried taxpayer may still be able to qualify for the head of household filing status.

Hannah, who is single, received a qualified dividend of $1,000. Hannah's marginal ordinary income tax rate is 28%. What amount of tax must she pay on the $1,000 dividend?

Anna is a qualifying child of her parents. However, she was recently married. Anna and her husband filed a joint return. If they had filed separately, Anna would have owed no taxes, though her husband would have owed just $5. Because Anna herself owed no taxes, her parents can still claim her as a dependent.

For purposes of the dependency exemption qualification, the test for qualifying children includes an age restriction but the test for qualifying relative does not.

An individual may be considered as a qualifying child of her parents and a qualifying child of her grandparents in the same year.

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.

An individual may never be considered as both a qualifying relative and a qualifying child of the same taxpayer.

An individual may meet the relationship test to be a taxpayer's qualifying relative even if the individual has no family relationship with the taxpayer.

Filing status determines all of the following except ___________

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?

Which of the following types of income are not considered ordinary income?

In June of year 1, Edgar's wife Cathy died and Edgar did not remarry during the year. What is his filing status for year 1? (assuming they did not have any dependents)

Which of the following relationships does NOT pass the relationship test for a qualifying child?

In April of year 1, Martin left his wife Marianne. The couple has two children under the age of 15. While the couple was apart, they were not legally divorced. Marianne remained in the home and paid all the costs of maintaining the home for the remainder of the year. Assuming the couple does not file jointly, which of the following statements regarding filing status is true?

For AGI deductions are commonly referred to as deductions "below the line."

The Inouyes filed jointly in 2016. Their AGI is $78,000. They reported $16,000 of itemized deductions and they have two children, one of whom qualifies as their dependent. The 2016 standard deduction amount is $12,600 and each exemption is $4,050. What is the total amount of from AGI deductions they are allowed to claim on their 2016 tax return?

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)

It is generally more advantageous from a tax perspective for a married couple to file separately than it is for them to file jointly.