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Exam 3: Tax Formula and Tax Determination; an Overview of Property Transactions

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Question 71

Multiple Choice

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During 2017, Trevor has the following capital transactions: After the netting process, the following results:

A) Long-term collectible gain of $2,000.
B) LTCG of $6,000, Long-term collectible gain of $2,000, and a STCL of $6,000.
C) LTCG of $6,000, Long-term collectible gain of $2,000, and a STCL carryover to 2018 of $3,000.
D) LTCG of $2,000.
E) None of these.

F) A) and B)
G) A) and C)

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Question 72

Multiple Choice

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Kyle and Liza are married and under 65 years of age. During 2017, 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 2016. 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, 2017, 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) C) and D)
G) A) and E)

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Question 73

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In terms of income tax consequences, abandoned spouses are treated the same way as married persons filing separate returns.

When the kiddie tax applies, the child need not file an income tax return because the child's income will be reported on the parents' return.

In determining whether the gross income test is met for dependency exemption purposes, only the taxable portion of a scholarship is considered.

Dan and Donna are husband and wife and file separate returns for the year. If Dan itemizes his deductions from AGI, Donna cannot claim the standard deduction.

Match the statements that relate to each other. Note: Choice l. may be used more than once. a.Available to a 70-year-old father claimed as a dependent by his son. b.Equal to tax liability divided by taxable income. c.The highest income tax rate applicable to a taxpayer. d.Not eligible for the standard deduction. e.No one qualified taxpayer meets the support test. f.Taxpayer's ex-husband does not qualify. g.A dependent child (age 18) who has only unearned income. h.Highest applicable rate is 39.6%. i.Applicable rate could be as low as 0%.j.Maximum rate is 28%.k.Income from foreign sources is not subject to tax.l.No correct match provided. -Global system of taxation

Tony, age 15, is claimed as a dependent by his grandmother. During 2017, Tony had interest income from Boeing Corporation bonds of $1,000 and earnings from a part-time job of $800. Tony's taxable income is:

Regarding dependency exemptions, classify each statement in one of the four categories: a.Could be a qualifying child. b.Could be a qualifying relative. c.Could be either a qualifying child or a qualifying relative. d.Could be neither a qualifying child nor a qualifying relative. -An uncle who lives with taxpayer.

Which, if any, of the following is a deduction for AGI?

In January 2017, Jake's wife dies and he does not remarry. For tax year 2017, Jake may not be able to use the filing status available to married persons filing joint returns.

In 2017, Ed is 66 and single. If he has itemized deductions of $7,400, he should not claim the standard deduction alternative.

Under the Federal income tax formula for individuals, a choice must be made between claiming deductions for AGI and itemized deductions.

Match the statements that relate to each other. Note: Some choices may be used more than once. a.Not available to 65-year old taxpayer who itemizes. b.Exception for U.S. citizenship or residency test (for dependency exemption purposes). c.Largest basic standard deduction available to a dependent who has no earned income. d.Considered for dependency exemption purposes. e.Qualifies for head of household filing status. f.A child (age 15) who is a dependent and has only earned income. g.Considered in applying gross income test (for dependency exemption purposes). h.Not considered in applying the gross income test (for dependency exemption purposes). i.Unmarried taxpayer who can use the same tax rates as married persons filing jointly.j.Exception to the support test (for dependency exemption purposes).k.A child (age 16) who is a dependent and has only unearned income of $4,500.l.No correct match provided. -Surviving spouse

Which of the following taxpayers may file as a head of household in 2017? ​ 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 2017 working at a fast food restaurant and is saving his money to attend college in 2018. Dan lives in Tammy's home.​ Joe's wife left him late in December of 2016. No legal action was taken and Joe has not heard from her in 2017. Joe supported his 6-year-old son, who lived with him throughout 2017.

For the past few years, Corey's filing status has been as follows: 2013 (married/joint); 2014 (married/separate); 2015 (surviving spouse); 2016 (surviving spouse); and 2017 (head of household). Explain what probably has happened.

Match the statements that relate to each other. Note: Choice l. may be used more than once. a.Available to a 70-year-old father claimed as a dependent by his son. b.Equal to tax liability divided by taxable income. c.The highest income tax rate applicable to a taxpayer. d.Not eligible for the standard deduction. e.No one qualified taxpayer meets the support test. f.Taxpayer's ex-husband does not qualify. g.A dependent child (age 18) who has only unearned income. h.Highest applicable rate is 39.6%. i.Applicable rate could be as low as 0%.j.Maximum rate is 28%.k.Income from foreign sources is not subject to tax.l.No correct match provided. -Additional standard deduction

Match the statements that relate to each other. Note: Some choices may be used more than once. a.Not available to 65-year old taxpayer who itemizes. b.Exception for U.S. citizenship or residency test (for dependency exemption purposes). c.Largest basic standard deduction available to a dependent who has no earned income. d.Considered for dependency exemption purposes. e.Qualifies for head of household filing status. f.A child (age 15) who is a dependent and has only earned income. g.Considered in applying gross income test (for dependency exemption purposes). h.Not considered in applying the gross income test (for dependency exemption purposes). i.Unmarried taxpayer who can use the same tax rates as married persons filing jointly.j.Exception to the support test (for dependency exemption purposes).k.A child (age 16) who is a dependent and has only unearned income of $4,500.l.No correct match provided. -Resident of Canada or Mexico

An "above the line" deduction refers to a deduction for AGI.

In which, if any, of the following situations may the individual not be claimed as a dependent of the taxpayer?