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

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Question 1

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In resolving qualified child status for dependency exemption purposes,why are tiebreaker rules necessary? Can these rules be waived?

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A person being claimed as a de...

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Question 2

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Ashley earns a salary of $55,000,has capital gains of $3,000,and interest income of $5,000 in 2012.Her husband died in 2011.Ashley has a dependent son,Tyrone,who is age 8.Her itemized deductions are $9,000.

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Question 3

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Gain on the sale of collectibles held for more than 12 months could be subject to tax at a rate lower than 28%.

Warren,age 17,is claimed as a dependent by his father.In 2012,Warren has dividend income of $1,500 and earns $400 from a part-time job.

Pedro is married to Consuela,who lives with him.Both are U.S.citizens and residents of Nebraska.Pedro furnishes all of the support of his parents,who are citizens and residents of Mexico.He also furnishes all of the support of Consuela's parents,who are citizens and residents of El Salvador.Consuela has no gross income for the year.If Pedro files as a married person filing separately,how many personal and dependency exemptions can he claim on his return?

Buddy and Hazel are ages 72 and 71 and file a joint return.If they have itemized deductions of $14,000 for 2012,they should not claim the standard deduction.

Emily,whose husband died in December 2011,maintains a household in which her dependent daughter lives.Which (if any) of the following is her filing status for the tax year 2012? (Note: Emily is the executor of her husband's estate.)

After Carolyn moves out of the apartment she had rented as her personal residence,she recovers her damage deposit of $500.The $500 is income to Carolyn.

Emma had the following transactions for 2012: What is Emma's AGI for 2012?

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

When separate income tax returns are filed by married taxpayers,one spouse cannot claim the other spouse as an exemption.

Homer (age 68)and his wife Jean (age 70)file a joint return.They furnish all of the support of Luther (Homer's 90-year old father),who lives with them.For 2012,they received $6,000 of interest income on city of Chicago bonds and interest income on corporate bonds of $48,000.Compute Homer and Jean's taxable income for 2012.

For 2012,Stuart has a short-term capital loss,a collectible long-term capital gain,and a long-term capital gain from land held as investment.The short-term loss is first applied to the collectible capital gain.

Clara,age 68,claims head of household filing status.If she has itemized deductions of $9,500 for 2012,she should not claim the standard deduction.

The Dargers have itemized deductions that exceed the standard deduction.However,when they file their joint return,they choose the standard deduction option.

Under the income tax formula,a taxpayer must choose between deductions from AGI and the standard deduction.

The kiddie tax does not apply as to a child whose earned income is more than one-half of his or her support.

A decrease in a taxpayer's AGI could decrease the amount of charitable contribution that can be claimed.

Adjusted gross income (AGI)sets the ceiling or the floor for certain deductions.Explain and illustrate what this statement means.

Even if the individual does not spend funds that have been received from another source (e.g.,interest on municipal bonds),the unexpended amounts are considered for purposes of the support test.