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Exam 3: Computing the Tax

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Question 21

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Lee,a citizen of Korea,is a resident of the U.S.Any income Lee receives from land he owns in Korea is subject to the U.S.income tax.

A) True
B) False

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Question 22

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Maude's parents live in another state and she cannot claim them as her dependents.If Maude pays their medical expenses,can she derive any tax benefit from doing so? Explain.

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If Maude could otherwise claim...

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Question 23

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Clara,age 68,claims head of household filing status.If she has itemized deductions of $9,500 for 2010,she should claim the standard deduction.

Arnold is married to Sybil,who abandoned him in 2008.He has not seen or communicated with her since April of that year.He maintains a household in which their son,Evans,lives.Evans is age 25 and earns over $20,000 each year.For tax year 2010,Arnold's filing status is:

A child who is married can be subject to the kiddie tax.

Muriel,age 70 and single,is claimed as a dependent on her daughter's tax return.During 2010,she had interest income of $2,400 and $800 of earned income from baby sitting.Muriel's taxable income is:

The Hutters filed a joint return for 2010.They provide more than 50% of the support of Carla,Melvin,and Aaron.Carla (age 18) is a cousin and earns $5,000 from a part-time job.Melvin (age 25) is their son and is a full-time law student.He received from the university a $3,800 scholarship for tuition.Aaron is a brother who is a citizen of Israel but resides in France.Carla and Melvin live with the Hutters.How many personal and dependency exemptions can the Hutters claim on their Federal income tax return?

Which,if any,of the statements regarding the standard deduction is correct?

Benjamin,age 16,is claimed as a dependent by his parents.During 2010,he earned $700 at a car wash.Benjamin's standard deduction is $1,250 ($950 + $300).

After paying down the mortgage on their personal residence,the Hills have found that their itemized deductions for each year are always slightly less than the standard deduction option.

Logan,an 80-year-old widower,dies on January 2,2010.Even though he lived for only two days,on his final income tax return for 2010,the full basic and additional standard deductions can be claimed.

Katrina,age 16,is claimed as a dependent by her parents.During 2010,she earned $5,500 as a checker at a grocery store.Her standard deduction is $5,800 ($5,500 earned income + $300).

For tax purposes,married persons filing separate returns are treated the same as single taxpayers.

During the year,Marcus had the following transactions: How are these transactions handled for income tax purposes?

During the current year,Doris received a large gift from her parents and a sizeable inheritance from an uncle.She also paid premiums on an insurance policy on her life.Doris is confused because she cannot find any place on Form 1040 to report these items.Explain.

In early 2010,Ben sold a yacht,held for 9 months and for pleasure,for a $5,000 gain.Concerned about offsetting the gain before year-end,Ben is considering selling one of the following-each of which would yield a $5,000 loss: · Houseboat used for recreation. · Truck used in business. · Stock investment held for 13 months. Evaluate each choice.

It is possible for an individual taxpayer to claim more than one type of standard deduction.

During 2010,Marvin had the following transactions: Marvin's AGI is:

During 2010,Carmen had salary income of $90,000 and the following capital transactions: How are these transactions handled for income tax purposes?

During 2010,Dena has the following gains and losses: