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Exam 16: Introduction to the Taxation of Individuals

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Question 1

True/False

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Claude's deductions from AGI exceed the standard deduction allowed for 2013.Under these circumstances,Claude cannot claim the standard deduction.

A) True
B) False

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Question 2

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Merle is a widow,age 80 and blind,who is claimed as a dependent by her son.During 2013,she received $4,800 in Social Security benefits,$2,350 in bank interest,and $1,800 in cash dividends from stocks.Merle's taxable income is:

A) $4,150 - $1,000 - $3,000 = $150.
B) $4,150 - $3,000 = $1,150.
C) $4,150 - $1,000 - $1,500 = $1,650.
D) $8,950 - $1,000 - $3,000 = $4,950.
E) None of the above.

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

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Question 3

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Georgia contributed $2,000 to a qualifying Health Savings Account in 2013.The entire amount qualifies as an expense deductible for AGI.

Byron owned stock in Blossom Corporation that he donated to a museum (a qualified charitable organization) on June 8 this year.What is the amount of Byron's deduction assuming that he had purchased the stock for $10,500 last year on August 7,and the stock had a fair market value of $13,800 when he made the donation?

George and Martha are married and file a joint tax return claiming their two children,ages 10 and 8 as dependents.Assuming their AGI is $119,650,George and Martha's child tax credit is:

If a scholarship does not satisfy the requirements for a gift,the scholarship must be included in gross income.

Bradley has two college-age children,Clint,a freshman at State University,and Abigail,a junior at Northwest University.Both Clint and Abigail are full-time students.Clint's expenses during the 2013 fall semester are as follows: $2,400 tuition,$250 books and course materials,and $1,600 room and board.Abigail's expenses for the 2013 calendar year are as follows: $10,200 tuition,$1,200 books and course materials,and $3,600 room and board.Tuition and the applicable room and board costs are paid at the beginning of each semester.Bradley is married,files a joint tax return,claims both children as dependents,and has a combined AGI with his wife of $114,000 for 2013.Determine Bradley's available education tax credit for 2013.

The maximum credit for child and dependent care expenses is $2,100 if only one spouse is employed and the other spouse is a full-time student.

Stealth taxes are directed at lower income taxpayers.

In order to claim a dependency exemption for other than a qualifying child,a taxpayer must meet the support test.Generally,this is done by furnishing more than 50% of a dependent's support.What exceptions exist,if any,where the support furnished need not be more than 50%?

A taxpayer may qualify for the credit for child and dependent care expenses if the taxpayer's dependent is under age 17.

Fred and Lucy are married,ages 33 and 32,and together have AGI of $120,000 in 2013.They have four dependents and file a joint return.They pay $5,000 for a high deductible health insurance policy and contribute $2,600 to a qualified Health Savings Account.During the year,they paid the following amounts for medical care: $9,200 in doctor and dentist bills and hospital expenses,and $3,000 for prescribed medicine and drugs.In October 2013,they received an insurance reimbursement of $4,400 for the hospitalization.They expect to receive an additional reimbursement of $1,000 in January 2014.Determine the maximum deduction allowable for medical expenses in 2013.

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

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

Roy and Linda were divorced in 2012.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 2013.

Arnold is married to Sybil,who abandoned him in 2012.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 $6,000 each year.For tax year 2013,Arnold's filing status is:

Under the terms of a divorce agreement,Lanny was to pay his wife Joyce $2,000 per month in alimony and $500 per month in child support.For a twelve-month period,Lanny can deduct from gross income (and Joyce must include in gross income) :

The election to itemize is appropriate when total itemized deductions are less than the standard deduction based on the taxpayer's filing status.

Richard,age 50,is employed as an actuary.For calendar year 2013,he had AGI of $130,000 and paid the following medical expenses: Derrick and Jane would qualify as Richard's dependents except that they file a joint return.Richard's medical insurance policy does not cover them.Richard filed a claim for $4,800 of his own expenses with his insurance company in November 2013 and received the reimbursement in January 2014.What is Richard's maximum allowable medical expense deduction for 2013?

A dependent cannot claim a personal exemption on his or her own return.