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Exam 3: Computing the Tax

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Question 41

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

A) True
B) False

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Question 42

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Gain on the sale of collectibles held for more than 12 months always is subject to a tax rate of 28%.

A) True
B) False

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Question 43

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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 37%. i. Applicable rate could be as low as 0%. j. Maximum rate is 28%. k. No correct match provided. -Nonresident alien

Sarah furnishes more than 50% of the support of her son and daughter-in-law who live with her. If the son and daughter-in-law file a joint return, Sarah cannot claim them as dependents.

Which, if any, of the following statements relating to the standard deduction is correct?

Roy and Linda were divorced in 2017. The divorce decree awards custody of their children (under age 17) to Linda but is silent as to who is entitled to treat them as dependents for purposes of claiming the child credit. If Roy furnished more than half of their support, he can claim the child tax credit for them in 2018.

Taylor, who works for a public accounting firm, had the following transactions for 2018:

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 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. -Scholarship funds for tuition

Jayden and Chloe Harper are husband and wife and use the calendar year for tax purposes. a. If the Harpers file a joint return for 2018, can they later switch to separate returns for 2018? b. If the Harpers file separate returns for 2018, can they later switch to a joint return for 2018?

Clara, age 68, claims head of household filing status. If she has itemized deductions of $18,900 for 2018, she should claim the standard deduction.

Kyle and Liza are married and under 65 years of age. During 2018, they furnish more than half of the support of their 19-year old daughter, Kendra, who lives with them. She graduated from high school in May 2017. Kendra 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, 2018, at age 90, has for many years qualified as their dependent. How many dependents can Kyle and Liza claim?

The Deweys are expecting to save on their taxes for 2018. Not only have both incurred large medical expenses, but both reached age 65. During the year, they also recognized a $30,000 loss on some land they sold which was purchased as an investment several years ago. Are the Deweys under a mistaken understanding regarding their tax position? Explain.

After her divorce, Hope continues to support her ex-husband's sister, Cindy, who does not live with her. Hope can claim Cindy as a dependent.

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 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. -Abandoned spouse

Debby, age 18, is claimed as a dependent by her mother. During 2018, she earned $1,100 in interest income on a savings account. Debby's standard deduction is $1,450 ($1,100 + $350).

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.

Tony, age 15, is claimed as a dependent by his grandmother. During 2018, 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:

Surviving spouse filing status begins in the year in which the deceased spouse died.

Frank sold his personal use automobile for a loss of $9,000. He also sold a personal coin collection for a gain of $10,000. As a result of these sales, $10,000 is subject to income tax.

During 2018, Jackson had the following capital gains and losses: a. How much is Jackson's tax liability if he is in the 12% tax bracket? b. If his tax bracket is 32% (not 12%)?