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Exam 4: Individual Income Tax Overview, Exemptions, and Filing Status

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Question 1

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In June of year 1, Eric's wife Savannah died. Eric did not remarry during year 1, year 2, or year 3. Eric maintains the household for his dependent daughter Catherine in year 1, year 2, and year 3. Which is the most advantageous filing status for Eric in year 2?

A) Head of household.
B) Qualifying widower.
C) Single.
D) Married filing separately.

E) A) and B)
F) C) and D)

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Question 2

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Itemized deductions and the standard deduction are deductions from AGI but deductions for personal and dependency exemptions are deductions for AGI.

A) True
B) False

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Question 3

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In certain circumstances, a taxpayer who provides less than half the support of another may still be able to claim a dependency exemption for that person as a qualifying relative.

Filing status determines all of the following except ____________

Jennifer and Stephan are married at year end and they file separate tax returns. If Jennifer itemizes deductions on her return, Stephan must also itemize deductions on his return even if his itemized deductions don't exceed his standard deduction.

A child who is her parents' qualifying child can claim a personal exemption for herself as long as her parents choose not to claim her as a dependent.

A taxpayer who is claimed as a dependent on another's tax return may not claim any personal or dependency exemptions on his or her tax return.

In April of year 1, Martin left his wife Marianne. While the couple was apart, they were not legally divorced. Marianne found herself having to financially provide for the couple's only child (who qualifies as Marianne's dependent) and to pay all the costs of maintaining the household. When Marianne filed her tax return for year 1, she filed a return separate from Martin. What is Marianne's most favorable filing status for year 1?

The Dashwoods have calculated their taxable income to be $80,000 for 2014, which includes $2,000 of long-term capital gains. Using the appropriate tax rate schedule, calculate the Dashwood's income tax liability assuming they are married and file a joint return.

Charlotte is the Lucas family's 22-year-old daughter. She is a full-time student at an out-of-state university but plans to return home when the school year ends. During the year, Charlotte earned $4,000 of income working part-time. Her support totaled $30,000 for the year. Of this amount, Charlotte paid $7,000 with her own funds, her parents paid $14,000, and Charlotte's grandparents paid $9,000. Which of the following statements most accurately describes whether Charlotte's parents can claim a dependency exemption for Charlotte?

Which of the following statements regarding exemptions is correct?

All of the following are for AGI deductions except:

Mason and his wife Madison have been married for five years. Jaxon, who is 18 years old and unrelated to Mason and Madison, has been living with Mason and Madison for the last two years. In May of year 1, Mason and Madison divorced. Mason and Jaxon stayed in the home and Madison moved out. During year 2, Mason provided all of Jaxon's support and Jaxon lived in the home for all of year 2. Jaxon did not earn any income during year 2. What is Mason's most favorable filing status for year 2?

Which of the following is not a requirement for a married taxpayer to be treated as unmarried at the end of the year for filing status purposes?

Relative to for AGI deductions, from AGI deductions tend to relate to items that are more personal in nature.

Which of the following statements regarding realized income is true?

In June of year 1, Edgar's wife Cathy died and Edgar did not remarry during the year. What is his filing status for year 1 (assuming they did not have any dependents) ?

Certain types of income are taxed at a lower rate than ordinary income.

Which of the following types of income are not considered ordinary income?

Lydia and John Wickham filed jointly in year 1. They divorced in year 2. In late year 2, the IRS discovered that the Wickham's underpaid their year 1 taxes by $2,000. Both Lydia and John worked in year 1 and received equal income but John had $2,000 less tax withheld than did Lydia. Who is legally liable for the tax underpayment?