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

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Question 61

Multiple Choice

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Jane is unmarried and has no children, but provides more than half of her mother's financial support.Jane's mother lives in an apartment across town and has a part-time job earning $5,000 a year.Which is the most advantageous filing status available to Jane?

A) Single.
B) Head of household.
C) Qualifying individual.
D) Surviving single.

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

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Question 62

True/False

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An individual with gross income of $5,000 could qualify as a qualifying child of another taxpayer but could not qualify as a qualifying relative of another taxpayer.

A) True
B) False

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Question 63

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Anna is a qualifying child of her parents.However, she was recently married.Anna and her husband filed a joint return.If they had filed separately, Anna would have owed no taxes, though her husband would have owed just $5.Because Anna herself owed no taxes, her parents can still claim her as a dependent.

Which of the following is not a filing status?

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.

It is generally more advantageous from a tax perspective for a married couple to file separately than it is for them to file jointly.

Bonnie and Ernie file a joint return.Bonnie works and receives income during the year but Ernie does not.If the couple files a joint tax return, Ernie is responsible for paying any taxes due if Bonnie is unable to pay the taxes.

Sam and Tracy have been married for 25 years.They have filed a joint return every year of their marriage.They have two sons, Christopher and Zachary.Christopher is 19 years old and Zachary is 14 years old.Christopher lived in his parents' home from January through August and he lived in his own apartment from September through December.During the year, Christopher attended college for one month before dropping out.Christopher's living expenses totaled $12,000 for the year.Of that, Christopher paid $5,000 from income he received while working a part-time job.Sam and Tracy provided the remaining $7,000 of Christopher's support.Zachary lived at home the entire year and did not earn any income.Whom are Sam and Tracy allowed to claim as dependents?

Sheri and Jake Woodhouse have one daughter, Emma, who is 16 years old.They also have taken in Emma's friend, Harriet, who has lived with them since February of the current year and is also 16 years of age.The Woodhouses have not legally adopted Harriet but Emma often refers to Harriet as her "sister." The Woodhouses provide all of the support for both girls, and both girls live at the Woodhouse residence.Which of the following statements is true regarding whom Sheri and Jake may claim as dependents for the current year?

Tax credits are generally more valuable than tax deductions because tax credits reduce a taxpayer's gross tax liability dollar for dollar while tax deductions do not.

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

In 2019, Brittany, who is single, cares for her father, Raymond.Brittany pays the bills relating to Raymond's home.She also buys groceries and provides the rest of his support.Raymond has no gross income.Brittany received $45,000 of salary from her employer during the year.Brittany reports $3,000 of itemized deductions.What is Brittany's taxable income?

Jane and Ed Rochester are married with a 2-year-old child, who lives with them and whom they support financially.In 2019, Ed and Jane realized the following items of income and expense: $\begin{array} { l r } \text { Item}&\text { Amount } \\\text { Ed's Salary } & 35,000\\\text { Jarie's Salary } & 70,000 \\\text { Muricipal bond interest income } &400 \\\text { Qualified business income } & 1,000 \\\text { Alimony paid for AGI deduction) } &( 7,000 ) \\\text { Real property tax (from AGI deduction) } & ( 10,000 ) \\\text { Charitable contributions (from AGI) } &( 15,000 ) \\\end{array}$ They also qualified for a $2,000 child tax credit.Their employers withheld $5,800 in federal income taxes from their paychecks (in the aggregate).Finally, the 2019 standard deduction amount for MFJ taxpayers is $24,400. What is the couple's taxable income?

Which of the following statements regarding tax deductions is false?

Tax credits reduce taxable income dollar for dollar.

The Inouyes filed jointly in 2019.Their AGI is $78,000.They reported $2,000 of qualified business income and $22,000 of itemized deductions.They have two children, one of whom qualifies as their dependent as a qualifying child.The 2019 standard deduction amount for MFJ taxpayers is $24,400.What is the total amount of from AGI deductions they are allowed to claim on their 2019 tax return?

The character of income is a factor in determining the rate at which the income is taxed.

Eric and Josephine were married in Year 1.In Year 2, Eric dies.The couple did not have any children.Assuming Josephine does not remarry, she may file as a qualifying widow in Year 3.

Tom Suzuki's tax liability for the year is $2,450.He had $2,050 of federal income taxes withheld from his paycheck during the year by his employer and has $2,000 in tax credits.What are Tom's taxes due or tax refund for the year?

A taxpayer may not qualify for the head of household filing status if she does not have any dependent children.