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

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Question 61

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Miguel, a widower whose wife died in year 1, maintains a household for himself and his daughter who qualifies as his dependent. Miguel did not remarry. What is the most favorable filing status that Miguel qualifies for in year 3?

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

E) A) and C)
F) None of the above

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Question 62

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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.

A) True
B) False

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Question 63

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An individual may meet the relationship test to be a taxpayer's qualifying relative even if the individual has no family relationship with the taxpayer.

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.

Charles, who is single, pays all of the costs of maintaining a home for himself and Damarcus. Charles and Damarcus have no family relationship but Damarcus lives with Charles for the entire year. Damarcus qualifies as a qualifying relative for Charles (Charles claims a dependency exemption for Damarcus on his tax return). Charles qualifies for head of household filing status.

If a taxpayer does not provide more than half the support of a child, that child cannot qualify as the taxpayer's qualifying child.

Joanna received $60,000 compensation from her employer, the value of her stock in ABC company appreciated by $5,000 during the year (but she did not sell any of the stock) , she received $30,000 of life insurance proceeds from the death of her husband. What is the amount of Joanna's gross income from these items?

Which of the following is NOT a from AGI deduction?

In April of year 1, Martin left his wife Marianne. The couple has two children under the age of 15. While the couple was apart, they were not legally divorced. Marianne remained in the home and paid all the costs of maintaining the home for the remainder of the year. Assuming the couple does not file jointly, which of the following statements regarding filing status is true?

For filing status purposes, the taxpayer's marital status is determined at what point during the year?

In order to be a qualifying relative of another, an individual's gross income must be less than ________.

What is the couple's gross income?

Taxpayers are generally allowed to claim deductions for expenditures unless a specific tax provision indicates the expenditure is not deductible.

In 2014, 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?

An individual receiving $5,000 of tax exempt income during the year could qualify as a qualifying child of another taxpayer but could not qualify as a qualifying relative of another taxpayer.

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.

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.

In certain circumstances, a married taxpayer who files separately may qualify for the head of household filing status.

Which of the following series of inequalities is generally most accurate?

The test for a qualifying child includes a gross income restriction while the test for qualifying relative does not.