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Exam 3: Computing the Tax

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Question 21

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In meeting the criteria of a qualifying child for dependency exemption purposes, when if ever, might the child's income become relevant?

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The amount of income earned by the quali...

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Question 22

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When can a taxpayer not use Form 1040EZ? Form 1040A?

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Form 1040EZ cannot be used when the taxp...

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Question 23

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Regarding dependency exemptions, classify each statement in one of the four categories: -A granddaughter, who lives with taxpayer, is 19 years old, earns $5,000, and is not a full-time student.

During 2014, Jackson had the following capital gains and losses: $\begin{array}{llr} \text { Gain from the sale of coin collection (held three years) } &\$12,000\\ \text { Gain from the sale of land held as an investment for six years } &9,000\\ \text {Gain from the sale of stock held as an investment (held for 10 months) } &3,000\end{array}$ a. How much is Jackson's tax liability if he is in the 15% tax bracket? b. If his tax bracket is 33% (not 15%)?

Millie, age 80, is supported during the current year as follows: $\begin{array}{ll}&\text { Percent of Support }\\\text { Weston (a son) } & 20 \% \\\text { Faith (a daughter) } & 35 \% \\\text { Jake (a cousin) } & 25 \% \\\text { Brayden (unrelated close family friend) } & 20 \%\end{array}$ During the year, Millie lives in an assisted living facility. Under a multiple support agreement, indicate which parties can qualify to claim Millie as a dependent.

Using borrowed funds from a mortgage on her home, Leah provides 52% of her own support, while her sons furnished the rest. Leah can be claimed as a dependent under a multiple support agreement.

During 2014, Trevor has the following capital transactions: $\begin{array}{lr}\text { LTCG } & \$ 6,000 \\\text { Long-term collectible gain } & 2,000 \\\text { STCG } & 4,000 \\\text { STCL } & 10.000\end{array}$ After the netting process, the following results:

A taxpayer who itemizes must use Form 1040, and cannot use Form 1040EZ or Form 1040A.

Match the statements that relate to each other. Note: Choice L may be used more than once. -Surviving spouse

The Deweys are expecting to save on their taxes for 2014. 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.

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

Dan and Donna are husband and wife and file separate returns for the year. If Dan itemizes his deductions from AGI, Donna cannot claim the standard deduction.

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

Contrast the tax consequences resulting from the following filing status situations: a. Married filing jointly versus married filing separately. b. Married filing separately versus single filing separately. c. Married filing separately versus abandoned spouse status.

Edgar had the following transactions for 2014: What is Edgar's AGI for 2014?

Regarding dependency exemptions, classify each statement in one of the four categories: -A daughter-in-law who lives with taxpayer.

Which, if any, of the following is a correct statement relating to the kiddie tax?

Match the statements that relate to each other. Note: Choice L may be used more than once. -Tax Rate Schedule

For tax purposes, married persons filing separate returns are treated the same as single taxpayers.

Mr. Lee is a citizen and resident of Hong Kong, while Mr. Anderson is a citizen and resident of the U.S. In the taxation of income, Hong Kong uses a territorial approach, while the U.S. follows the global system. In terms of effect, explain what this means to Mr. Lee and Mr. Anderson.