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Exam 3: Tax Formula and Tax Determination an Overview of Property Transactions

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Question 61

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Because they appear on page 1 of Form 1040, itemized deductions are also referred to as "page 1 deductions."

A) True
B) False

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Question 62

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A qualifying child cannot include:

A) A nonresident alien.
B) A married son who files a joint return.
C) A daughter who is away at college.
D) A brother who is 28 years of age and disabled.
E) A grandmother.

F) B) and C)
G) A) and E)

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Question 63

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Under the Federal income tax formula for individuals, the determination of adjusted gross income AGI) precedes that of taxable income TI).

For the year a spouse dies, the surviving spouse is considered married for the entire year for income tax purposes.

If an individual does not spend funds that have been received from another source

Pedro is married to Consuela, who lives with him. Both are U.S. citizens and residents of Nebraska. Pedro furnishes all of the support of his parents, who are citizens and residents of the United States. He also furnishes all of the support of Consuela's parents, who are citizens and residents of El Salvador. Consuela has no gross income for the year. If Pedro and Consuela file as married persons filing jointly, how many dependents can they claim?

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.

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

All exclusions from gross income are reported on Form 1040.

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?

During the current year, Doris received a large gift from her parents and a sizeable inheritance from an uncle. She also paid premiums on an insurance policy on her life. Doris is confused because she cannot find any place on Form 1040 to report these items. Explain.

The major advantage of being classified as an abandoned spouse is that the taxpayer is treated for tax purposes as being single and not married. This means that an abandoned spouse can use the more favorable tax rates available to single persons than those available to married persons filing separately. Comment on the accuracy of this conclusion.

Regarding the rules applicable to filing of income tax returns, which, if any, of the following is an incorrect statement:

Kyle, whose wife died in December 2015, filed a joint tax return for 2015. He did not remarry, but has continued to maintain his home in which his two dependent children live. What is Kyle's filing status in 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.