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Exam 3: Computing the Tax

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Question 1

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Ellen,age 12,lives in the same household with her father,grandfather,and uncle.The cost of maintaining the household is provided by her grandfather (40%) and her uncle (60%) .Disregarding tie-breaker rules,Ellen is a qualifying child as to:

A) All parties involved (i.e. ,father,grandfather,and uncle) .
B) Only her grandfather and uncle.
C) Only her uncle.
D) Only her father.
E) None of the above.

F) B) and D)
G) A) and E)

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Question 2

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Buddy and Hazel are ages 72 and 71 and file a joint return.If they have itemized deductions of $13,500 for 2010,they should not claim the standard deduction.

A) True
B) False

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Question 3

Multiple Choice

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

In terms of income tax consequences,abandoned spouses are not treated the same way as married persons filing separate returns.

Robert had the following transactions for 2010: What is Robert's AGI for 2010?

Mickey,age 12,lives in the same household with his mother,grandmother,and uncle.

Ashley earns a salary of $35,000,has capital gains of $4,000,and interest income of $3,000 in 2010.Her husband died in 2009.Ashley has a dependent son,Tyrone,who is age 8.Her itemized deductions are $9,000.

In 2010,Hal furnishes more than half of the support of his ex-wife and her father,neither of whom lives with him.The divorce occurred in 2009.Hal may claim the father-in-law but not the ex-wife as dependents.

When separate income tax returns are filed by married taxpayers,one spouse cannot claim the other spouse as an exemption.

In January 2010,Jake's wife dies and he does not remarry.For tax year 2010,Jake may not be able to use the filing status available to married persons filing joint returns.

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

Jason and Peg are married and file a joint return.Both are over 65 years of age and Jason is blind.Their standard deduction for 2010 is $14,700 ($11,400 + $1,100 + $1,100 + $1,100).

In which,if any,of the following situations may the individual not be claimed as a dependent of the taxpayer?

Most exclusions from gross income are not reported on Form 1040.

Ellen,age 39 and single,furnishes more than 50% of the support of her parents,who do not live with her.Ellen practices as a self-employed interior decorator and has gross income in 2010 of $120,000.Her deductions are as follows: $30,000 business and $8,100 itemized.

Homer (age 68)and his wife Jean (age 70)file a joint return.They furnish all of the support of Luther (Homer's 90-year old father),who lives with them.For 2010,they received $6,000 of interest income on city of Chicago bonds and interest income on corporate bonds of $48,000.Compute Homer and Jean's taxable income for 2010.

Regarding head of household filing status,comment on the following:

An increase in the amount of a taxpayer's AGI will not affect the amount of medical expenses allowed as a deduction.

Which of the following items,if any,is deductible?

Albert buys his mother a used car.For purposes of meeting the support test,Albert cannot count the cost of the used car.