Tax 503 Chapter 4

How many filing statuses are available to taxpayers?

5

In 2019, Ryan files as single and has taxable income of $45,653. None of his taxable income consists of capital gains or qualified dividends. His tax liability rounded to the nearest dollar totals $

5902

Which of the following would most likely NOT qualify as support for meeting the support test?

A riding lawnmower used by a child to mow the family yard

Which of the following choices is NOT a form of a tax prepayment?

A tax refund received in the current year for the prior year

In addition to the individual income tax, individuals may be required to pay other taxes. Taxpayers with a large amount of tax preference items and itemized deductions may be subject to the ________ __________ tax.

Alternative minimum

Which one of the following individuals CANNOT meet the residence test for being a qualifying child of another taxpayer?

Amy lived with her parents until the end of April. She moved into an apartment on May 1.

Which one of the following individuals would NOT meet the relationship test for being a qualifying relative of the taxpayer through a qualifying family relationship?

Cousin

Hillary, Craig, and David provide 60% of the support for their elderly aunt, Brooke. Hillary provides 8%, while Craig provides 40% and David provides 12%. Which of the taxpayers are eligible to claim Brooke as a dependent?

Craig and David

Depreciable assets used in a trade or business are classified as capital assets.

False

In order to meet the support test for a qualifying child, the taxpayer must provide more than half of the individual's support for the year.

False

The gross income test requires that a qualifying relative's gross income for the year be less than $5,000 for tax year 2019.

False

Corey is 25 and has a full-time job. His younger brother, James, is 20 and was enrolled as a full-time student at the community college during the summer and fall semesters. James lives with Corey. Which of the following statements is correct with respect to the age requirement for a qualifying child?

James meets the age test because he is younger than Corey, and he is under age 24 and a full-time student.

Lan is from Vietnam and has lived in the U.S. for five months during the year. He is not yet considered a resident because he hasn't lived in the U.S. for long enough. He resides with his uncle who is a U.S. citizen. Lan is single and a full-time student. If eligible, Lan would otherwise be considered a qualifying child of his uncle. Which of the following is correct regarding Lan's status as a dependent?

Lan can NOT be claimed as a dependent by his uncle because he is not a citizen or resident of the U.S..

Which filing status is used if one spouse dies during the year and the surviving spouse does not remarry before the end of the year?

Married filing jointly (or separately)

Kayla and Ben were married in November of the current year. What will be their filing status for the current year?

Married filing jointly (or separately) because they were married as of the end of the year

Which two filing statuses have the same standard deduction amount?

Married filing separately and single

Which one of the following individuals meet the requirements to be a a qualifying relative (not a qualifying child) for Owen?

Owen provides over half of his son, Vinnie's (age 20) support. Vinnie, a part-time college student, earned $3,800 and lived with Owen.

Which one of the following items is NOT a deduction FOR AGI?

Real estate taxes on personal residence

Which of the following items does NOT constitute support when determining who provided the support for a child of the taxpayer who is a full-time student?

Scholarships

Which of the following individuals meet the requirements of a qualifying person for determining head of household filing status?

The taxpayer's mother who is a dependent of the taxpayer, but lives in her own home which is maintained by the taxpayer

For AGI deductions are preferable to from AGI deductions.

True

Chasity is 20, has a full-time job, and supports herself. Her brother, William, age 22, has decided to go back to college. He moved in with Chasity and is attending college full-time. Which of the following statements is accurate regarding the age test for a qualifying child and how it applies to William?

William does NOT meet the age test because he is older than Chasity.

In order to meet the criteria for a qualifying (choose either: child/relative), the dependent must NOT have provided more than half of his or her own support for the year. However, the support may have been provided by someone other than the taxpayer.

child

All sources of income are taxable unless specifically excluded through a tax provision. However,________ are NOT permitted unless a specific tax provision allows them.

deductions

Sharon Jones is single. During 2019, she had gross income of $159,800, deductions for AGI of $5,500, itemized deductions of $14,000 and tax credits of $2,000. Sharon had $22,000 withheld by their employer for federal income tax. She has a tax (due/refund) of $

due, 3847

Expenses such as alimony paid for divorces finalized before 1/1/2019, contributions to qualified retirement accounts, and business expenses for self-employed persons are deductions AGI.

for

Head of household status is (less/more) favorable than the married filing jointly status, but (less/more) favorable than the single filing status.

less, more

Income that is taxed in the current year according to the tax rate schedule is referred to as ______ income.

ordinary

A taxpayer may file as a single taxpayer when:

she is unmarried at the end of the tax year

Which of the following taxes may be imposed in addition to the individual income tax and are calculated on tax bases other than the regular taxable income? (Check all that apply.)

- Alternative minimum tax - Self-employment tax

Which of the following individuals would meet the relationship test for being a qualifying child of the taxpayer? (Check all that apply.)

- Nephew (younger than the taxpayer) - Stepson - Half-sister (younger than the taxpayer)

Which of the following requirements are necessary to qualify for head of household status? (Check all that apply.)

- Pay more than half the costs of keeping up a home for the year - Be unmarried (or considered unmarried under the abandoned spouse provisions) at the end of the year

Which of the choices below are the tests that must be met to qualify as a qualifying relative? (Check all that apply.)

- Relationship - Gross income - Support

Which of the following individuals meet the requirements to be qualifying children for Tonya? (Choose all that apply.)

- Sandy (age 23) does not provide half of her own support. She is a full-time college, earned $7,000 this year, and lives with her aunt, Tonya. - Vinnie (age 17) does not provide half of his own support. He is in high school, earned $5,000 this year, and lives with his mother, Tonya.

Which of the following choices describe tax deductions? (Choose all that apply.)

- Tax deductions are a matter of legislative grace. - Taxpayers are NOT allowed to deduct anything unless a specific tax provision allows them to do so.

Rank the filing statuses according to which is the most favorable for taxpayers.

- married filling jointly - head of household - single

Which of the following statements is TRUE regarding the individual income tax formula?

A taxpayer may deduct the greater of his standard deduction or his itemized deductions from AGI to arrive at taxable income.

Which one of the following choices is the definition of realized income?

Income from a transaction with a second party where there is a measurable change in property rights between parties

Which of the following statements is correct?

Stock which has appreciated in value must be sold before it is considered part of gross income.

The U.S. tax laws are based on the all-inclusive concept where gross income includes all realized income from whatever source derived.

True

Dividends from corporations that meet certain requirements may be taxed at a favorable rate. These dividends are referred to as:

qualified dividends.

In addition to the individual income tax, individuals may be required to pay other taxes. Owners of unincorporated businesses may have to pay _________ tax.

self-employment

Will and Lyndsey are married with no dependents and file a joint tax return. In 2019, they paid $3,000 in qualified student loan interest in addition to $22,550 in itemized deductions. What is the total of their "FROM AGI" deductions in 2019?

$24,400

Multiple Choice Question Amy and Ethan are married and file a joint return for 2019. Their taxable income is $78,300. What is the amount of their tax liability?

$9,008

Zack is single and has collected the following information for preparing his 2019 taxes: Gross income $74,000, tax credits $2,500, itemized deductions $9,000, deductions for AGI $5,000, tax prepayments $8,400. Based on this information, Zack's "adjusted gross income" equals $_______ , and his "taxable income" equals $_________

- 69000 - 56800

Which of the following assets are classified as capital assets? (Check all that apply.)

- A house owned and used by a taxpayer - Stock held for investment

Which of the following items are deductions FOR adjusted gross income? (Check all that apply.)

- Capital losses - Contributions to (non Roth) qualified retirement accounts - Health insurance for self-employed persons - Alimony paid for divorces finalized before 1/1/2019

Which of the following individuals would meet the relationship test for being a qualifying relative of the taxpayer if s/he has only lived with the taxpayer for eight months of the year? (Check all that apply.)

- Father - Niece - Brother - Grandchild

Which of the following individuals would be considered as an eligible relatives to meet the relationship test for being a qualifying child of the taxpayer? (Check all that apply.)

- Grandchild - Niece (younger than the taxpayer) - Brother (younger than the taxpayer) - Child

Which of the following choices are filing statuses that may be used by a taxpayer? (Check all that apply.)

- Head of household - Single - Married filing jointly

If a taxpayer is unmarried at the end of the year, which of the following filing statuses could possibly be used by the individual? (Check all that apply.)

- Head of household - Single - Qualifying widow or widower

Match the type or character of income to its definition. - Tax-exempt - Tax-deferred - Ordinary - Capital

- Income realized during the year that is excluded from gross income and never taxed - Income realized during the year that is not included in gross income until a later year - Income included in gross income in the current year and taxed at the ordinary rates per the tax rate schedules - Gains (or losses) on investment or personal use assets that may be taxed at favorable rates

Which of the following statements are correct concerning the married filing separately (MFS) filing status? (Check all that apply.)

- The MFS status may be useful when one spouse does NOT want to be liable for the tax liability of the other spouse. - Tax-related items for MFS taxpayers (i.e. tax rate schedules, standard deduction amounts), are half the amounts for married filing jointly taxpayers.

Which of the following statements are true regarding the qualifying widow or widower filing status? (Check all that apply.)

- The surviving spouse must NOT have remarried during the year. - The surviving spouse must have dependents. - The status may be used for up to two years after the year the other spouse died.

Under a multiple support agreement, taxpayers who DON'T pay over half of an individual's support may still be allowed to claim an exemption if which of the following rules apply? (Check all that apply.)

- The taxpayer and a least one other person provided over one-half of the support of the individual. - All other individuals contributing more than 10 percent support provides statements to taxpayer agreeing NOT to claim the individual as a dependent. - No one taxpayer paid over one-half of the individual's support.

Which of the following are requirements that must be met to qualify as an abandoned spouse? (Check all that apply.)

- The taxpayer is still married at the end of the year. - The taxpayer pays more than half the costs of maintaining his or her home for the entire year.

In order for an individual to be a qualifying relative, rather than a qualifying child, which of the following criteria must be met? (Check all that apply.)

- The taxpayer must provide over half of the individual's support. - The individual must meet a "gross income test."

When can the married filing jointly or married filing separately filing status be used? (Check all that apply.)

- When one spouse died during the year and the surviving spouse has not remarried - When the taxpayers are married as of the last day of the tax year

A taxpayer who is married at the end of the year, but lived apart from the other spouse for the last six months of the year, may qualify as a(n) and be able to use the head of household filing status.

- abandoned - spouse

A tax ______ reduces taxable income and a tax _______ reduces the tax liability dollar for dollar.

- deduction - credit

A taxpayer's filing status depends on his or her status at the end of the year and whether the taxpayer has any .

- marital - dependants

The three tests that must be met to qualify as a qualifying relative are: , , and . (Each blank may contain more than one word.)

- relationship test - support test - gross income test

In 2019, Ryan files as head of household and has taxable income of $122,500. None of his taxable income consists of capital gains or qualified dividends. Using the tax rate schedule, his tax liability rounded to the nearest dollar, totals $

22154

The gross income test requires that a qualifying relative's gross income for the year be less than $

4200

Put the following items in the order in which they are found in the individual income tax formula.

5. Equals taxable income 4. Minus from AGI deductions 3. Equals adjusted gross income 1. Gross income 2. Minus for AGI deductions

Andrew is trying to determine if Annie will qualify as his dependent. She will NOT meet the criteria for a qualifying child, so Andrew is checking to see if she is a qualifying relative. Assuming there is NOT a multiple support agreement involved, which one of the following criteria for the support test must be met in order for Annie to be considered a qualifying relative for Andrew?

Andrew must provide over half of Annie's support for the year.

Ashley and Roland were married and had two dependent children. Roland died last year. What filing status will Ashley use for the year Roland died and for the current year (assuming she does not remarry)?

Ashley will use married filing jointly in the prior year and qualifying widow in the current year.

Which filing status is best for a married couple that lives together, but one spouse does NOT want to be liable for the other spouse's tax liability?

Both individuals should file "married filing separately."

Choose the statement you think is INCORRECT when comparing tax deductions and tax credits?

Both tax deductions and tax credits reduce taxable income.

Which of the following statements is correct regarding the choice of a taxpayer's filing status?

Filing status depends on marital status and whether the taxpayer has dependents.

Which of the choices below is NOT one of the tests that must be met to qualify as a qualifying child?

Gross income

When is it possible for a qualifying person for determining head of household status to NOT live with the taxpayer?

If the person is the parent of the taxpayer

Which of the following criteria is NOT necessary to qualify as a dependent of another taxpayer?

Must be unmarried for at least a portion of the year

Ruida divorced on October 31 of the current year. He does NOT have any dependents. Which filing status should Ruida use for the current year?

Single

Which filing status is allowed the lowest standard deduction amount?

Single

Which of the following tests states that the qualifying child must NOT have provided more than half his or her own living expenses for the year?

Support

If an individual is a qualifying child for both of his parents who divorced during the year, which parent is entitled to claim the dependency exemption?

The parent with whom the child has lived with the longest during the year

Yolanda is your client. With her current level of taxable income, she is paying tax at a 24% marginal rate. She received $2,000 in qualified dividends this year. What rate of tax do you expect that Yolanda will pay on her dividends?

The qualified dividends are taxed at a favorable rate. Since Yolanda is in the 24% bracket, the dividends will be taxed at 15%.

Select the statement you believe is INCORRECT when comparing the rules for determining who qualifies as a dependent as a qualifying child and who qualifies as a dependent as a qualifying relative.

The relationship requirement is more broadly defined for qualifying children than for qualifying relatives.

When can a single taxpayer's mother or father be a qualifying person for determining head of household filing status?

When the taxpayer can claim a dependency exemption for the parent and the taxpayer pays over half the cost of maintaining the parent's home

Deductions ______ (for/from) AGI cause a reduction in AGI, which increases the deductibility of _________ (for/from) AGI deductions subject to AGI limitations.

for , from

In a situation where the parents are divorced and the child resides with both parents for the same amount of time during the year, the dependency exemption should go to the parent with the ______.

highest AGI

For tax years beginning in 2018, a taxpayer's from AGI deductions include the greater of the standard deduction or the taxpayer's _________ deductions and 20% of the taxpayer's qualified ___________ income.

itemized , business

An individual that is unrelated to the taxpayer may meet the relationship test for a qualifying relative if he or she:

lives with the taxpayer for the entire year.

In order to meet the requirements of the residence test for a qualifying child, the individual must live with the taxpayer for:

more than half the year

Assuming no multiple-support agreement, to meet the support test to be a qualifying relative of a taxpayer, the taxpayer must pay ______ of the individual's support.

over half

If an individual could be a qualifying child for either her parent or her grandparent, the (parent/grandparent) is entitled to the dependency exemption.

parent

Examples of a tax ________ include income taxes withheld from a taxpayer's salary by an employer, estimated tax payments paid directly to the IRS, and amounts from a prior year overpayment that were applied to the current year's tax liability.

prepayment

Sheila and Joe Wells are married with two dependent children. During 2019, they have gross income of $159,800, deductions for AGI of $5,500, itemized deductions of $10,000, and tax credits of $2,000. The Wells' had $22,000 withheld by their employer for federal income tax. They have , of $

refund, 3,705

Sheila and Joe Wells are married with two dependent children. During 2019, they have gross income of $159,800, deductions for AGI of $5,500, itemized deductions of $25,000 and tax credits of $2,000. The Wells' had $22,000 withheld by their employer for federal income tax. They have a tax (due/refund) of $

refund, 3,837

Unmarried taxpayers will file as if they do NOT qualify for head of household or qualifying widow(er) status.

single

The U.S. tax laws are based on the all-inclusive concept where gross income includes all realized income from "whatever_______ ________ ."

source derived