Question 1

Mel is not quite sure whether an expenditure he made is a deduction for AGI or a deduction from AGI. Since he plans to choose the standard deduction option for the year, does the distinction matter? Explain.

Accepted Answer

The answer of Mel is not quite sure whether an...

Question 2

During 2018, Trevor has the following capital transactions: $$\begin{array} { l r } 
\text { LTCG } & \$ 6,000 \
\text { Long-term collectible gain } & 2,000 \
\text { STCG } & 4,000 \
\text { STCL } & 10,000
\end{array}$$ After the netting process, the following results:

Accepted Answer

The answer of During 2018, Trevor has the following capital...

Question 3

In order to claim someone other than a qualifying child as a dependent, a taxpayer must meet the support test. Generally, this is done by furnishing more than 50% of a dependent's support. What exceptions exist, if any, where the support furnished need not be more than 50%?

Accepted Answer

The answer of In order to claim someone other than...

Question 4

The Deweys are expecting to save on their taxes for 2018. 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.

Accepted Answer

The answer of The Deweys are expecting to save on...

Question 5

For the past few years, Corey's filing status has been as follows: 2014 married/joint); 2015 married/separate); 2016 surviving spouse); 2017 surviving spouse); and 2018 head of household). Explain what probably has happened.

Accepted Answer

The answer of For the past few years, Corey's filing...

Question 6

In early 2018, Ben sold a yacht, held for 9 months and for pleasure, for a $5,000 gain. Concerned about offsetting the gain before year-end, Ben is considering selling one of the following-each of which would yield a $5,000 loss:
∙ Houseboat used for recreation.
∙ Truck used in business.
∙ Stock investment held for 13 months.
Evaluate each choice.

Accepted Answer

The answer of In early 2018, Ben sold a yacht,...

Question 7

Mandeep's parents live in another state and she cannot claim them as her dependents. If Mandeep pays their medical expenses, can she derive any tax benefit from doing so? Explain.

Accepted Answer

The answer of Mandeep's parents live in another state and...

Question 8

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?

Accepted Answer

The answer of Pedro is married to Consuela, who lives...

Question 9

The Martins have a teenage son who has become an accomplished bagpiper. With proper promotion and scheduling, the son has good income potential by charging for his services at special events particularly funerals). However, the Martins are fearful that the income could generate a kiddie tax and cause them the loss of a dependent tax credit. Are the Martins' concerns justified? Explain.

Accepted Answer

The answer of The Martins have a teenage son who...

Question 10

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

Accepted Answer

The answer of In meeting the criteria of a qualifying...

Question 11

In applying the gross income test in the case of dependents that are married, could the application of community property laws have any effect? Explain.

Accepted Answer

The answer of In applying the gross income test in...

Question 12

When married persons file a joint return, joint and several liability results. What does this mean?

Accepted Answer

The answer of When married persons file a joint return,...

Question 13

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

Accepted Answer

The answer of When can a taxpayer not use Form...

Question 14

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.

Accepted Answer

The answer of The major advantage of being classified as...

Question 15

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.

Accepted Answer

The answer of During the current year, Doris received a...

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