Question 1

Michael, Diane, Karen, and Kenny provide support for their mother Janet who is 75 years old. Janet lives by herself in an apartment in Los Angeles. Janet's gross income for the year is $3,000. Janet provides 10% of her own support, Michael provides 40% ofJanet's support, Diane provides 8% of Janet's support, Karen provides 10% of Janet's support, and Kenny provides the remaining 32% of Janet's support. Under a multiple support agreement, who may claim a dependency exemption for Janet as a qualifying relative?

Accepted Answer

The answer of Michael, Diane, Karen, and Kenny provide support...

Question 2

Katy has one child, Dustin, who is 18 years old at the end of the year. Dustin lived at home for three months during the year before leaving home to work full-time in another city. During the year, Dustin earned $15,000. Katy provided more than half of Dustin's support for the year. Which of the following statements regarding whether Katy may claim Dustin as a dependent for the current year is accurate?

Accepted Answer

The answer of Katy has one child, Dustin, who is...

Question 3

Catherine de Bourgh has one child, Anne, who is 18 years old at the end of the year.Anne lived at home for seven months during the year before leaving home to attend State University for the rest of the year. During the year, Anne earned $6,000 while working part time. Catherine provided 80 percent of Anne's support and Anne provided the rest. Which of the following statements regarding whether Anne is Catherine's qualifyingchild for the current year is correct?

Accepted Answer

Anne is a qualifying child of Catherine because she meets the age, residency, and support tests. The residency test is satisfied as time spent away for education is considered temporary absence. The support test is met as Catherine provided more than half of Anne's support. The gross income test does not apply to qualifying children.

Question 4

Jane is unmarried and has no children, but provides more than half of her mother'sfinancial support. Jane's mother lives in an apartment across town and has a part-time job earning $5,000 a year. Which is the most advantageous filing status available to Jane?

Accepted Answer

The answer of Jane is unmarried and has no children,...

Question 5

Sheri and Jake Woodhouse have one daughter, Emma, who is 16 years old. They also have taken in Emma's friend, Harriet, who has lived with them since February of the current year and is also 16 years of age. The Woodhouses have not legally adopted Harriet but Emma often refers to Harriet as "her sister." The Woodhouses provide all of the support for both girls, and both girls live at the Woodhouse residence. Which of thefollowing statements is true regarding the dependency exemptions (and the reason for the exemptions) Sheri and Jake may claim for the current year for these girls?

Accepted Answer

The answer of Sheri and Jake Woodhouse have one daughter,...

Question 6

In order to be a qualifying relative of another, an individual's gross income must be less than ________.

Accepted Answer

To be a qualifying relative for tax purposes, an individual's gross income must be less than the personal and dependency exemption amount.

Question 7

Which of the following statements regarding the difference between the requirements for a qualifying child and the requirements for a qualifying relative is false?

Accepted Answer

The support test for qualifying relatives focuses on the support the taxpayer provides, not the support the potential dependent self-provides.

Question 8

In June of year 1, Jake's wife Darla died. The couple did not have any children and Jake did not remarry in year 1 or year 2. Which is the most favorable filing status for Jake in year 2?

Accepted Answer

Jake does not qualify as a qualifying widower because he does not have a dependent child. He also cannot file as head of household because he does not meet the requirements. Therefore, the most favorable filing status for him in year 2 is single.

Question 9

Lydia and John Wickham filed jointly in year 1. They divorced in year 2. In late year 2, the IRS discovered that the Wickham's underpaid their year 1 taxes by $2,000. Both Lydia and John worked in year 1 and received equal income but John had $2,000 less tax withheld than did Lydia. Who is legally liable for the tax underpayment?

Accepted Answer

When a couple files a joint tax return, both parties are jointly and severally liable for any tax underpayment. This means that both Lydia and John are legally liable for the $2,000 tax underpayment in year 1, even though John had less tax withheld from his income. This remains true even though Lydia and John are now divorced.

Question 10

All of the following are tests for determining qualifying relative status except ________.

Accepted Answer

The answer of All of the following are tests for...

Question 11

Earl and Lawanda Jackson have been married for 15 years. They have no children. Ned, who is an old friend from high school, has been living with the Jacksons during thecurrent year. Which of the following is a true statement regarding whether the Jacksons can claim a dependency exemption for Ned in the current year?

Accepted Answer

To qualify as a dependent, the person must meet certain criteria such as being a qualifying child or relative, not providing more than half of their own support, and meeting other tests like citizenship or residency. In this case, Ned may qualify as a dependent under the qualifying relative test if he meets the support and income requirements and the Jacksons provided more than half of his support during the year. Option A explains that if Ned earned $3,000 at a part-time job and received $5,000 in municipal bond interest, he may qualify as their dependent so long as the Jacksons provided more than half his support.

Question 12

William and Charlotte Collins divorced in November of year 1. William moved out and Charlotte remained in their house with their 10-month-old daughter Autumn. Diana, Charlotte's mother, lived in the home and acted as Autumn's nanny for all of year 1. William provided 70% of Autumn's support, Diana provided 20%, and Charlotteprovided 10%. When the time came to file their tax returns for year 1, William, Charlotte, and Diana each wanted to claim Autumn as a dependent. Their respective AGIs for year 1 were $50,000, $35,000, and $52,000. Who has priority to claim Autumn as a dependent?

Accepted Answer

Charlotte has priority to claim Autumn as a dependent because she is the custodial parent, having lived with Autumn for more than half of the year.

Question 13

In June of year 1, Eric's wife Savannah died. Eric did not remarry during year 1, year 2, or year 3. Eric maintains the household for his dependent daughter Catherine in year 1, year 2, and year 3. Which is the most advantageous filing status for Eric in year 2?

Accepted Answer

Qualifying widower status allows Eric to use the higher standard deduction and more favorable tax brackets for married taxpayers for two years after Savannah's death. This status also allows Eric to keep the benefits of filing jointly, such as eligibility for certain itemized deductions and credits. Since Eric did not remarry during year 1, year 2, or year 3, he is still eligible to file as a qualifying widower in year 2. This is more advantageous than filing as head of household or single, as those statuses have lower standard deductions and less favorable tax brackets. Married filing separately is also not advantageous, as it would result in Eric losing many tax benefits he would have as a qualifying widower.

Question 14

Filing status determines all of the following except ________

Accepted Answer

Filing status does not determine the standard amount of each personal and dependency exemption. This amount is determined by the IRS and may vary each year. The other options are all determined by filing status.

Question 15

Which of the following is not a filing status?

Accepted Answer

"Unmarried" is not a filing status recognized by the IRS. The recognized filing statuses are single, married filing jointly, married filing separately, head of household, and qualifying widow or widower.

Question 16

Which of the following statements about a qualifying person for head of household filing status is true?

Accepted Answer

A qualifying person must have a family relationship with the taxpayer to qualify them for head of household filing status.

Question 17

Char and Russ Dasrup have one daughter, Siera, who is 16 years old. In November oflast year, the Dasrup's took in Siera's 16 year old friend, Angela, who has lived with them ever since. The Dasrup's have not legally adopted Angela but Siera often refers to Angela as "her sister." In the current year, the Dasrups provide all of the support for both girls, neither girl receives any income during the year, and both girls live at the Dasrup'sresidence. Which of the following statements is true regarding the dependencyexemptions (and the reason for the exemptions) Char and Russ may claim for the current year for these girls?

Accepted Answer

Siera is a qualifying child because she is the Dasrup's daughter and meets the age, support, and residency requirements. Angela is a qualifying relative because she is Siera's sister (as defined by the tax code) and meets the support, residency, and gross income requirements.

Question 18

In year 1, the Bennetts' 25-year-old daughter, Jane, is a full-time student at anout-of-state university but she plans to return home after the school year ends. Inprevious years, Jane has never worked and her parents have always been able to claim her as a dependent. In year 1, a kind neighbor offers to pay for all of Jane's educational and living expenses. Which of the following statements is most accurate regarding whether Jane's parents would be allowed to claim an exemption for Jane in year 1assuming the neighbor pays for all of Jane's support?

Accepted Answer

The answer of In year 1, the Bennetts' 25-year-old daughter,...

Question 19

In June of year 1, Edgar's wife Cathy died and Edgar did not remarry during the year.What is his filing status for year 1 (assuming they did not have any dependents)?

Accepted Answer

Edgar can file as "Married filing jointly" for the year of his spouse's death, even if he did not remarry and they had no dependents.

Question 20

Jan is unmarried and has no children, but she provides all of the financial support for her mother, who lives in an apartment across town. Jan's mother qualifies as Jan's dependent. Which is the most advantageous filing status available to Jan?

Accepted Answer

Jan can qualify for the head of household filing status because she is unmarried, pays more than half the cost of keeping up a home for herself and her dependent mother, and her mother qualifies as her dependent due to Jan providing all of her financial support. This filing status will result in a lower tax liability than if Jan were to file as single or surviving single. The qualifying individual filing status is not a recognized filing status by the IRS.

Quiz 4: Individual Income Tax Overview, Exemptions, and Filing Status