Question 1

Rachel and Rob are married and living together in California.Their income is: $$\begin{array}{l}
\begin{array} { l r } 
\text { Rob's salary } & \$ 120,000 \
\text { Rachel's net income from her business } & 130,000 \
\text { Interest (Rob's separate property investments) } & 4,000 \
\text { Interest (Rachel's separate property investments) } & 2,000 \
\text { Dividends (community property) } & 5,000
\end{array}\
\text { Total income is } \$ 261,000
\end{array}$$ 
a.If Rachel files a separate return, how much income should she report?
b.If Rob and Rachel live in Texas, what should Rachel report as income?

Accepted Answer

The answer of Rachel and Rob are married and living...

Question 2

Toni and Beyonze are married and file jointly.During 2018, they paid tuition for their daughter's college in the amount of $23,000.If their AGI was $142,000, what is the amount of tuition deduction they are eligible for?

Accepted Answer

For 2018, the tuition and fees deduction was not available for taxpayers with an AGI over $160,000 for married filing jointly. Since their AGI is $142,000, they are eligible for a $0 deduction because the deduction was not available for that year.

Question 3

Which one of the following conditions must be satisfied in order for a married taxpayer to be taxed on only his income if he resides in a community property state?

Accepted Answer

The answer of Which one of the following conditions must...

Question 4

Which of the following is not a true statement regarding community property law?

Accepted Answer

Colorado, Ohio, and Florida are not community property states. The other statements are true regarding community property law.

Question 5

Most states are community property states.

Accepted Answer

Only nine states in the U.S. are considered community property states, where property acquired during the marriage is considered jointly owned by both spouses. The majority of states follow equitable distribution rules.

Question 6

In all community property states, income from community property is community income.

Accepted Answer

In community property states, income from community property is considered equally owned by both spouses and therefore is classified as community income.

Question 7

New York is a community property state.

Accepted Answer

New York is not a community property state. Instead, it follows the rules of equitable distribution in divorce cases.

Question 8

Molly and Steve are married and live in Texas.Molly earns a salary of $50,000 and Steve owns a rental property that gives him $35,000 of income.If they filed separate tax returns, what amount of income would Steve report?

Accepted Answer

The answer of Molly and Steve are married and live...

Question 9

All taxpayers may deduct up to $4,000 of higher education tuition expenses.

Accepted Answer

The statement was true for tax years prior to the Tax Cuts and Jobs Act of 2017. However, under the new law, the tuition and fees deduction has been eliminated.

Question 10

Patricia and Cliff are married but file separate tax returns.Patricia received a salary of $42,000 and Cliff received $15,000 of dividends from a stock portfolio that is his own separate property.
a.​If Patricia and Cliff live in a common law state, what income should Patricia show on her separate return?​Salary​​Dividends​​
b.​If they live in California (a community property state), what income should Patricia show on her separate return?​Salary​​Dividends​

Accepted Answer

The answer of Patricia and Cliff are married but file...

Question 11

Lee and Pat are married taxpayers living in Louisiana.Lee earns wages of $40,000 and has $5,000 of dividend income from separate property.Lee and Pat have interest income from community property of $10,000.If Lee and Pat file separate income tax returns, what amount of income must be included on Lee's separate tax return?

Accepted Answer

In Louisiana, community property laws apply which means that the interest income of $10,000 earned from community property is split equally between Lee and Pat. Therefore, Lee's share of the community property is $5,000 ($10,000/2).

Thus, the total income that Lee must report is $40,000 (wages) + $5,000 (dividend income from separate property) + $5,000 (Lee's share of community property interest income) = $50,000.

However, if Lee and Pat file separate tax returns, Lee only needs to report his own separate income which is $40,000 (wages) + $5,000 (dividend income from separate property) = $45,000.

Therefore, the amount of income that must be included on Lee's separate tax return is $27,500 (Lee's income plus half of community income) which is option C.

Quiz 2: Gross Income and Exclusions