Question 1

A qualifying child cannot include:
A)A nonresident alien.
B)A married son who files a joint return.
C)A daughter who is away at college.
D)A brother who is 28 years of age and disabled.
E)A grandmother.

Accepted Answer

The answer of A qualifying child cannot include:
A)A nonresident alien.
B)A...

Question 2

Arnold is married to Sybil,who abandoned him in 2014.He has not seen or communicated with her since April of that year.He maintains a household in which their son,Evans,lives.Evans is age 25 and earns over $6,000 each year.For tax year 2015,Arnold's filing status is:
A)Married,filing jointly.
B)Head of household.
C)Married,filing separately.
D)Surviving spouse.
E)Single.

Accepted Answer

Arnold is still legally married to Sybil, so he cannot file as single or head of household. Since they are not living together and he has not communicated with her, he cannot file jointly. Therefore, the correct status is married, filing separately.

Question 3

Merle is a widow,age 80 and blind,who is claimed as a dependent by her son.During 2015,she received $4,800 in Social Security benefits,$2,500 in bank interest,and $1,800 in cash dividends from stocks.Merle's taxable income is:
A)$4,300 - $1,050 - $3,100 = $150.
B)$4,300 - $3,100 = $1,200.
C)$4,300 - $1,050 - $1,550 = $1,700.
D)$9,100 - $1,050 - $3,100 = $4,950.
E)None of these.

Accepted Answer

Merle's gross income is $4,800 + $2,500 + $1,800 = $9,100. Her standard deduction is $1,050. Her personal exemption is $3,100. Her taxable income is $9,100 - $1,050 - $3,100 = $4,950.

Question 4

In 2015,Cindy had the following transactions: Salary $90,000 Short-term capital gain from a stock investment 4,000 Moving expense to change jobs (11,000) Received repayment of $20,000 loan she made to her sister in 2011 (includes no interest) 20,000 State income taxes (5,000) Cindy's AGI is:
A)$114,000.
B)$103,000.
C)$98,000.
D)$94,000.
E)$83,000.

Accepted Answer

The answer of In 2015,Cindy had the following transactions: Salary...

Question 5

Which of the following characteristics correctly describes the procedure for the phaseout of exemptions?
A)The threshold amounts are different and depend on filing status (e.g. ,joint return,single).
B)The threshold amounts are indexed for inflation each year.
C)The phaseout procedure is known as a "stealth tax."
D)For the phaseout procedure to be applied,a taxpayer's AGI must exceed the threshold amount.
E)All of these.

Accepted Answer

All of the characteristics listed correctly describe the procedure for the phaseout of exemptions. The threshold amounts vary by filing status, are indexed for inflation, the phaseout is considered a "stealth tax," and the phaseout only applies if the taxpayer's AGI exceeds the threshold amount.

Question 6

Evan and Eileen Carter are husband and wife and file a joint return for 2015.Both are under 65 years of age.They provide more than half of the support of their daughter,Pamela (age 25),who is a full-time medical student.Pamela receives a $5,000 scholarship covering her tuition at college.They furnish all of the support of Belinda (Evan's grandmother),who is age 80 and lives in a nursing home.They also support Peggy (age 66),who is a friend of the family and lives with them.How many dependency exemptions may the Carters claim?
A)Two
B)Three
C)Four
D)Five
E)None of these

Accepted Answer

The Carters can claim three dependency exemptions: one for Pamela, as she is a qualifying child under the age of 24 and a full-time student; one for Belinda, as she is a qualifying relative (Evan's grandmother) who they fully support; and one for Peggy, as she is a qualifying relative who lives with them and they provide more than half of her support.

Question 7

Kyle and Liza are married and under 65 years of age.During 2015,they furnish more than half of the support of their 19-year old daughter,May,who lives with them.She graduated from high school in May 2014.May earns $15,000 from a part-time job,most of which she sets aside for future college expenses.Kyle and Liza also provide more than half of the support of Kyle's cousin who lives with them.Liza's father,who died on January 3,2015,at age 90,has for many years qualified as their dependent.How many personal and dependency exemptions should Kyle and Liza claim?
A)Two
B)Three
C)Four
D)Five
E)None of these

Accepted Answer

Kyle and Liza can claim the following exemptions:
- Personal exemption for each of them: 2
- Dependency exemption for their daughter May: 1
- Dependency exemption for Kyle's cousin: 1
- Dependency exemption for Liza's father: 1 (even though he died in 2015, he was alive for more than half of the year and therefore qualifies as a dependent)

Total exemptions: 2 + 1 + 1 + 1 = 5

Question 8

During 2015,Lisa (age 66) furnished more than 50% of the support of the following persons: ∙ Lisa's current husband who has no income and is not claimed by someone else as a dependent. ∙ ​ Lisa's stepson (age 19) who lives with her and earns $6,000 as a dance instructor.He dropped out of school a year ago. ∙ Lisa's ex-husband who does not live with her.The divorce occurred two years ago. ∙ Lisa's former brother-in-law who does not live with her. Presuming all other dependency tests are met,on a separate return how many personal and dependency exemptions may Lisa claim?
A)Two
B)Three
C)Four
D)Five
E)None of these

Accepted Answer

The answer of During 2015,Lisa (age 66) furnished more than...

Question 9

Kyle,whose wife died in December 2012,filed a joint tax return for 2012.He did not remarry,but has continued to maintain his home in which his two dependent children live.What is Kyle's filing status as to 2015?
A)Head of household
B)Surviving spouse
C)Single
D)Married filing separately
E)None of these

Accepted Answer

Kyle qualifies as "Head of Household" because he has not remarried, maintains a home for his dependent children, and his spouse died more than two years ago.

Question 10

Wilma,age 70 and single,is claimed as a dependent on her daughter's tax return.During 2015,she had interest income of $2,500 and $800 of earned income from babysitting.Wilma's taxable income is:
A)$700.
B)$900.
C)$1,750.
D)$2,250.
E)None of these.

Accepted Answer

The answer of Wilma,age 70 and single,is claimed as a...

Question 11

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

Accepted Answer

The answer of Ellen,age 12,lives in the same household with...

Question 12

Which of the following taxpayers may file as a head of household in 2015? ​ Ron provides all the support for his mother,Betty,who lives by herself in an apartment in Fort Lauderdale.Ron pays the rent and other expenses for the apartment and properly claims his mother as a dependent. ​ Tammy provides over one-half the support for her 18-year old brother,Dan.Dan earned $4,200 in 2015 working at a fast food restaurant and is saving his money to attend college in 2016.Dan lives in Tammy's home. ​ Joe's wife left him late in December of 2014.No legal action was taken and Joe has not heard from her in 2015.Joe supported his 6-year-old son,who lived with him throughout 2015.
A)Ron only
B)Tammy only
C)Joe only
D)Ron and Joe only
E)Ron,Tammy,and Joe

Accepted Answer

The answer of Which of the following taxpayers may file...

Question 13

Emily,whose husband died in December 2014,maintains a household in which her dependent mother lives.Which (if any) of the following is her filing status for the tax year 2015? (Note: Emily is the executor of her husband's estate. )
A)Single
B)Married,filing separately
C)Surviving spouse
D)Head of household
E)Married,filing jointly

Accepted Answer

Emily qualifies as a head of household since she is unmarried, maintained a household for a dependent (her mother), and her husband passed away during the tax year. Being the executor of her husband's estate does not affect her filing status.

Question 14

Regarding the rules applicable to filing of income tax returns,which,if any,of the following is an incorrect statement:
A)Married persons who file joint returns cannot later (after the due date of the return) substitute separate returns.
B)Married persons who file separate returns can later (after the due date of the return) substitute a joint return.
C)The usual test as to when a taxpayer must file a return is based on the total of the following: personal exemption + basic standard deduction + both additional standard deductions.
D)Special filing requirement rules exist for taxpayers who are claimed as dependents of another.
E)None of these.

Accepted Answer

The statement in C is incorrect. The usual test for filing a return is based on a taxpayer's gross income, not on personal exemption, basic standard deduction, and additional standard deductions.

Question 15

Millie,age 80,is supported during the current year as follows: Percent of Support Weston (a son) 20% Faith (a daughter) 35% Jake (a cousin) 25% Brayden (unrelated close family friend) 20% During the year,Millie lives in an assisted living facility.Under a multiple support agreement,indicate which parties can qualify to claim Millie as a dependent.
A)Weston and Faith.
B)Faith.
C)Weston,Faith,Jake,and Brayden.
D)Faith,Jake,and Brayden.
E)None of these.

Accepted Answer

According to the multiple support agreement rules, any person who contributes more than 50% of the support of an individual can claim them as a dependent. In this case, no single person contributes more than 35% of Millie's support, which means she does not meet the support test for any one person to claim her as a dependent. However, the multiple support agreement rule allows multiple people to pool their support together to meet the 50% threshold. Weston and Faith together contribute 55% of Millie's support, which is more than 50%, so they can both qualify to claim her as a dependent under the multiple support agreement.

Question 16

In which,if any,of the following situations may the individual not be claimed as a dependent of the taxpayer?
A)A former spouse who lives with the taxpayer (divorce took place last year).
B)A stepmother who does not live with the taxpayer.
C)A married daughter who lives with the taxpayer.
D)A half-brother who does not live with the taxpayer and is a citizen and resident of Canada.
E)A cousin who does not live with the taxpayer.

Accepted Answer

The answer of In which,if any,of the following situations may...

Question 17

Sylvia,age 17,is claimed by her parents as a dependent.During 2015,she had interest income from a bank savings account of $2,000 and income from a part-time job of $4,200.Sylvia's taxable income is:
A)$4,200 - $4,550 = $0.
B)$6,200 - $5,700 = $500.
C)$6,200 - $4,550 = $1,650.
D)$6,200 - $1,000 = $5,200.
E)None of these.

Accepted Answer

Sylvia's standard deduction for 2015 is $4,550 because she is claimed as a dependent by her parents. Her taxable income is calculated by subtracting the standard deduction from her total income:

$6,200 (total income) - $4,550 (standard deduction) = $1,650 (taxable income)

Question 18

The Hutters filed a joint return for 2015.They provide more than 50% of the support of Carla,Melvin,and Aaron.Carla (age 18) is a cousin and earns $2,800 from a part-time job.Melvin (age 25) is their son and is a full-time law student.He received from the university a $3,800 scholarship for tuition.Aaron is a brother who is a citizen of Israel but resides in France.Carla and Melvin live with the Hutters.How many personal and dependency exemptions can the Hutters claim on their Federal income tax return?
A)Two
B)Three
C)Four
D)Five
E)None of these

Accepted Answer

The Hutters can claim three personal and dependency exemptions: one for themselves, one for Carla, and one for Melvin. Aaron is not a dependent because he is not a U.S. citizen or resident.

Question 19

Tony,age 15,is claimed as a dependent by his grandmother.During 2015,Tony had interest income from Boeing Corporation bonds of $1,000 and earnings from a part-time job of $800.Tony's taxable income is:
A)$1,800.
B)$1,800 - $800 - $1,050 = ($50).
C)$1,800 - $1,150 = $650.
D)$1,800 - $1,050 = $750.
E)None of these.

Accepted Answer

As Tony is claimed as a dependent by his grandmother, his standard deduction is limited to the greater of $1,050 or his earned income plus $350, which in this case is $800 + $350 = $1,150. Therefore, his taxable income is calculated as: 
Total income = $1,000 (interest income) + $800 (part-time job earnings) = $1,800 
Taxable income = Total income - Standard deduction 
Taxable income = $1,800 - $1,150 = $650. Thus, the correct answer is option C.

Question 20

Nelda is married to Chad,who abandoned her in early June of 2015.She has not seen or communicated with him since then.She maintains a household in which she and her two dependent children live.Which of the following statements about Nelda's filing status in 2015 is correct?
A)Nelda can use the rates for single taxpayers.
B)Nelda can file a joint return with Chad.
C)Nelda can file as a surviving spouse.
D)Nelda can file as a head of household.
E)None of these statements is appropriate.

Accepted Answer

Nelda is not eligible to file a joint return with Chad since he abandoned her in June 2015 and has had no communication with him since then. She is also not considered a surviving spouse since Chad is not deceased. However, she can file as a head of household since she maintains a household for herself and her two dependent children. This filing status generally provides a lower tax rate than filing as a single taxpayer.

Quiz 3: Computing the Tax

A qualifying child cannot include:

Arnold is married to Sybil,who abandoned him in 2014.He has not seen or communicated with her since April of that year.He maintains a household in which their son,Evans,lives.Evans is age 25 and earns over $6,000 each year.For tax year 2015,Arnold's filing status is:

Merle is a widow,age 80 and blind,who is claimed as a dependent by her son.During 2015,she received $4,800 in Social Security benefits,$2,500 in bank interest,and $1,800 in cash dividends from stocks.Merle's taxable income is:

In 2015,Cindy had the following transactions: Salary $90,000 Short-term capital gain from a stock investment 4,000 Moving expense to change jobs (11,000) Received repayment of $20,000 loan she made to her sister in 2011 (includes no interest) 20,000 State income taxes (5,000) Cindy's AGI is:

Which of the following characteristics correctly describes the procedure for the phaseout of exemptions?

Kyle,whose wife died in December 2012,filed a joint tax return for 2012.He did not remarry,but has continued to maintain his home in which his two dependent children live.What is Kyle's filing status as to 2015?

Wilma,age 70 and single,is claimed as a dependent on her daughter's tax return.During 2015,she had interest income of $2,500 and $800 of earned income from babysitting.Wilma's taxable income is:

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:

Emily,whose husband died in December 2014,maintains a household in which her dependent mother lives.Which (if any) of the following is her filing status for the tax year 2015? (Note: Emily is the executor of her husband's estate. )

Regarding the rules applicable to filing of income tax returns,which,if any,of the following is an incorrect statement:

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

Sylvia,age 17,is claimed by her parents as a dependent.During 2015,she had interest income from a bank savings account of $2,000 and income from a part-time job of $4,200.Sylvia's taxable income is:

Tony,age 15,is claimed as a dependent by his grandmother.During 2015,Tony had interest income from Boeing Corporation bonds of $1,000 and earnings from a part-time job of $800.Tony's taxable income is:

Nelda is married to Chad,who abandoned her in early June of 2015.She has not seen or communicated with him since then.She maintains a household in which she and her two dependent children live.Which of the following statements about Nelda's filing status in 2015 is correct?