Question 1

Regarding classification as a dependent, classify each statement in one of the four categories:
a. Could be a qualifying child.
b. Could be a qualifying relative.
c. Could be either a qualifying child or a qualifying relative.
d. Could be neither a qualifying child nor a qualifying relative.
-A stepdaughter who does not live with taxpayer.

Accepted Answer

For a stepdaughter to be considered a dependent under the qualifying relative category, she does not need to live with the taxpayer. The key requirements include the relationship test, gross income test, and support test, none of which mandate residency with the taxpayer for the entire year, unlike the qualifying child criteria.

Question 2

Regarding classification as a dependent, classify each statement in one of the four categories:
a. Could be a qualifying child.
b. Could be a qualifying relative.
c. Could be either a qualifying child or a qualifying relative.
d. Could be neither a qualifying child nor a qualifying relative.
-A granddaughter, who lives with taxpayer, is 19 years old, earns $5,000, and is not a full-time student.

Accepted Answer

The answer of Regarding classification as a dependent, classify each...

Question 3

For 2018, Tom has taxable income of $48,005. When he uses the Tax Tables, Tom finds that his tax liability is higher than under the Tax Rate Schedules.
a. Why is there a difference?
b. Can Tom use the Tax Rate Schedules?

Accepted Answer

The answer of For 2018, Tom has taxable income of...

Question 4

Regarding classification as a dependent, classify each statement in one of the four categories:
a. Could be a qualifying child.
b. Could be a qualifying relative.
c. Could be either a qualifying child or a qualifying relative.
d. Could be neither a qualifying child nor a qualifying relative.
-A son lives with taxpayer and earns $3,000.

Accepted Answer

The statement implies that the son is living with the taxpayer, which meets the residency requirement for both qualifying child and qualifying relative. However, the income of $3,000 exceeds the gross income test for qualifying children but not for qualifying relatives. Therefore, the son could be either a qualifying child or a qualifying relative depending on other factors such as age, relationship to the taxpayer, and support provided.

Question 5

Regarding classification as a dependent, classify each statement in one of the four categories:
a. Could be a qualifying child.
b. Could be a qualifying relative.
c. Could be either a qualifying child or a qualifying relative.
d. Could be neither a qualifying child nor a qualifying relative.
-A family friend who is supported by and lives with the taxpayer.

Accepted Answer

A family friend who is supported by and lives with the taxpayer could be considered a qualifying relative if they meet the other IRS requirements for this classification, such as not being a qualifying child of another taxpayer and meeting income and support tests. They cannot be a qualifying child because the IRS requires a qualifying child to have a specific relationship to the taxpayer, such as being a son, daughter, or foster child, which does not include family friends.

Question 6

After paying down the mortgage on their personal residence, the Hills have found that their itemized deductions for each year are always slightly less than the standard deduction option.
a. Explain what has happened.
b. What remedy do you suggest?

Accepted Answer

The answer of After paying down the mortgage on their...

Question 7

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 8

Regarding classification as a dependent, classify each statement in one of the four categories:
a. Could be a qualifying child.
b. Could be a qualifying relative.
c. Could be either a qualifying child or a qualifying relative.
d. Could be neither a qualifying child nor a qualifying relative.
-An ex-husband (divorce occurred last year) who lives with taxpayer.

Accepted Answer

An ex-husband cannot be a qualifying child because he is not a biological or adopted child of the taxpayer, nor does he meet the age or residency requirements. However, he could be a qualifying relative if he meets the four tests: not a qualifying child, lives with the taxpayer for the entire year, gross income is less than $4,200, and the taxpayer provides more than half of his support.

Question 9

Regarding classification as a dependent, classify each statement in one of the four categories:
a. Could be a qualifying child.
b. Could be a qualifying relative.
c. Could be either a qualifying child or a qualifying relative.
d. Could be neither a qualifying child nor a qualifying relative.
-An uncle who lives with taxpayer.

Accepted Answer

An uncle cannot be a qualifying child since there is no parent-child relationship. However, if the uncle meets the other requirements of a qualifying relative (such as living with the taxpayer the entire year, having gross income below $4,300, and receiving less than half of their support from the taxpayer), they could be considered a qualifying relative.

Question 10

Regarding classification as a dependent, classify each statement in one of the four categories:
a. Could be a qualifying child.
b. Could be a qualifying relative.
c. Could be either a qualifying child or a qualifying relative.
d. Could be neither a qualifying child nor a qualifying relative.
-A daughter-in-law who lives with taxpayer.

Accepted Answer

A daughter-in-law who lives with the taxpayer cannot be a qualifying child because the IRS's definition of a qualifying child does not include in-laws. However, she could potentially be a qualifying relative if she meets the other requirements set forth by the IRS, such as not having a gross income above a certain threshold and being supported by the taxpayer for more than half of her living expenses.

Question 11

Match the statements that relate to each other. Note: Some choices may be used more than once.
a. Not available to 65-year old taxpayer who itemizes.
b. Exception for U.S. citizenship or residency test (for dependency exemption purposes).
c. Largest basic standard deduction available to a dependent who has no earned income.
d. Considered for dependency purposes.
e. Qualifies for head of household filing status.
f. A child (age 15) who is a dependent and has only earned income.
g. Considered in applying gross income test (for dependency exemption purposes).
h. Not considered in applying the gross income test (for dependency exemption purposes). 
i. Unmarried taxpayer who can use the same tax rates as married persons filing jointly.
j. Exception to the support test (for dependency exemption purposes).
k. A child (age 16) who is a dependent and has only unearned income of $4,500. 
l. No correct match provided.
-Scholarship funds for tuition

Accepted Answer

The answer of Match the statements that relate to each...

Question 12

Match the statements that relate to each other. Note: Some choices may be used more than once.
a. Not available to 65-year old taxpayer who itemizes.
b. Exception for U.S. citizenship or residency test (for dependency exemption purposes).
c. Largest basic standard deduction available to a dependent who has no earned income.
d. Considered for dependency purposes.
e. Qualifies for head of household filing status.
f. A child (age 15) who is a dependent and has only earned income.
g. Considered in applying gross income test (for dependency exemption purposes).
h. Not considered in applying the gross income test (for dependency exemption purposes). 
i. Unmarried taxpayer who can use the same tax rates as married persons filing jointly.
j. Exception to the support test (for dependency exemption purposes).
k. A child (age 16) who is a dependent and has only unearned income of $4,500. 
l. No correct match provided.
-Surviving spouse

Accepted Answer

Surviving spouses are allowed to use the same tax rates as married persons filing jointly, providing a significant tax benefit.

Question 13

List at least three exceptions to the application of the kiddie tax.

Accepted Answer

The answer of List at least three exceptions to the...

Question 14

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 15

Regarding classification as a dependent, classify each statement in one of the four categories:
a. Could be a qualifying child.
b. Could be a qualifying relative.
c. Could be either a qualifying child or a qualifying relative.
d. Could be neither a qualifying child nor a qualifying relative.
-A daughter who does not live with taxpayer.

Accepted Answer

A daughter who does not live with the taxpayer could still be considered a qualifying relative if she meets the other requirements for this classification, such as not having a gross income above a certain threshold and the taxpayer providing over half of her support for the year. The residency requirement is stricter for qualifying children, generally requiring them to live with the taxpayer for more than half of the year, which is not met in this scenario.

Question 16

Regarding classification as a dependent, classify each statement in one of the four categories:
a. Could be a qualifying child.
b. Could be a qualifying relative.
c. Could be either a qualifying child or a qualifying relative.
d. Could be neither a qualifying child nor a qualifying relative.
-A half-brother who lives with taxpayer.

Accepted Answer

A half-brother who lives with taxpayer could be either a qualifying child or a qualifying relative depending on their age, relationship to the taxpayer, and other factors.

Question 17

Regarding classification as a dependent, classify each statement in one of the four categories:
a. Could be a qualifying child.
b. Could be a qualifying relative.
c. Could be either a qualifying child or a qualifying relative.
d. Could be neither a qualifying child nor a qualifying relative.
-A nephew who lives with taxpayer.

Accepted Answer

Without further information it is possible that the nephew could meet the requirements to be classified as either a qualifying child or a qualifying relative, depending on factors such as age, support provided by the taxpayer, and relationship to the taxpayer.

Question 18

Regarding classification as a dependent, classify each statement in one of the four categories:
a. Could be a qualifying child.
b. Could be a qualifying relative.
c. Could be either a qualifying child or a qualifying relative.
d. Could be neither a qualifying child nor a qualifying relative.
-A cousin who does not live with taxpayer.

Accepted Answer

A cousin who does not live with the taxpayer cannot be a qualifying child because one of the requirements is that the child must live with the taxpayer for more than half of the year. Cousins also do not meet the specific relationship tests to be considered a qualifying relative under IRS rules.

Question 19

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 20

Regarding classification as a dependent, classify each statement in one of the four categories:
a. Could be a qualifying child.
b. Could be a qualifying relative.
c. Could be either a qualifying child or a qualifying relative.
d. Could be neither a qualifying child nor a qualifying relative.
-A niece who lives with taxpayer, is 20 years old, earns $5,000, and is a full-time student.

Accepted Answer

This niece meets the criteria for a qualifying child because she is a full-time student under the age of 24, lives with the taxpayer, and does not provide more than half of her own support.

Quiz 3: Computing the Tax

For 2018, Tom has taxable income of $48,005. When he uses the Tax Tables, Tom finds that his tax liability is higher than under the Tax Rate Schedules. a. Why is there a difference? b. Can Tom use the Tax Rate Schedules?

After paying down the mortgage on their personal residence, the Hills have found that their itemized deductions for each year are always slightly less than the standard deduction option. a. Explain what has happened. b. What remedy do you suggest?

List at least three exceptions to the application of the kiddie tax.

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.