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

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Question 1

True/False

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To determine filing status, a taxpayer's marital status is determined on January 1 of each tax year in question.

A) True
B) False

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Question 2

Multiple Choice

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

A) relationship test
B) gross income test
C) support test
D) residence test

E) A) and B)
F) None of the above

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Question 3

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John Maylor is a self-employed plumber of John's John Service, his sole proprietorship. In the current year, John's John Service had revenue of $120,000 and $40,000 of business expenses. John also received $2,000 of interest income from corporate bonds. What is John's adjusted gross income assuming he had no other income or expenses? (ignore any deduction for self-employment tax)

Charles, who is single, pays all of the costs of maintaining a home for himself and Damarcus. Charles and Damarcus have no family relationship but Damarcus lives with Charles for the entire year. Damarcus qualifies as a qualifying relative for Charles (Charles claims a dependency exemption for Damarcus on his tax return). Charles qualifies for head of household filing status.

Which of the following is NOT a from AGI deduction?

All of the following represents a type or character of income except:

Anna is a 21-year-old full-time college student (she plans on returning home at the end of the school year) . Her total support for the year was $34,000 (including $8,000 of tuition) . Anna covered $12,000 of her support costs out of her own pocket (from savings, she did not work) and she received an $8,000 scholarship that covered all of her tuition costs. Which of the following statements regarding who is allowed to claim Anna as an exemption is true?

Taxpayers need not include an income item in gross income unless there is a specific tax provision requiring the taxpayer to include the income item in gross income.

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?

Taxpayers who file as qualifying widows/widowers are treated exactly the same for tax purposes in all respects as taxpayers who are married filing jointly for tax purposes.

Lebron received $50,000 of compensation from his employer and he received $400 of interest from a municipal bond. What is the amount of Lebron's gross income from these items?

Hannah, who is single, received a qualified dividend of $1,000. Hannah's marginal ordinary income tax rate is 28%. What amount of tax must she pay on the $1,000 dividend?

Jasmine and her husband Arty have been married for 25 years. In May of this year, the couple divorced. During the year, Jasmine provided all the support for herself and her 22-year-old child Dexter who lived in the same home as Jasmine for the entire year. Dexter is employed full-time, earning $29,000 this year. What is the Jasmine's most favorable filing status for the year?

A taxpayer may qualify for the head of household filing status even if she does not have any dependent children.

Which of the following statements regarding tax deductions is false?

Which of the following statements regarding personal and dependency exemptions is false?

Which of the following statements regarding realized income is true?

The Dashwoods have calculated their taxable income to be $80,000 for 2016, which includes $2,000 of long-term capital gains. Using the appropriate tax rate schedule, calculate the Dashwood's income tax liability assuming they are married and file a joint return.

In certain circumstances, a married taxpayer who files separately may qualify for the head of household filing status.

The standard deduction amount for married filing separately taxpayers (MFS) is less than the standard deduction amount for married filing jointly taxpayers.