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Exam 4: Individual Income Tax Overview, Dependents, 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

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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?

A) Head of household.
B) Qualifying widower.
C) Single.
D) Married filing separately.

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

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Question 3

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Jane and Ed Rochester are married with a two-year-old child who lives with them and whom they support financially. In 2018, Ed and Jane realized the following items of income and expense: They also qualified for a $2,000 child tax credit. Their employers withheld $5,800 in federal income taxes from their paychecks (in the aggregate). Finally, the 2018 standard deduction amount for MFJ taxpayers is $24,000. What are the couple's taxes due or tax refund (use the tax rate schedules not tax tables)?

The Inouyes filed jointly in 2018. Their AGI is $78,000. They reported $2,000 of qualified business income and $22,000 of itemized deductions. They have two children, one of whom qualifies as their dependent as a qualifying child. The 2018 standard deduction amount for MFJ taxpayers is $24,000. What is the total amount of from AGI deductions they are allowed to claim on their 2018 tax return?

A taxpayer may qualify for the head of household filing status if she has no dependent children but pays more than half of the cost of maintaining a separate household for her dependent mother and/or father.

From AGI deductions are generally more valuable to taxpayers than for AGI deductions.

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

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) ?

The income tax base for an individual tax return is:

Tax credits are generally more valuable than tax deductions because tax credits reduce a taxpayer's gross tax liability dollar for dollar while tax deductions do not.

Which of the following statements regarding tax deductions is False?

An individual with gross income of $5,000 could qualify as a qualifying child of another taxpayer but could not qualify as a qualifying relative of another taxpayer.

Joanna received $60,000 compensation from her employer, the value of her stock in ABC company appreciated by $5,000 during the year (but she did not sell any of the stock) , she received $30,000 of life insurance proceeds from the death of her husband. What is the amount of Joanna's gross income from these items?

In February of 2017, Lorna and Kirk were married. During 2018, Lorna received $40,000 of compensation from her employer and Kirk received $30,000 of compensation from his employer. The couple together reported $2,000 of itemized deductions. Lorna and Kirk filed separately in 2018. What is Lorna's taxable income and what is her tax liability (use the applicable tax rate schedule and round your answer to the nearest whole number)?

Jane and Ed Rochester are married with a two-year-old child who lives with them and whom they support financially. In 2018, Ed and Jane realized the following items of income and expense: They also qualified for a $2,000 child tax credit. Their employers withheld $5,800 in federal income taxes from their paychecks (in the aggregate). Finally, the 2018 standard deduction amount for MFJ taxpayers is $24,000. What is the couple's gross income?

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)

Sally received $60,000 of compensation from her employer and she received $500 of interest from a corporate bond. What is the amount of Sally's gross income from these items?

For purposes of the dependency exemption qualification, the test for qualifying children includes an age restriction but the test for qualifying relative does not.

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

Which of the following types of income are not considered ordinary income?