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Exam 3: Tax Formula and Tax Determination an Overview of Property Transactions

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Question 41

Multiple Choice

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Tony, age 15, is claimed as a dependent by his grandmother. During 2018, 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.

F) A) and D)
G) A) and C)

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Question 42

Multiple Choice

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Which, if any, of the following is a deduction for AGI?

A) Contributions to a traditional Individual Retirement Account.
B) Child support payments.
C) Funeral expenses.
D) Loss on the sale of a personal residence.
E) Medical expenses.

F) C) and D)
G) A) and C)

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Question 43

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In January 2018, Jake's wife dies and he does not remarry. For tax year 2018, Jake may not be able to use the filing status available to married persons filing joint returns.

Darren, age 20 and not disabled, earns $4,300 during 2018. Darren's parents cannot claim him as a dependent unless he is a full-time student.

Under the Federal income tax formula for individuals, a choice must be made between claiming deductions for AGI and itemized deductions.

After Ellie moves out of the apartment she had rented as her personal residence, she recovers her damage deposit of $1,000. The $1,000 is not income to Ellie.

In applying the gross income test in the case of dependents that are married, could the application of community property laws have any effect? Explain.

After her divorce, Hope continues to support her ex-husband's sister, Cindy, who does not live with her. Hope can claim Cindy as a dependent.

Ayla, age 17, is claimed by her parents as a dependent. During 2018, she had interest income from a bank savings account of $2,000 and income from a part-time job of $4,200. Ayla's taxable income is:

When can a taxpayer not use Form 1040EZ? Form 1040A?

Butch and Minerva are divorced in December of 2018. Since they were married for more than one-half of the year, they are considered as married for 2018.

The Deweys are expecting to save on their taxes for 2018. Not only have both incurred large medical expenses, but both reached age 65. During the year, they also recognized a $30,000 loss on some land they sold which was purchased as an investment several years ago. Are the Deweys under a mistaken understanding regarding their tax position? Explain.

Sarah furnishes more than 50% of the support of her son and daughter-in-law who live with her. If the son and daughter-in-law file a joint return, Sarah cannot claim them as dependents.

An individual taxpayer uses a fiscal year of March 1 to February 28. The due date of this taxpayer's Federal income tax return is May 15 of each tax year.

In terms of the tax formula applicable to individual taxpayers, which, if any, of the following statements is correct?

Which, if any, of the following is a deduction for AGI?

The kiddie tax does not apply to a child whose earned income is more than one-half of his or her support.

Regarding the tax formula and its relationship to Form 1040, which, if any, of the following statements is correct?

Under the income tax formula, a taxpayer must choose between deductions for AGI and the standard deduction.

Katelyn is divorced and maintains a household in which she and her daughter, Crissa, live. Crissa, age 22, earns $11,000 during 2018 as a model. Katelyn does not qualify for head of household filing status.