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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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It is generally more advantageous for liability protection purposes for a married couple to file separately than it is for them to file jointly.

A) True
B) False

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Question 2

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For AGI deductions are commonly referred to as deductions "below the line."

A) True
B) False

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False

Question 3

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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.

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

The Tanakas filed jointly in 2019. Their AGI is $120,000. They reported $10,000 of qualified business income and $26,000 of itemized deductions. They also have two dependent qualifying children. The 2019 standard deduction amount for MFJ taxpayers is $24,400. What is the total amount of from AGI deductions they are allowed to claim on their 2019 tax return?

In Year 1, Harold Weston's wife died. Since her death, he has maintained a household for their son, Frank (age 3) , his qualifying child. Which is the most advantageous filing status available to Harold in Year 4?

An individual may never be considered as both a qualifying relative and a qualifying child of the same taxpayer.

Sullivan's wife, Susan, died four years ago. Sullivan has not remarried and he maintains a home for his dependent child, Sammy. In 2019, Sullivan received $70,000 of salary from his employer and $3,000 of qualified business income from a business investment, and he paid $10,000 of itemized deductions. What is Sullivan's taxable income for 2019?

The only from AGI deductions are the standard deduction and itemized deductions.

In April of Year 1, Martin left his wife, Marianne. While the couple was apart, they were not legally divorced. Marianne found herself having to financially provide for the couple's only child (who qualifies as Marianne's dependent) and to pay all the costs of maintaining the household. When Marianne filed her tax return for Year 1, she filed a return separate from Martin. What is Marianne's most favorable filing status for Year 1?

The character of income is a factor in determining the rate at which the income is taxed.

Miguel, a widower whose wife died in Year 1, maintains a household for himself and his daughter, who qualifies as his dependent. Miguel did not remarry. What is the most favorable filing status that Miguel qualifies for in Year 3?

An individual may be considered as a qualifying child of her parents and a qualifying child of her grandparents in the same year.

For AGI deductions are commonly referred to as deductions "above the line."

Jane and Ed Rochester are married with a 2-year-old child, who lives with them and whom they support financially. In 2019, 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 2019 standard deduction amount for MFJ taxpayers is $24,400. What are the couple's taxes due or tax refund? (Use the tax rate schedules, not tax tables.)

To be considered a qualifying child of a taxpayer, the individual must be the son or daughter of the taxpayer.

Charlotte is the Lucas family's 22-year-old daughter. She is a full-time student at an out-of-state university but plans to return home when the school year ends. During the year, Charlotte earned $4,000 of income working part time. Her support totaled $30,000 for the year. Of this amount, Charlotte paid $7,000 with her own funds, her parents paid $14,000, and Charlotte's grandparents paid $9,000. Which of the following statements most accurately describes whether Charlotte's parents can claim Charlotte as a dependent?

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?

The relationship requirement for qualifying relative includes cousins.

Kabuo and Melinda got married on December 15, Year 1. Kabuo's salary for the year was $54,000, and Melinda's was $62,000. In addition, Kabuo received $250 of interest income, ($100 of which was from municipal bonds), and Melinda received $10,000 of alimony from a former spouse (pre-2019 divorce decree). If Kabuo and Melinda choose to file jointly, what is their Year 1 gross income?