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Exam 4: Individual Tax Overview

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Question 41

True/False

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For purposes of the qualifying child residence test,a temporary absence from the taxpayer's home for full-time schoolwork by the child is counted as though the child lived in the taxpayer's home during the absence.

A) True
B) False

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Question 42

Multiple Choice

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Which of the following statements regarding tax credits is true?

A) Tax credits reduce taxable income dollar for dollar.
B) Tax credits provide a greater tax benefit the greater the taxpayer's marginal tax rate.
C) Tax credits reduce taxes payable dollar for dollar.
D) None of these statements is true.Credits reduce the taxes payable dollar for dollar and are therefore not sensitive to marginal tax rates.

E) B) and D)
F) All of the above

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Question 43

Multiple Choice

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Earl and Lawanda Jackson have been married for 15 years.They have no children.Ned,who is an old friend from high school,has been living with the Jacksons during the current year.Which of the following is a true statement regarding whether the Jacksons can claim a dependency exemption for Ned in the current year?

The test for a qualifying child includes a gross income restriction while the test for qualifying relative does not.

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?

Anna is a qualifying child of her parents.However,she was recently married.Anna and her husband filed a joint return.If they had filed separately,Anna would have owed no taxes,though her husband would have owed just $5.Because Anna herself owed no taxes,her parents can still claim her as a dependent.

By the end of year 1,Harold and Jamie Allred had been married for 30 years and have filed a joint return every year of their marriage.Their three sons,Jacob,Larry,and Andi,are ages 13,16,and 23 respectively and all live at home and are fully supported by their parents.Andi is employed full-time,earning $17,000 in year 1.How many exemptions are Harold and Jamie entitled to claim?

The test for qualifying children includes an age restrictions but the test for qualifying relative does not.

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

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.Charles does not qualify because he and Damarcus have no qualifying family relationship.

To determine filing status,a taxpayer's marital status is determined on January 1 of the tax year in question.Marital status is determined at year-end.

An individual may meet the relationship test to be a taxpayer's qualifying relative even if the individual has no family relationship with the taxpayer.

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

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

An individual receiving $5,000 of tax exempt income during the year could qualify as a qualifying child of another taxpayer but could not qualify as a qualifying relative of another taxpayer.The taxpayer could qualify as a qualifying relative (doesn't fail the gross income test) because the tax exempt income is excluded from gross income.

William and Charlotte Collins divorced in November of year 1.William moved out and Charlotte remained in their house with their 10-month-old daughter Autumn.Diana,Charlotte's mother,lived in the home and acted as Autumn's nanny for all of year 1.William provided 70% of Autumn's support,Diana provided 20%,and Charlotte provided 10%.When the time came to file their tax returns for year 1,William,Charlotte,and Diana each wanted to claim Autumn as a dependent.Their respective AGIs for year 1 were $50,000,$35,000,and $52,000.Who has priority to claim Autumn as a dependent?

Which of the following statements regarding exemptions is correct?

The relationship requirement is more broadly defined (includes more relationships) for a qualifying relative than it is for a qualifying child.

All of the following are for AGI deductions except

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