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Exam 3: Computing the Tax

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Question 41

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List at least three exceptions to the application of the kiddie tax.

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Unearned income of $2,000 or less.
-Age ...

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Question 42

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Regarding the Tax Tables applicable to the Federal income tax, which of the following statements is correct?

A) For any one year, the Tax Tables are issued by the IRS after the Tax Rate Schedules.
B) The Tax Tables will always yield the same amount of tax as the Tax Rate Schedules.
C) Taxpayers can elect as to whether the use the Tax Tables or the Tax Rate Schedules.
D) The Tax Tables can be used by an estate but not by a trust.
E) No correct answer given.

F) A) and D)
G) A) and E)

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Question 43

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Match the statements that relate to each other. Note: Choice L may be used more than once. -Basic standard deduction

Kyle, whose wife died in December 2011, filed a joint tax return for 2011. He did not remarry, but has continued to maintain his home in which his two dependent children live. What is Kyle's filing status as to 2014?

Regarding dependency exemptions, classify each statement in one of the four categories: -An uncle who lives with taxpayer.

Claude's deductions from AGI exceed the standard deduction allowed for 2014. Under these circumstances, Claude cannot claim the standard deduction.

Katrina, age 16, is claimed as a dependent by her parents. During 2014, she earned $5,600 as a checker at a grocery store. Her standard deduction is $5,950 ($5,600 earned income + $350).

Evan and Eileen Carter are husband and wife and file a joint return for 2014. Both are under 65 years of age. They provide more than half of the support of their daughter, Pamela (age 25) , who is a full-time medical student. Pamela receives a $5,000 scholarship covering her tuition at college. They furnish all of the support of Belinda (Evan's grandmother) , who is age 80 and lives in a nursing home. They also support Peggy (age 66) , who is a friend of the family and lives with them. How many dependency exemptions may the Carters claim?

Roy and Linda were divorced in 2013. The divorce decree awards custody of their children to Linda but is silent as to who is entitled to claim them as dependents. If Roy furnished more than half of their support, he can claim them as dependents in 2014.

Butch and Minerva are divorced in December of 2014. Since they were married for more than one-half of the year, they are considered as married for 2014.

Married taxpayers who file separately cannot later (i.e., after the due date for filing) change to a joint return.

Regarding dependency exemptions, classify each statement in one of the four categories: -A daughter who does not live with taxpayer.

Kirby is in the 15% tax bracket and had the following capital asset transactions during 2014: $\begin{array}{llr} \text { Long-term gain from the sale of a coin collection } &\$11,000\\ \text {Long-term gain from the sale of a land investment } &10,000\\ \text { Short-term gain from the sale of a stock investment } &2,000\end{array}$ Kirby's tax consequences from these gains are as follows: A) $(5 \% \times \$ 10,000)+(15 \% \times \$ 13,000)$ B) $(15 \% \times \$ 13,000)+(28 \% \times \$ 11,000)$ C) $(0 \% \times \$ 10,000)+(15 \% \times \$ 13,000)$ . D) $(15 \% \times \$ 23,000)$ . E)None of the above

A decrease in a taxpayer's AGI could increase the amount of medical expenses that can be deducted.

Match the statements that relate to each other. Note: Choice L may be used more than once. -Marginal income tax rate

Once a child reaches age 19, the kiddie tax no longer applies.

Heloise, age 74 and a widow, is claimed as a dependent by her daughter. For 2014, she had income as follows: $2,500 interest on municipal bonds; $3,200 Social Security benefits; $3,000 income from a part-time job; and $2,800 dividends on stock investments. What is Heloise's taxable income for 2014?

Regarding dependency exemptions, classify each statement in one of the four categories: -A niece who lives with taxpayer, is 20 years old, earns $5,000, and is a full-time student.

Match the statements that relate to each other. Note: Choice L may be used more than once. -Long-term capital gains

In order to claim a dependency exemption for other than a qualifying child, a taxpayer must meet the support test. Generally, this is done by furnishing more than 50% of a dependent's support. What exceptions exist, if any, where the support furnished need not be more than 50%?