Question 1. In satisfying the support test and the gross income test for claiming

1. In satisfying the support test and the gross income test for claiming a dependency exemption, a scholarship received by the person being claimed is handled the same way for each test. Do you agree or disagree with this statement? Why?

2. 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%?

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3. 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.

$4,000 (50% × $8,000) of income, while Alice remains immune.

4. In meeting the criteria of a qualifying child for dependency exemption purposes, when if ever, might the child’s income become relevant?

5. Lena is 66 years of age, single, and blind and is not claimed as a dependent. How much gross income must she have before she is required to file a Federal income tax return for 2014?

6. When can a taxpayer not useForm 1040EZ? Form 1040A?

7. When married persons file a joint return, joint and several liability results. What does this mean?

8. Jayden and Chloe Harper are husband and wife and use the calendar year for tax purposes.

a. If the Harpers file a joint return for 2014, can they later switch to separate returns for 2014?

b. If the Harpers file separate returns for 2014, can they later switch to a joint return for 2014?

9. Contrast the tax consequences resulting from the following filing status situations:

a. Married filing jointly versus married filing separately.

b. Married filing separately versus single filing separately.

c. Married filing separately versus abandoned spouse status.

10. Regarding head of household filing status, comment on the following:

a. A taxpayer qualifies even though he maintains a household which he and the dependent do notshare.

b. A taxpayer does not qualify even though the person sharing the household isa dependent.

c. The usual eventual filing status of a surviving spouse.

11. The major advantage of being classified as an abandoned spouse is that the taxpayer is treated for tax purposes as being single and not married. This means that an abandoned spouse can use the more favorable tax rates available to single persons than those available to married persons filing separately. Comment on the accuracy of this conclusion.

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12. For the past few years, Corey’s filing status has been as follows: 2010 (married/joint); 2011 (married/separate); 2012 (surviving spouse); 2013 (surviving spouse); and 2014 (head of household). Explain what probably has happened.

13. DeWayne is a U.S. citizen and resident. He spends much of each year in the United Kingdom on business. He is married to Petula, a U.K. citizen and resident of London. DeWayne has heard that it is possible that he can file a joint income tax return for U.S. purposes. If this is so, what are the constraints he should consider in making any such decision?

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14. For 2014, Tom has taxable income of $48,005. When he uses the Tax Tables, Tom finds that his tax liability is higher than under the Tax Rate Schedules.

a. Why is there a difference?

b. Can Tom use the Tax Rate Schedules?

a. .

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

16. The Martins have a teenage son who has become an accomplished bagpiper. With proper promotion and scheduling, the son has good income potential by charging for his services at special events (particularly funerals). However, the Martins are fearful that the income could generate a kiddie tax and cause them the loss of a dependency exemption deduction. Are the Martins’ concerns justified? Explain.

17. In early 2014, Ben sold a yacht, held for 9 months and for pleasure, for a $5,000 gain. Concerned about offsetting the gain before year­end, Ben is considering selling one of the following—each of which would yield a $5,000 loss:

· Houseboat used for recreation.

· Truck used in business.

· Stock investment held for 13 months.

Evaluate each choice.

18. After paying down the mortgage on their personal residence, the Hills have found that their itemized deductions for each year are always slightly less than the standard deduction option.

a. Explain what has happened.

b. What remedy do you suggest?

19. Maude’s parents live in another state and she cannot claim them as her dependents. If Maude pays their medical expenses, can she derive any tax benefit from doing so? Explain.

20. A son lives with taxpayer and earns $3,000.

21. A daughter who does not live with taxpayer.

22. A granddaughter, who lives with taxpayer, is 19 years old, earns $5,000, and is not a full-time student.

23. An uncle who lives with taxpayer.

24. A nephew who lives with taxpayer.

25. A niece who lives with taxpayer, is 20 years old, earns $5,000, and is a full-time student.

26. A half brother who lives with taxpayer.

27. A cousin who does not live with taxpayer.

28. A stepdaughter who does not live with taxpayer.

29. A daughter-in-law who lives with taxpayer.

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