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Exam 3: Computing the Tax

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Question 21

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When filing their Federal income tax returns, the Youngs always claimed the standard deduction.After they purchased a home, however, they started to itemize their deductions from AGI.

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Question 22

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Married taxpayers who file a joint return cannot later (i.e., after the filing due date) switch to separate returns for that year.

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B) False

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Question 23

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For the year a spouse dies, the surviving spouse is considered married for the entire year for income tax purposes.

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

As opposed to itemizing deductions from AGI, the majority of individual taxpayers choose the standard deduction.

Deductions for AGI are often referred to as "above-the-line" or "page 1" deductions.Explain.

Because they appear on page 1 of Form 1040, itemized deductions are also referred to as "page 1 deductions."

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

A child who is married can be subject to the kiddie tax.

During 2012, Esther had the following transactions: Esther's AGI is:

In 2012, Hal furnishes more than half of the support of his ex-wife and her father, both of whom live with him.The divorce occurred in 2011.Hal may claim the father-in-law and the ex-wife as dependents.

Katrina, age 16, is claimed as a dependent by her parents.During 2012, she earned $5,600 as a checker at a grocery store.Her standard deduction is $5,900 ($5,600 earned income + $300).

A taxpayer who itemizes must use Form 1040, and cannot use Form 1040EZ or Form 1040A.

Under the Federal income tax formula for individuals, the determination of adjusted gross income (AGI) follows that of taxable income (TI).

Evan and Eileen Carter are husband and wife and file a joint return for 2012.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?

Many taxpayers who previously itemized will start claiming the standard deduction when they purchase a home.

Dan and Donna are husband and wife and file separate returns for the year.If Dan itemizes his deductions from AGI, Donna still can claim the standard deduction.

Debby, age 18, is claimed as a dependent by her mother.During 2012, she earned $1,100 in interest income on a savings account.Debby's standard deduction is $1,400 ($1,100 + $300).

A qualifying child cannot include:

Ed is divorced and maintains a home in which he and a dependent friend live.Ed does not qualify for head of household filing status.