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Exam 3: Computing the Tax

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Question 41

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Which,if any,of the following is a deduction from AGI?

A) Alimony payments.
B) Child support payments.
C) Funeral expenses.
D) Loss on the sale of a personal residence.
E) Interest on home mortgage.

F) B) and E)
G) A) and E)

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Question 42

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A taxpayer who itemizes his deductions from AGI can claim the property taxes on his personal residence as a deduction.

A) True
B) False

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Question 43

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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%?

Perry is in the 33% tax bracket.During 2010,he had the following capital asset transactions: Perry's tax consequences from these gains are as follows:

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.

Using borrowed funds from a mortgage on her home,Leah provides 52% of her own support,while her sons furnished the rest.Leah can be claimed as a dependent under a multiple support agreement.

Ed is divorced and maintains a home in which he and a dependent friend live.Ed qualifies for head of household filing status.

An "above the line" deduction refers to a deduction for AGI.

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

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

Derek,age 46,is a surviving spouse.If he has itemized deductions of $11,600 for 2010,Derek should not claim the standard deduction.

The IRS facilitates the filing of income tax returns by persons in the U.S.illegally through the issuance of ITINs.

Gene is single and for 2010 has AGI of $40,000.He is age 65 and has no dependents.For 2010,he has itemized deductions from AGI of $7,000.Determine Gene's taxable income for 2010.

Nelda is married to Chad,who abandoned her in early June of 2010.She has not seen or communicated with him since then.She maintains a household in which she and her two dependent children live.Which of the following statements about Nelda's filing status in 2010 is correct?

Pablo is married to Elena,who lives with him.Both are U.S.citizens and residents of Kansas.Pablo furnishes all of the support of his parents,who are citizens of Nicaragua and residents of Mexico.He also furnishes all of the support of Elena's parents,who are citizens and residents of Nicaragua.Elena has no gross income for the year.If Pablo files as a married person filing separately,how many personal and dependency exemptions can he claim on his return?

Tad claims his 70-year-old mother as a dependent.The mother may not claim an additional standard deduction for her age.

For the current year,David has salary income of $80,000 and the following property transactions: What is David's AGI for the current year?

Merle,age 17,is claimed by her parents as a dependent.During 2010,she had interest income from a bank savings account of $2,000 and income from a part-time job of $4,200.Merle's taxable income is:

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

After her divorce,Hope continues to support her ex-husband's sister,Cindy,who does not live with her.Hope cannot claim Cindy as a dependent.