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Exam 3: Computing the Tax

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Question 41

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Under the income tax formula, a taxpayer must choose between deductions for AGI and the standard deduction.

A) True
B) False

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Question 42

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

A) Available to a 70-year-old father claimed as a dependent by his son.
B) Equal to tax liability divided by taxable income.
C) The highest income tax rate applicable to a taxpayer.
D) Not eligible for the standard deduction.
E) No one qualified taxpayer meets the support test.
F) Taxpayer's ex-husband does not qualify.
G) A dependent child (age 18) who has only unearned income.
H) Highest applicable rate is 37%.
I) Applicable rate could be as low as 0%.
J) Maximum rate is 28%.
K) No correct match provided.

L) B) and H)
M) B) and E)

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Question 43

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

Match the statements that relate to each other. Note: Choice k. may be used more than once. -Tax Rate Schedule

Clara, age 68, claims head of household filing status. If she has itemized deductions of $18,900 for 2019, she should claim the standard deduction.

Under the Federal income tax formula for individuals, a choice must be made between claiming deductions for AGI and itemized deductions.

Kyle, whose wife died in December 2016, filed a joint tax return for 2016. He did not remarry but has continued to maintain his home in which his two dependent children live. What is Kyle's filing status in 2019?

Stuart has a short-term capital loss, a collectible long-term capital gain, and a long-term capital gain from land held as investment. The short-term loss is first applied to the collectible capital gain.

An increase in a taxpayer's AGI could decrease the amount of charitable contribution that can be claimed.

During 2019, Trevor has the following capital transactions: $\begin{array}{lr}\text { LTCG } & \$ 6,000 \\\text { Long-term collectible gain } & 2,000 \\\text { STCG } & 4,000 \\\text { STCL } & 10,000\end{array}$ After the netting process, the following results:

The filing status of a taxpayer (e.g., single, head of household) must be identified before the applicable standard deduction is determined.

Hannah, age 70 and single, is claimed as a dependent by her daughter. During 2019, Hannah had interest income of $2,550 and $850 of earned income from babysitting. Hannah's taxable income is:

In satisfying the support test and the gross income test for claiming someone as a dependent, 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?

In January 2019, Jake's wife dies and he does not remarry. For tax year 2019, Jake may not be able to use the filing status available to married persons filing joint returns.

Kirby, a single taxpayer, has taxable income of $30,000 and is in the 12% tax bracket. During 2019, she had the following capital asset transactions: $\begin{array}{lr}\text { Long-term gain from the sale of a coin collection } & \$ 11,000 \\\text { Long-term gain from the sale of a land investment } & 10,000 \\\text { Short-term gain from the sale of a stock investment } & 2,000\end{array}$ Kirby's tax consequences from these gains are as follows:

Darren, age 20 and not disabled, earns $4,300 during 2019. Darren's parents cannot claim him as a dependent unless he is a full-time student.

Contrast the tax consequences resulting from the following filing status situations: a. Married filing jointly versus married filing separately. a. Married persons filing jointly have a number of tax elections available to them that cannot be chosen if they file separate returns. For example, the credit for child and dependent care expenses and the earned income credit are not available unless married persons file joint returns. b. Married filing separately versus single. c. Married filing separately versus abandoned spouse status.

During 2019, Sandeep had the following transactions: $\begin{array}{lr}\text { Salary } & \$ 80,000 \\\text { Interest income on City of Baltimore bonds } & 1,000 \\\text { Damages for personal injury (car accident) } & 100,000 \\\text { Punitive damages (same car accident) } & 200,000 \\\text { Cash dividends from Chevron Corporation stock } & 7,000\end{array}$ Sandeep's AGI is:

Natalie is married to Chad, who abandoned her in early June of 2019. 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 Natalie's filing status in 2019 is correct?

In 2019, Ed is 66 and single. If he has itemized deductions of $12,700, he should not claim the standard deduction alternative.