CHAPTER 1: FUNDAMENTALS OF INCOME TAXATION FULL EXAM

Which of the following is NOT a requirement that must be satisfied in order for a legally married taxpayer to qualify as an abandoned spouse and use the head-of-household filing status? 1. The taxpayer must file a separate tax return from the spouse. 2. The taxpayer must furnish over one-half of the cost of maintaining the household. 3. The spouse must not be a member of the household during the last 6 months of the tax year. 4. The taxpayer must be legally separated from the spouse. - CORRECT ANSWER-The taxpayer must be legally separated from the spouse. Trevor is 62 years old, single, and a dependent of his daughter. During the current year, Trevor received $3,500 interest on money in a bank account and $2,300 from a parttime job. What is Trevor's taxable income? - CORRECT ANSWER-$3,150 Because Trevor is a dependent of another, his standard deduction is limited to the greater of $1,100 and his earned income + $350. Therefore Trevors standard deduction is $2,650. $5,800 - $2,650 = $3,150 taxable income Alfred, aged 21, is a full-time student at a university and is a dependent of his parents. This year, he earned $2,000 from a part-time job and had $950 interest from a savings account. He had a total of $200 in itemized deductions in the current year. What is Alfred's taxable income this year? - CORRECT ANSWER-$600 Alfred's bank account and salary combine to give him an income of $2,950 before the standard deduction. Because Alfred is a dependent of another, his standard deduction is limited to the greater of $1,100 and his earned income + $350. Therefore Gus deduction is $2,350. $2,950 - $2,350 = $600 taxable income Peyton is single and has two dependent children. Financial records show the following items in the current year: A $12,000 gift from a friend $1,200 in dividends received on stock A $1,000 prize won in the state lottery A $35,000 salary from his employer $6,000 in child support received from an ex-spouse