Chapter 3 :: Fundamentals of Income Taxation|2023 LATEST UPDATE|GUARANTEED SUCCESS

Which of the following is not a requirement that must be satisfied in order for a legally married taxpayer to use the head of household filing status? a.) The taxpayer must furnish more than half the cost of maintaining the household, b.) The taxpayer must file a separate tax return from the spouse. c.) The taxpayer must be legally separated from their spouse. d.) The spouse must not be a member of the household during the last six months of the tax year. c.) The taxpayer must be legally separated from their spouse. Bobby is age 62, single, and is a dependent of his daughter. During the current year, Bobby received interest on a bank account of $3,500 and $2,300 from a part-time job. What is Bobby's taxable income? a.) $3,150 b.) $550 c.) $0 d.) $2,300 a.) $3,150 George, age 21 is a full-time student at the University and is a dependent of his parents. He had earned income of $2,000 from a part-time job. In addition he had $950 interest from a savings account. He had total itemized deductions of $200 in the current year. What is George's taxable income this year? a.) $950 b.) $600 c.) $2,000 d.) $2,950 b.) $600 Total income = $2,000 + $950 = $2,950 Since George is a full-time student and a dependent of his parents, his full earnings + $350 can be deducted from his total income. $2,950 - $2,000 - $350 = $600 - taxable income Cassie is preparing her federal income tax return. Which of the following items should be excluded from Cassie's gross income? a.) Alimony received by Cassie from her ex-husband (2016 divorce decree).. b.) Royalties received by Cassie for her best-selling novel. c.) $100,000 in cash received by Cassie when her grandmother died. d.) $5,000 of gain resulting from the sale of Cassie's favorite painting. c.) $100,000 in cash received by Cassie when her grandmother died. Tony (age 70) and Kate (age 68) are married and file a joint return for 2020. Although Tony's eyesight is above average for a man his age, Kate is legally blind. What is Tony and Kate's standard deduction for 2020? a.) $24,800 b.) $26,100 c.) $27,400 d.) $28,700 c.) $27,400 $24,800 + $1,300 (Tony age) + $1,300 (Kate age) = $27,400 Jackie and Julie have been in a long-term relationship and get married on January 1, 2021. They intend to file a joint return for all years in which they are eligible to do so. Neither Jackie nor Julie has ever been married before and neither have any children or other dependents. What filing status can Julie use on her 2020 tax return? a.) Single b.) Married Filing Separately c.) Married Filing Jointly d.) Head of Household a.) Single To file MFJ, they would have had to been married on December 31. Hank and Irene are married and have two qualifying dependents. Hank and Irene are both 35 years old and have gross income of $115,000. Their deductions for AGI equal $10,000 and they always use the standard deduction. Using the married filing jointly tax rate schedule, compute their tax on taxable income for 2020. a.) $9,229 b.) $14,680 c.) $23,100 d.) $9,624 a.) $9,229 $115,000 - $24,800 - $10,000 = $80,200 - taxable income $80,200 - $19,750 = $60,450 x 12% = $7,254 + $1,975 = $9,229 Ralph is not married and does not have any children. However, Ralph is a very good son and provides more than half of the cost of maintaining a very nice apartment for his mother, and more than half of her support since her only income is a small amount from Social Security. Which of the following filing statuses should Ralph use and why? a.) Single, because Ralph is not married. b.) Head of Household, because Ralph's mother is a qualifying child. c.) Head of Household, because Ralph's mother is his dependent. d.) Single, because Ralph does not have any qualifying children. c.) Head of Household, because Ralph's mother is his dependent. Which of the following circumstances is(are) required for the child of divorced parents be treated as the qualifying child of the noncustodial parent? 1.) The parents are divorced. 2.) The child receives over one-half of his support for the year from his parents. 3.) The child is in the custody of the parents for more than half the year. 4.) The custodial parent signs a statement that he will not claim the child as a dependent for the year and the noncustodial parent attaches the statement to his return. a.) 4 only b.) 1 and 4 only c.) 1, 2, 3, and 4 d.) 3 and 4 only c.) 1, 2, 3, and 4 Leona is 68 years old and single. What is the largest amount of adjusted gross income that Leona can have for 2020 without being required to file a tax return? a.) $13,700 b.) $14,050 c.) $1,650 d.) $12,400 b.) $14,050 Income includes a return of invested capital. a.) True b.) False b.) False Income, broadly defined, means the total amount received, but it does not include borrowed money or a return of invested dollars. Property obtained by inheritance is not included in gross income. a.) True b.) False a.) True A nonresident alien taxpayer is allowed to use the standard deduction. a.) True b.) False b.) False A nonresident alien is not allowed to use a standard deduction and must itemize his deductions.