Exercises - Grace College and Seminary

Report
EXERCISES
•Standard
•Filing
deduction
status
•Exemptions
STANDARD DEDUCTION
EXERCISE

All of the following factors determine the amount
of a taxpayer's standard deduction EXCEPT
_____.
a.
b.
c.
d.
The taxpayer's filing status
The taxpayer's gross income
Whether the taxpayer is 65 or older, or blind
Whether the taxpayer can be claimed as a
dependent
EXERCISE

Michael is single, 22, cannot be claimed by
another taxpayer, and has no itemized
deductions. What is his standard deduction for
the tax year?
a.
b.
c.
$5,700
$7,850
$3,000
EXERCISE

Nicole is 35, has two children, and qualifies for
the Head of Household filing status. She will not
itemize any deductions. What is her standard
deduction for the tax year?
a.
b.
c.
$5,700
$8,400
$11,150
EXAMPLE

Janet is single, 22, a full-time student, and not
blind. Her parents claimed her as a dependent .
She has no itemized deductions, so she will take
the standard deduction. She has interest income
of $120, taxes withheld of $35, and wages of
$780. Her standard deduction is $1,080
($780+$300).
FILING STATUS
EXERCISES

Who may choose to file under either the Married
Filing Jointly or the Married Filing Separately
status?
a.
b.
c.

A married taxpayer whose spouse who does not have
income
A divorced taxpayer who itemizes deductions
Taxpayers who are legally separated and share child
custody
Tom and Judith Ballard want to file under the
Married Filing Separately status. If Tom wants to
itemize his casualty losses, then _____.
a.
b.
c.
d.
They will have to file jointly
Judith must take the standard deduction
Judith must either itemize her deductions or claim a zero
standard deduction
None of the above
EXERCISES

Samantha is divorced and provided over half the
cost of keeping up a home. Her daughter, Pam,
lived with her for seven months last year.
Samantha has signed a written declaration
allowing her ex-husband to claim the child as a
dependent . Can she file as Head of Household?
EXERCISES
Peggy's only source of income is welfare, but she
manages to pay more than half the cost of
keeping up a home for her niece Trina, a
qualified dependent relative. Can Peggy file as
Head of Household?
 Alexandra's 17 yr old unemployed brother, lived
with friends from January-February. From
March-July, he lived with Alexandra. On August
1, he moved back in with his friends for the rest
of the year. Alexandra gave him money every
month. Assuming Alexandra had no other
dependents, can she file as Head of Household for
2009?

EXERCISES

Which dependent relative may qualify a taxpayer for
head of the household filing status?
Daughter-in-law who lives across town
A long time family friend who lives with the taxpayer
Father who lives in his own home and not with the
taxpayer
 Child who lived with taxpayer 3 months of the tax year




Debbie has a child and separated from her husband
during the tax year. Which of the following would
prevent Debbie from filing Head of Household?
Debbie has maintained a separate residence from her
husband since April of the tax year
 The qualifying child's principal home is now with Debbie
 Debbie's parents assisted with 25% of the household costs
 The child lived with Debbie beginning in mid-July of the
tax year

EXERCISES



For the past two years, Hank has lived with his two
dependent children, whom he supports, and apart
from his wife, Tonya. If Hank and Tonya file a joint
return, can Hank file as Head of Household?
Ginger is single and paid more than half the cost of
keeping up her home. Her grandfather, whom she
claimed as a dependent, lived with her all year.
Which filing status should Ginger use?
a. Single
b. Head of Household
Franklin is single and lives alone. He paid more than
half the cost of maintaining a home for his father for
the entire year, but he does not claim his father as a
dependent. Which filing status should Franklin use?
EXERCISES


John Reed's wife died during the prior tax year. Which
questions would help determine if he can file as a
Qualifying Widow(er) with Dependent Children?
 Did John file a separate return the prior tax year
 What is John's source of income to maintain the home?
 Will John remarry in the next two years?
 Does John maintain a home for a dependent child?
In 2004, Claudia and her husband Ray adopted Rachel.
Although eligible to file jointly, Claudia and Ray always
filed separately. In January 2008, Ray died. Claudia
continued to support Rachel and did not remarry. Which
filing status should Claudia use for 2008
 Qualifying Widow(er) With Dependent Child
 Either Married Filing Jointly or Married Filing
Separately
 Head of Household
 Single
EXERCISES

Martin and Rita got divorced in December, and
neither has remarried. Martin supported Rita all
year. Which of the following filing statuses might
Martin be able to use?
Single or Married Filing Separately
 Married Filing Jointly or Married Filing Separately
 Single


Kathy, divorced with no children, lived with her
unemployed roommate, Sandra, for the entire
year. Kathy had to pay more than half of the cost
of keeping up their apartment. Which filing
status can Kathy use?
Head of Household
 Married Filing Separately
 Single

EXERCISES

Jack has lived apart from his wife for several years.
Their children live with his wife, but Jack pays more
than half of the children's support. Which filing
status can Jack use?
Head of Household
 Married Filing Separately or Married Filing Jointly
 Single


Lily left her husband in August of the tax year. She
took all her children with her, supported them the
entire year, and claims them as dependents. She will
not file a joint return with her husband. Which filing
status should Lily use?
Head of Household
 Married Filing Jointly
 Single
 Married Filing Separately

EXEMPTIONS
EXERCISES

John is a 23-year-old single college student. His
mother is entitled to claim him as a dependent on
her tax return. Is John entitled to claim himself
as a personal exemption on his own return?
EXERCISES

Janice is 18 years old and a full-time student.
She comes into the Volunteer Tax Office with
some questions about her tax return. She says
that she is claimed as a dependent on her
parents' tax return. Over the summer, she
worked full time in a clothing boutique. Janice
wants to file Form 1040EZ to report this
income. How many exemptions will you
indicate for Janice on her tax return?
Zero
 One
 Two
 Three

EXERCISES

True or False? Jennifer Rawls, an eighteen-yearold single mother who can be claimed as a
dependent by her parents, can claim her infant son
as a dependent on her own tax return.
EXAMPLE

Ruth, who had no income, got married in
November of the tax year. Ruth's husband had
$16,700 income and they claimed two personal
exemptions on their return. Ruth's father
supported her and paid for the wedding, but he
cannot claim her as a dependent because she is
filing a joint return with her husband. While they
are filing a return just to claim a refund of taxes
withheld, Ruth's husband would have tax
liability if he filed a separate return.
EXERCISES

Bob is 22 and a full-time student for the entire
year. During the tax year, he lived at home with
his parents for six months and lived in the dorm
for the remaining six months. During the tax
year, he worked part-time and earned $6,000, but
that income did not amount to half of his total
support. Does Bob pass the tests for a qualifying
child
EXAMPLES
Joe is 65 years old and lives with his son and
daughter-in-law. In 2009, Joe's taxable pension
income was $4,700. Can they claim Joe for
dependency exemption?
 Sherrie's father received $2,700 from social
security and investments, but he put $300 of it
in a savings account and spent only $2,400 for
his own support. Sherrie spent $2,600 of her
income for his support. Is he a qualifying
relative?
 What if all the facts were the same as in this
example, except that Sherrie's father had spent
all his income on himself?

EXAMPLES

Jessica has been raising her son, Jim, alone since
her husband died 5 years ago. In 2009, Jessica
earned $25,000. Jim, who lives with Jessica, is
single, and does not provide more than half of his
own support. He was 19 years old on September
17, 2009. Jim is not a full-time student and is not
disabled. He worked for a short time at a fast food
restaurant and made about $1,800. Jessica and
Jim are both U.S. citizens and have SSNs. Is Jim
the qualifying child or qualifying relative of
Jessica?
Jim meets the requirements for being Jessica's
qualifying relative.
 Jim is Jessica’s qualifying child since he is her son.

EXERCISES
Doris, who is 8 years old, has a small role in a
television series. She made $60,000 during the tax
year, but her parents put all the money in a trust
fund to pay for college. She lived at home all year.
Does she meet the support test?
 What if Doris, an 8-year-old actress, earned
$60,000 during the tax year, but her parents used
the money to defray household expenses: would
she meet the support test?

EXAMPLE

Bob and Judy live together, they are not married.
They have one child together, Katie, who is 4 years
old. Bob, Judy, and Katie are U.S. citizens and
have SSNs. Katie did not provide her own support
and lived with her parents all year. Bob’s AGI is
$18,500 and Judy’s AGI is $14,000. Neither Bob
nor Judy can be claimed as a dependent by any
other taxpayer. They did not have any investment
income. Bob pays for Katie's daycare so he and
Judy can work. Bob pays over half of the costs of
maintaining their home. Who may claim Katie as
their qualifying child, and what can be claimed on
the return.
EXAMPLE - OPTIONS
Only Bob can claim Katie as a dependent.
 Only Judy can claim Katie as a dependent.
 Katie is a qualifying child for both Bob and Judy.
They agree that Bob should claim Katie. He can
claim the Head of Household filing status, the
dependency exemption, the Child Tax Credit, the
child and dependent care credit, and the Earned
Income credit.
 Judy can claim the dependency exemption, Child Tax
Credit, and Earned Income Credit for Katie, and Bob
can claim the Head of Household filing status and the
dependent care credit.

EXAMPLE

Mary and Ralph were divorced in 2003. They have
one child together, Amy, who lives with Mary. All
are U.S. citizens and have SSNs. Mary and Ralph
provide more than half of Amy’s support. Mary’s
AGI is $31,000 and Ralph’s AGI is $39,000. Amy is
12 years old. The divorce decree does not state who
can claim the child. Who may claim Amy as a
qualifying child along with the tax benefits?
EXAMPLE - OPTIONS
Ralph can claim Amy as a dependent and the tax
benefits.
 Ralph and Mary must choose who will claim Amy as
a dependent and any other benefits.
 Mary signed Form 8332 to give the dependency
exemption to Ralph. He can claim Amy as a
dependent and he can claim the child tax credit.
Mary can use the Head of Household filing status,
and she can claim the Earned Income Credit and the
child and dependent care credit as long as she meets
the requirements for those specific benefits.
 Neither Ralph nor Mary can claim Amy as a
dependent or any of the other benefits.

EXAMPLE

Todd has lived all year with his girlfriend, Eva,
and her two children, in his home. This
cohabitation does not violate local laws. Eva is not
required to file, and does not file, a tax return.
Todd has provided more than half of their support
for the entire year. Eva and her two children are
Todd's qualifying relatives because they meet the
member of household or relationship test, gross
income test, and support test.
EXAMPLE 2
What if all the facts were the same as in the
previous example, except that Eva is required to
file a tax return? She still meets all the tests to be
Todd's qualifying relative; however, since Eva has
a filing requirement—and her children meet the
qualifying child tests to be her dependents—Todd
could not claim the children as qualifying
relatives. He could still claim Eva as a dependent,
but then Eva could not claim herself or any
dependents.
EXERCISE
Since late in 2008, Sally has been supporting her
friend, Ann, as well as Ann's young son, Bobby.
Ann and Bobby lived with Sally all of 2008 and
meet all the tests to be Sally's qualifying relatives.
Ann worked part-time and made $3,100 in wages
during 2009. Ann files a return only to have her
withholding refunded. She does not claim her own
exemption. Who can Sally claim as dependents?
 What if all the facts were the same as in the
previous example, except that Ann also claims the
Earned Income Credit?

EXERCISE - ANSWER
Because Ann did not file her return simply to get
a refund of her withholding, Bobby must now be
considered Ann's qualifying child. Therefore,
Sally cannot claim Bobby as a dependent, and
Ann cannot claim Bobby as a dependent either,
because she is a dependent herself.
 Ann can, however, use Bobby as a qualifying
child for the Earned Income Credit (Earned
Income Credit is covered in the Earned Income
Credit lesson).


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