25: In connection with the
application of the kiddie tax, comment on the following:
a. The child has only earned income.
b.
The child has a modest amount of unearned
income.
c.
The child is age 20, not a student, and not
disabled.
d.
The child is married.
e.
Effect of the parental election
f. The result when parental election is made and the married parents file
separate returns.
26: During the year, Hernando has
the following transactions:
a. Gain on the sale of stock held as an investment for 10 months.
b.
Gain on the sale of land held as an
investment for 4 years.
c.
Gain on the sale of a houseboat owned for 2
years and used for family vacations.
d. Loss on the sale of a reconditioned motorcycle owned for 3 years and
used for recreational purposes.
How should Hernando treat these transactions for income
tax purpose?
29: Compute the taxable income for
2013 in each of the following independent situations:
a. Drew and Meg, ages 40 and 41, respectively, are married and file a joint
return. In addition to four dependent
children, they have AGI of $65,000 and itemized deductions of $15,000.
b.
Sybil, age 40, is single and supports her
dependent parents who live with her, as well as her grandfather who is in a
nursing home. She has AGI of $80,000 and
itemized deductions of $8,000.
c.
Scott, age 49, is a surviving spouse. His household includes two unmarried stepsons
who qualify as his dependents. He has
AGI of $75,000 and itemized of $10,100.
d.
Amelia, age 33, is an abandoned spouse who
maintains a household for her three dependent children. She has AGI of $58,000 and itemized
deductions of $9,100.
e. Dale, age 42, is divorced but maintains the home in which he and his
daughter, Jill, live. Jill is single and
qualifies as Dale’s dependent. Dale has
AGI of $64,000 and itemized deductions of $9,900.
30: Compute the
taxable income for 2013 for Emily on the basis of the following
information. Her filing status is
single.
|
Salary |
$85,000 |
|
Interest income from bonds issued by Xerox |
1,100 |
|
Alimony payments received |
6,000 |
|
Contributions to traditional IRA |
5,500 |
|
Gift from parents |
25,000 |
|
Short-term capital gain from stock investment |
2,000 |
|
Amount lost in football office pool (sports gambling is |
500 |
|
Number of potential dependents (two cousins, who live |
? |
|
Age |
40 |
32: Determine the amount of the
standard deduction allowed for 2013 in the following independent
situations. In each case, assume that
the taxpayer is claimed as another person’s dependent.
a. Curtis, age 18, has income as follows:
$700 interest from a certificate of deposit and $6,000 from repairing
cars. .
b.
Mattie, age 18, has income as follows: $600 cash dividends from a stock investment
and $4,700 from handling a paper route.
c.
Mel, age 16, has income as follows: $800 interest on a bank savings account and
$700 for painting a neighbor’s fence.
d.
Lucy, age 15, has income as follows: $400 cash dividends from a stock investment
and $500 from grooming pets.
e. Sarah, age 67 and a widow, has income as follows: $500 from a bank savings account and $3,200
from babysitting.
34: For tax year
2012, determine the number of personal and dependency exemption in each of the
following independent situations:
a. Leo and Amanda (ages 48 and 46, respectively) are husband and wife and
furnish more than 50% of the support of their two children. Elton (age 18) and Trista (age 24). During the year, Elton earns $4,500 providing
transportation for elderly persons with disabilities, and Trista receives a
$5,000 scholarship for tuition at the law school she attends.
b.
Audry (age 45) was divorced this year. She maintains a household in which she, her
ex-husband, Clint, and his mother, Olive, live and furnishes more than 50% of
their support. Olive is age 91 and blind.
c.
Crystal, age 45, furnishes more than 50% of
the support of her married son, Andy (age 18), and his wife, Paige (age 19),
who live with her. During the year, Andy
earned $8,000 from a part-time job. All
parties live in Iowa (a common law estate).
d.
Assume the same facts as in ( c ), except
that all parties live in Washington (a community property state).
35: Compute the
number of personal and dependency exemptions in each of the following
independent situations:
a. Reginald, a U.S. citizen and resident, contributes 100% of the support
of his parents who are citizens of Canada and live there.
b.
Pablo, a U.S. citizen and resident,
contributes 100% of the support of his parents who are citizens of Panama. Pablo’s father is a resident of Panama, and
his mother is a legal resident of the United States.
c.
Gretchen, a U.S. citizen and resident,
contributes 100% of the support of her parents, who are U.S. Citizens but
residents of Germany
d. Elena is a U.S. citizen and a resident of Italy. Her household includes Carlos, a 4 year old
adopted son who is a citizen of Spain
38: Sam and
Elizabeth Jefferson file a joint return and have three children – all of whom
qualify as dependents. If the Jefferson
have AGI of $322,000, what is their allowable deduction for personal and
dependency exemptions for 2013?
39: Wesley and Myrtle (ages 90 and
88, respectively) live in an assisted care facility and for 2012 and 2013
received their support from the following sources
|
PERCENTAGE OF SUPPORT |
|
|
Social Security benefits |
16% |
|
Son |
20% |
|
Niece |
29% |
|
Cousin |
12% |
|
Brother |
11% |
|
Family friend (not related) |
12% |
a. Which persons are eligible to claim the dependency exemptions under a
multiple support agreement?
b.
Must Wesley and Myrtle be claimed by the same
person(s) for both 2012 and 2013?
Explain. .
c.
Who, if anyone, can claim their medical
expenses
40: Taylor, age
18, is claimed as a dependent by her parents.
For 2013, she has the following income:
$4,000 wages from a summer job, $1,800 interest from a money market
account, and $2,000 interest from city of Boston bonds.
a. What is Taylor’s taxable income for 2013?
b. What is Taylor’s tax for 2013?
[(Her parents file a joint return and have taxable income of $130,000
(no dividends or capital gains.)]
41: Walter and
Nancy provide 60% of the support of their daughter (age 18) and son-in-law (age
22). The son-in-law (John) is a
full-time student at a local university, while the daughter (Irene) holds
various part-time jobs from which she earns $11,000. Walter and Nancy engage you to prepare their
tax return for 2013. During a meeting
with them in late March 2014, you learn that John and Irene have filed a joint
return. What tax advice would you give
based on the following assumptions:
a. All parties live in Louisiana (a community property state).
b.
All parties live in New Jersey (a common law
state).
42: Charlotte (age
40) is a surviving spouse and provides all of the support of her four minor
children who live with her. She also
maintains the household in which her parents live and furnished 60% of their
support. Besides interest on City of
Miami bonds in the amount of $5,500, Charlotte’s father received $2,400 from a
part-time job. Charlotte has a salary of
$80,000, a short-term capital loss of $2,000, a cash prize of $4,000 from a
church raffle, and itemized deductions of $10, 500. Using the Tax Rate Schedules, compute the
2013 tax liability for Charlotte.
