Question & Answer

Gary and Lakesha were married on December 31 last year. They are now preparing their taxes for the April 15 deadline and are unsure of their filing status.

a.    What filing status options do Gary and Lakesha have for last year?

Juan and Bonita are married and have two dependent children living at home.This year, Juan is killed in an avalanche while skiing.

a.What is Bonita’s filing status this year?

Ray Albertson is 72 years old and lives by himself in an apartment in Salt Lake City.Ray’s gross income for the year is $3,000.Ray’s support is provided as follows:Himself (11 percent), his daughters Diane (20 percent) and Karen (15percent), his sons Mike (20 percent) and Kenneth (10 percent), his friend Milt (14 percent), and his cousin Henry (12 percent).Absent a multiple support agreement, of the parties mentioned in the problem, who may claim adependency exemption for Ray as a qualifying relative

Lee is 30 years old and single.Lee paid all the costs of maintaining his household for the entire year.Determine Lee’s filing status in each of the following alternative situations:

a.       Lee is Ashton’s uncle.Ashton is 15 years old and has gross income of $5,000. Ashton lived in Lee’s home from April 1 through the end of the year.

b.      Lee is Ashton’s uncle.Ashton is 20 years old, not a full-time student, and has gross income of $7,000. Ashton lived in Lee’s home from April 1 through the end of the year.

c.       Lee is Ashton’s uncle.Ashton is 22 years old and was a full-time student from January through April.Ashton’s gross income was $5,000.Ashton lived in Lee’s home from April 1 through the end of the year.

d.      Lee is Ashton’s cousin.Ashton is 18 years old, has gross income of $3,000, and is not a full-time student. Ashton lived in Lee’s home from April 1 through the end of the year.

e.       Lee and Ashton are cousins.Ashton is 18 years old, has gross income of $3,000, and is not a full-time student. Ashton lived in Lee’s home for the entire year.

Kimberly is divorced and the custodial parent of a 3-year-old girl named Bailey. Kimberly and Bailey live with Kimberly’s parents, who pay all the costs of maintaining the household (such as mortgage, property taxes, and food). Kimberly pays forBailey’s clothing, entertainment, and healthinsurance costs.These costs comprised only a small part of the total costs of maintaining the household.Kimberly does not qualify as her parents’ dependent.

a. Determine the appropriate filing status for Kimberly.

Bob Ryan filed his tax return and claimed a dependency exemption for his 16-year-old son Dylan.Both Bob and Dylan are citizens and residents of the United States.Dylan meets all the necessary requirements to be considered a qualifying child; however, when Bob filed the tax return he didn’t know Dylan’s Social Security number and, therefore, didn’t include an identifying number for his son on the tax return.Instead, Bob submitted an affidavit with his tax return stating he had requested Dylan’s Social Security number from Dylan’s birth state.Is Bob allowed to claim a dependency exemption for Dylan without including Dylan’s identifying number on the return?

Mel and Cindy Gibson’s 12-year-old daughter Rachel was abducted on her way home from school on March 15, 2017.Police reports indicated that a stranger had physically dragged Rachel into a waiting car and sped away.Everyone hoped that the kidnapper and Rachel would be located quickly.However, as of the end of the year, Rachel was still missing.The police were still pursuing several promising leads and had every reason to believe that Rachel was still alive.In 2018, Rachel was returned safely to her parents.a.Are the Gibsons allowed to claim an exemption deduction for Rachel in 2017 even though she only lived in the Gibson’s home for two-and-one-half months?Explain and cite your authority.

Dean Kastner is 78 years old and lives by himself in an apartment in Chicago.Dean’s gross income for the year is $2,500.Dean’s support is provided as follows:Himself (5 percent, his daughters Camille (25 percent) and Rachel (30 percent), his son Zander (5 percent), his friend Frankie (15 percent), and his niece Sharon (20 percent).

Jamel and Jennifer have been married 30 years and have filed a joint return every year of their marriage.Their three daughters, Jade, Lindsay, and Abbi, are ages 12, 17, and 22 respectively and all live at home.None of the daughters provide more than half of her own support.Abbi is a full-time student at a local university and does not have any gross income.

a.       How many personal and dependency exemptions are Jamel and Jennifer allowed to claim?

Francine’s mother Donna and her father Darren separated and divorced in September of this year.Francine lived with both parents until the separation.Francine does not provide more than half of her own support.Francine is 15 years old at the end of the year.

a. Is Francine a qualifying child to Donna?

John and Tara Smith are married and have lived in the same home for over 20 years.John’s uncle Tim, who is 64 years old, has lived with the Smiths since March of this year. Tim is searching for employment but has been unable to find any—his gross income for the year is $2,000.Tim used all $2,000 toward his own support.The Smiths provided the rest of Tim’s support by providing him with lodging valued at $5,000 and food valued at $2,200.

a. Are the Smiths able to claim a dependency exemption for Tim?

The Samsons are trying to determine whether they can claim their 22-year-old adopted son, Jason, as a dependent.Jason is currently a full-time student at an out-of-state university.Jason lived in his parents’ home for three months of the year, and he was away at school for the rest of the year.He received $9,500 in scholarships this year for his outstanding academic performance and earned $4,800of income working a part-time job during the year. The Samsons paid a total of $5,000to support Jason while he was away at college.Jason used the scholarship, the earnings from the part-time job, and the money from the Samsons as his only sources of support.

a. Can the Samsons claim Jason as their dependent?

Aishwarya’s husband passed away in 2016.She needs to determine whether Jasmine, her 17-year-old stepdaughter who is single, qualifies as her dependent in 2017.Jasmine is a resident but not a citizen of the United States.She lived in Aishwarya’s home from June 15 through December 31, 2017. Aishwarya provided more than half of Jasmine’s support for 2017.

Rank the following three single taxpayers in order of the magnitude of taxable income (from lowest to highest) and explain your results. Ahmed           Baker                    Chin

Gross Income                 $ 80,000               $ 80,000               $ 80,000
Deductions For AGI            8,000                    4,000                           0
Itemized Deductions                   0                    4,000                    8,000

Planning} Matteo,who is single and has no dependents, was planning on spending the weekend repairing his car.On Friday, Matteo’s employer called and offered him $500 in overtime pay if he would agree to work over the weekend.Matteo could get his car repaired over the weekend at Autofix for $400.If Matteo works over the weekend, he will have to pay the $400 to have his car repaired, but he will earn $500. Assume Matteo pays tax at a flat 15 percent rate. Strictly considering tax factors, should Matteo work or repair his car if the $400 he must pay to have his car fixed is not deductible?

{Planning}Through November, Tex has received gross income of $120,000.For December, Tex is considering whether to accept one more work engagement for the year.Engagement 1 will generate $7,000 of revenue at a cost of $4,000, which is deductible for AGI.In contrast, engagement 2 will generate $7,000 of revenue at a costof $3,000,which is deductible as an itemized deduction.Tex files as a single taxpayer.

{Planning} Rick, who is single, has been offered a position as a city landscape consultant.The position pays $125,000 in cash wages.Assume Rick files single and is entitled to one personal exemption.Rick deducts the standard deduction instead of itemized deductions

a.What is the amount of Rick’s after-tax compensation (ignore payroll taxes)? 

David and Lilly Fernandez have determined their tax liability on their joint tax return to be $1,700. They have made prepayments of $1,500 and also have a child tax credit of $1,000.What is the amount of their tax refund or taxes due?

Jeremy earned $100,000 in salary and $6,000 in interest income during the year.Jeremy has two qualifying dependent children who live with him. He qualifies to file as head of household and has $17,000 in itemized deductions.Neither of his dependents qualifies for the child tax credit.

a. Use the 2017tax rate schedules to determine Jeremy’s taxes due.

Question:

What does it mean to say that a married couple filing a joint tax return has joint and several liability for the taxes associated with the return?

For tax purposes, why is the married filing jointly tax status generally preferable to the married filing separately filing status?Why might a married taxpayer prefer not to file a joint return with the taxpayer’s spouse?

Is a qualifying relative always a qualifying person for purposes of determining head of household filing status?

True or False.For purposes of determining head of household filing status, the taxpayer’s mother or father is considered to be a qualifying person of the taxpayer (even if the mother or father does not qualify as the taxpayer’s dependent) as long as the taxpayer pays more than half the costs of maintaining the household of the mother or father.Explain

What requirements do an abandoned spouse and qualifying widow or widower have in common?

Isabella provides 30% of the support for her father Hastings, who lives in an apartment by himself and has no gross income. Is it possible for Isabella to claim a dependency exemption for her father?Explain.