Basic Income Tax- Lesson 2

Question 1

What certain taxpayers are not eligible for standard tax deduction?

Answer 1

• married filing separately when other spouse itemizes deductions. If one spouse itemizes, the other spouse must also itemize.
• nonresidents aliens
• individual filing returns for tax year of less than 12 month

Question 2

What are all 4 tests a qualifying child must meet?

Answer 2

• relationship test
  -adobe test
  must live w taxpayer for more than 1/2 the year
  -age test
  under 19 or student under 24
  -support test
  child does not provide more than 1/2 of their own support

Question 3

What are the 4 tests a qualifying relative must meet to qualify as dependent of taxpayer for the child tax credit?

Answer 3

-relationship test
(cousins are not relatives)
-gross income test
(must be less than personal exempt amount; $4,150 for 2019)
-support test
taxpayer must provide more than 1/2 of support
-not a qualifying child test

Question 4

What is the Exclusion Ratio for tax on annuity payments?

Answer 4

= investment in the contract / expected total return

This determines the portion of each payment excluded from taxation and is calculated at the starting date of the annuity

Question 5

What is the Exclusion Ratio for distributions from retirement plans?

Answer 5

=cost basis in the annuity/total expected benefit from the plan

This determines the portion of distribution excluded from taxation