Individual Taxation - Exemptions Flashcards
What is the difference between a tax exemption and a tax exclusion
A tax exemption refers to a monetary exemption which reduces the amount of taxable gross income. Tax exempt status can provide complete relief from taxes, reduced rates, or tax on only a portion of items.
A tax exclusion is where certain income items are not included on the tax return in determining gross income, for example Child Support is a tax exclusion
T/F
In determining the total support of a dependent, you would include/consider the fair rental value of a dependent’s lodging
TRUE
Support includes food, clothing, FMV of lodging, medical, recreational, educational, and certain capital expenditures made on behalf of a dependent
T/F
In determining the total support of a dependent, you would include/consider medical insurance premiums paid on behalf of the dependent
TRUE
Support includes food, clothing, FMV of lodging, medical, recreational, educational, and certain capital expenditures made on behalf of a dependent
T/F
In determining the total support of a dependent, you would include/consider birthday presents given to the dependent
TRUE
Support includes food, clothing, FMV of lodging, medical, recreational, educational, and certain capital expenditures made on behalf of a dependent
T/F
In determining the total support of a dependent, you would include/consider nontaxable scholarships received by the dependent
FALSE
Excluded from support is life insurance premiums, funeral expenses, nontaxable scholarships, and income and social security taxes paid from a dependent’s own income
T/F
In determining the total support of a dependent, you would include/consider medical insurance premiums and life insurance premiums paid on behalf of the dependent
FALSE
Life insurance premiums are excluded from the definition of support. Medical insurance premiums, however, and included in the definition of support.
T/F
One of the requirements to claiming an exemption for a dependent is that you provide over half of their support
TRUE
One of the requirements to claiming an exemption for a dependent is that the dependent’s gross income is less than ______
$3950
T/F
When calculating a dependent’s gross income to determine if they are eligible as an exemption (gross income under $3950) you include any social security benefits
FALSE
Social Security Benefits are excluded from gross income
T/F
One of the requirements to claiming an exemption for a dependent is that they live with you
FALSE
They do not have to live with you if they are related to you
T/F
You may claim an exemption for an individual who otherwise qualifies as a dependent except that they file a joint return with their spouse and the joint return has a tax liability
FALSE
This will prevent you from claiming an exemption for that individual
T/F
A qualifying child is one who does not provide more than half of their own support and is a full-time student under age 24. A guardian can elect an exemption for this qualifying child.
TRUE
T/F
A child who is at least 19, not a full-time student, and has a gross income of more than $3950 will not qualify for an exemption
TRUE
T/F
When calculating a dependent’s gross income to determine if they are eligible as an exemption (gross income under $3950) you include any dividend income
TRUE
T/F
Exemptions are allowed for dependents even if they are not a US Citizen or a resident of the US, Canada, or Mexico
FALSE
T/F
There is an additional exemption for being 65 or older
FALSE
T/F
A dependent who is blind will be eligible for 2 exemptions rather than just 1
FALSE
A blind dependent is still eligible for only 1 exemption
T/F
The word’s “dependent” and “exemption” are almost interchangeable in that anyone who is eligible for an exemption is also going to be considered a dependent
FALSE
A taxpayer’s spouse is never considered a dependent but is eligible for an exemption
T/F
A cousin who qualifies as a dependent in all respects except that they do not live with the taxpayer can still be classified as a dependent
FALSE
A cousin is not of a specified relationship and therefore even if a taxpayer supports the cousin and the cousin meets all other requirements, if the cousin does not live with the taxpayer the taxpayer may not claim the cousin as a dependent
T/F
An aunt/uncle who qualifies as a dependent in all respects except that they do not live with the taxpayer can still be classified as a dependent
True
Unlike a cousin, an aunt/uncle is of a specified relationship and therefore if a taxpayer supports the aunt/uncle and the aunt/uncle meets all other requirements, even if the aunt/uncle does not live with the taxpayer the taxpayer may claim the aunt/uncle as a dependent
A multiple support agreement can be used if no single taxpayer furnishes more than ____ of a dependent’s support and if two or more persons, each of whom would be able to take the exemption but for the support test, together provide more than _____ of the dependent’s support
50%
50%
If a multiple support agreement is used, the taxpayer who provides more than ____ of the dependent’s support can claim the dependent if the other persons who furnish more than ____ agree not to claim the dependent as an exemption
10%
10%
