Personal and Dependency Exemptions

Question 1

Can a dependent claim own personal deduction when another TP claimed him as a dependent?

Answer 1

No.

Question 2

What are 2 qualifying test for dependent?

Answer 2

Qualifying child or qualifying relative.

Question 3

Can a personal exemption be claimed if TP or spouse dies during the tax year? Where?

Answer 3

Yes.

On TP’s final tax return.

Question 4

When birth or death occurs during the tax year, what’s the portion of exemption can TP claim?

Answer 4

A full exemption is allowed.

Question 5

What are 6 tests for a qualifying child?

Answer 5

Relationship test, residence test, age test, joint return test, citizenship/residency test, not self-supporting test.

Question 6

What is relationship test? Is spouse a dependent? Exception?

Answer 6

Natural child, stepchild, adopted child, foster child, sibling, step-sibling, or a descendant of any of these (child, grandchild) - this include brothers, sisters, nieces, and nephews.
No.

If a married couple files separately and a spouse has no gross income and was not claimed as another’s dependent, the spouse can be dependent.

Question 7

What is residence test?

Answer 7

The dependent must have the same principal place of abode as the TP for more than one half of the tax year.

Question 8

What is age test?

Answer 8

The dependent must be less than 19 at the end of the tax year, or less than 24 if a full-time students for at least 5 months of the tax year. No age limitation if the individual is permanently and totally disabled.

Question 9

What is joint return test?

Answer 9

If the individual is married and files a joint return with the spouse, he can’t be claimed as a dependent, unless there is no tax liability on the return (he is filing to get refund).

Question 10

What is citizenship/residency test?

Answer 10

The individual must be a US citizen or resident, or a resident of Canada or Mexico.

Question 11

What is not self-supporting test?

Answer 11

To be claimed as a dependent, the individual must not have provided more than 50% of her own support.

Question 12

What is other requirement re: age of TP and the child? Re: parents decline?

Answer 12

The child must be younger than the TP.
If the parents qualify to claim him as a dependent, but declines, then no one else can claim him unless the new TP’s AGI is higher than the parents’.

Question 13

What does term “qualifying relative” include?

Answer 13

All common relatives except for cousins.

Also any person who lives in TP’s home for the entire tax year.

Question 14

What are 5 tests for qualifying relative?

Answer 14

Relationship test, support test, joint return test, citizenship/residency test, and gross income test.

Question 15

What is support test?

Answer 15

The TP must provide more than 50% of the total support.

Question 16

What is gross income test? What’s the definition of gross income?

Answer 16

The dependent’s gross income must be less than the exemption amount for the year.
Gross income: Only income that is taxable (i.e. social security benefit - non-taxable - don’t include in gross income test).

Question 17

What are 2 exceptions to gross income test?

Answer 17

If a child/step child (adopted and foster);

1. that is less than 19 at the end of the tax year.
2. that is less than 24 at the end of the tax year and is a full-time student for at least 5 months during the tax year.

Question 18

What does “support” include? What it doesn’t include?

Answer 18

Yes: Food, clothing, value of lodging, medical, education, recreation, and certain capital expenses.

No: Life ins premiums, funeral expenses, nontaxable scholarships, unused sources of funds of dependent.

Question 19

If no one person provides more than 50% of an individual’s support, but a group of individuals does, what is the tax option?

Answer 19

The group can file a multiple support agreement designating which person will claim the individual as a dependent.

Question 20

Multiple support agreement: what are 2 other criteria to use this option re: the person designated?

Answer 20

The person designated must;

• provide more than 10% of the support for the individual.
• meet the other dependency tests.

Question 21

Divorced parents: who gets the exemption?

Answer 21

The parent with custody (over half the year) in the absence of any written agreement.

Question 22

Divorced parents: can the custodial parent waive the exemption? How?

Answer 22

Yes by signing Form 8332 and non-custodial parent must attach this form to the return.

Question 23

Tie-breaking rules: who has the highest priority? If the TP declines?

Answer 23

Parents.

A TP who has higher AGI than any other person who qualifies.

Question 24

Tie-breaking rule: If both individuals are parents and they do not file a joint return? If even that is tie?

Answer 24

The parent with who the child resides longest.

The parent who has highest AGI.

Question 25

Tie-breaking rule: if none of TPs are parents?

Answer 25

TP who has the highest AGI.

Question 26

Phase-out: what is it? If the excess AGI is 2,501?

Answer 26

2% of total exemptions are lost for each $2,500 increment (or portion) above the threshold AGI.
i.e. 4% reduction.

Question 27

Phase-out: can TP still claim exemptions even if not eligible to receive the exemption?

Answer 27

Yes.