R1-2 Flashcards
Joe and Barb are married, but Barb refuses to sign a Year 12 joint return. On Joe’s separate Year 12 return, an exemption may be claimed for Barb if:
a.
Barb was a full-time student for the entire Year 12 school year.
b.
Barb had no gross income and was not claimed as another person’s dependent in Year 12.
c.
Barb attaches a written statement to Joe’s income tax return, agreeing to be claimed as an exemption by Joe for Year 12.
d.
Barb was under the age of 19.
Choice “b” is correct. If a married individual files a separate return, a personal exemption may be claimed for his or her spouse if the spouse has no gross income and is not claimed as a dependent of another taxpayer.
Choice “a” is incorrect. The spouse does not have to be a full-time student.
Choice “c” is incorrect. The wife does not have to attach a written statement agreeing to be claimed by her husband.
Choice “d” is incorrect. The spouse does not have to be under the age of 19.
In Year 1, Smith, a divorced person, provided over one half the support for his widowed mother, Ruth, and his son, Clay, both of whom are U.S. citizens. During Year 1, Ruth did not live with Smith. She received $9,000 in Social Security benefits. Clay, a 25-year-old full-time graduate student, and his wife lived with Smith. Clay had no income but filed a joint return for Year 1, owing an additional $500 in taxes on his wife’s income. How many exemptions was Smith entitled to claim on his Year 1 tax return?
a.
1
b.
4
c.
3
d.
2
Explanation
Choice “d” is correct. Smith is entitled to an exemption for himself. He is also entitled to an exemption for his mother Ruth (qualifying relative). Ruth has $9,000 in Social Security payments during Year 1, but because that is her only income, the Social Security is not taxable, and nontaxable income does not count in calculating whether an exemption can be taken for a dependent. Clay cannot be taken as a dependent because he filed a joint return with his wife. Because the joint return was filed for a purpose other than simply claiming a refund, the joint return prevents Smith from claiming an exemption for Clay. An exemption cannot be taken for Clay’s wife because she filed a joint return with Clay. Smith is entitled to two exemptions.
Choice “b” is incorrect. Clay cannot be taken as a dependent because he filed a joint return with his wife. Because the joint return was filed for a purpose other than simply claiming a refund, the joint return prevents Smith from claiming an exemption for Clay. An exemption cannot be taken for Clay’s wife because she filed a joint return with Clay.
Choice “c” is incorrect. Clay cannot be taken as a dependent because he filed a joint return with his wife. Because the joint return was filed for a purpose other than simply claiming a refund, the joint return prevents Smith from claiming an exemption for Clay. An exemption cannot be taken for Clay’s wife because she filed a joint return with Clay.
Choice “a” is incorrect. Smith is entitled to an exemption for his mother, Ruth. Ruth has $9,000 in Social Security payments during Year 1, but because that is her only income, the Social Security income is not taxable, and nontaxable income does not count in calculating whether an exemption can be taken for a dependent.
Jim and Kay Ross contributed to the support of their two children, Dale and Kim, and Jim’s widowed parent, Grant. For Year 27, Dale, a 19-year-old full-time college student, earned $4,500 as a babysitter. Kim, a 23-year-old bank teller, earned $12,000. Grant received $5,000 in dividend income and $4,000 in nontaxable Social Security benefits. Grant and Kim are U.S. citizens and were over one-half supported by Jim and Kay, but neither of the two currently reside with Jim and Kay. Dale’s main place of residence is with Jim and Kay, and he is currently on a temporary absence to attend school. How many exemptions can Jim and Kay claim on their Year 27 joint income tax return?
a.
Two
b.
Four
c.
Three
d.
Five
Choice “c” is correct. Taxpayers are now entitled to an exemption for each qualifying child and qualifying relative (two tests are “CARES” or “SUPORT”). For Dale, he does meet the residency requirement because there is an exception for a temporary absence while attending school. Therefore, he is a qualifying child under the CARES test. Kim does not qualify as a qualifying child (CARES test) because, although she is under age 24, she is not a full-time student. Therefore, the income limitations of the SUPORT test apply, and she does not qualify under that test either. Likewise, Grant’s taxable income of $5,000 exceeds the minimum. Thus, 3 total exemptions can be claimed (Jim, Kay, and Dale).
Janet and Ted have two children, Mary (age 10) and Seth (age 12). Janet’s Aunt Martha resides with the family in an apartment over the garage. Martha’s only income is $1,500 a month in Social Security benefits. Janet and Ted receive no rent payments from Martha and provide all remaining support for her living arrangements. How many exemptions are Janet and Ted entitled to in filing their joint tax return?
a.
2
b.
3
c.
5
d.
4
Choice “c” is correct. Janet and Ted are entitled to dependency exemptions for themselves, their two children and Aunt Martha. Aunt Martha is a “qualified relative.” The qualifications to take an exemption for a qualifying relative are found in the “SUPORT” mnemonic.
Support (over 50%) test
Under a specific amount of (taxable) gross income test
Precludes dependent filing a joint tax return test
Only citizens (residents of US/Canada or Mexico) test
Relative test OR
Taxpayer lives with individual for whole year test
The two children meet the test for a qualifying child. In addition, Aunt Martha, a relative, qualifies because she does not have any taxable income (social security is not taxed at this low level of income), is not filing a joint tax return with another, is a citizen of the US, and is a qualifying relative. In this instance, note that Martha would not have to reside with the family. Only nonrelative members of a household must reside with the taxpayer for the entire year in order for the taxpayer to be entitled to a dependency exemption for that individual.
Choices “a”, “b”, and “d” are incorrect per the above explanation.
