Scenarios Flashcards
A total of $23.50 is rounded up to
$24
$23.49 is rounded down to
$23
Bess Rymon and her coworkers worked late into the evening to fill a rush order for their employer. Because the workers were missing dinner, the boss sent out for pizza, which he gave to the workers to eat.
Is the value of the pizza taxable to Beth?
No, because it was consumed on employer premesis and provided for employer convenience.
Bob and Carol were married on December 31, 2017. Are they considered married or unmarried for the 2017 tax year>
Married
Ted and Alice’s divorce became final on December 31, 2017. Are they considered married or unmarried for the 2017 tax year?
Unmarried
Russell and Dawn have been married for several years. Russell died on March 27, 2017. Are they considered married or unmarried for the 2017 tax year?
Married
Deanna Shoenburger was born on January 1, 1977. How old is she considered to be tax year 2017?
For general tax purposes, she is considered to be age 41 for the 2017 tax year, even though her 41st birthday does not occur until January 1, 2018.
Jane McGuire’s 65th birthday is January 1, 2018. Is she 64 or 65 for tax year 2017?
65
Shelly Burrows died on September 21, 2017, a month before her 65th birthday. How old is she considered to be for tax year 2017
64
Jared Peterson, dependent son of Beverly Peterson, was born on January 1, 2001; his 17th birthday is January 1, 2018.
How old is he considered to be for general tax purposes?
How old is he considered to be for determining the CTC?
17 general tax purposes
16 CTC determination
Matthew (42) and Sue (41) Calendo will file a joint return.. How much is their standard deduction and personal exemptions? What is the gross income filing requirement?
Their standard deduction is $12,700 and personal exemptions are $8,100 [$4,050 x 2 individuals]. Their gross income filing requirement is $20,800 [$12,700 + $8,100 personal exemptions].
Larry White (66) uses the single filing status. How much is their standard deduction and personal exemption? What is the gross filing requirement?
His standard deduction is $7,900 [$6,350 + $1,550] and personal exemption is $4,050. His gross income filing requirement is $11,950 [$7,900 standard deduction + $4,050 personal exemption].
Larry’s brother, Jeff White (56), is blind and uses the single filing status. How much is his standard deduction and personal exemption? What is the gross filing requirement?
His standard deduction is also $7,900 [$6,350 + $1,550 = $7,900] and personal exemption is $4,050. His gross income filing requirement is $10,400 [$6,350 + $4,050 personal exemption = $10,400]. Notice that the extra $1,550 standard deduction for blindness does not count in the computation of his gross income filing requirement.
Raúl and Leah Martinez are married. Leah has no income of any kind and does not receive any other support, but she does not wish to file a joint return with Raúl. Can Raul claim Leah’s exemption if he MFS?
Yes
Mark and Janice Hall may claim their daughter, Linda (18), as a dependent. Because Linda holds a part-time job and must file a return, they decide not to claim Linda thinking that she may take her own exemption on her return. Will this work?
No. This tactic does not work. The fact that Linda may be claimed on her parents’ return precludes her from claiming her own personal exemption. If Mark and Janice do not claim Linda’s exemption, no one will benefit from the $4,050 reduction in taxable income.
Markus Kleen (16) is a dependent on his parents’ return. He is single, not legally blind, and his gross income for the year is $1,400 [$900 earned income + $500 unearned income]. Is Markus required to file a return?
When determining if Markus is required to file a return, his unearned income is below the $1,050 threshold amount, and his earned income is also below the $6,350 threshold amount. When applying the gross income threshold, first determine if the maximum threshold amount is the greater of $1,050 or Markus’ earned income plus $350. Because Markus’ earned income is $900, his gross income threshold amount is set at $1,250 [$900 + $350 = $1,250]. Markus is required to file a return, because his gross income of $1,400 is greater than his gross income threshold amount of $1,250.
$ 75.50 rounds to
$76
$ 75.49 rounds to
$75
$100.61 rounds to
$101
$199.75 rounds to
$200
5.746321% rounds to
5.75% or .0575
16.324979% rounds to
16.32% or ,1632
19.996123% rounds to
20.00 or ,2000
25.004657% rounds to
25.00 or ,2500
Must file or not?
Married filing jointly (ages 48 and 44), gross income $18,250
No. The nondependent taxpayer’s gross income, filing MFJ, is less than $20,800.
Must file or not?
Qualifying widow(er) (age 48), gross income $18,150.
Yes. The nondependent taxpayer’s gross income, filing QW, is greater than $16,750.
Must file or not?
Single (age 64), gross income $11,400.
Yes. The nondependent taxpayer’s gross income, filing single, is greater than $10,400.
Must file or not?
Single (age 65), gross income $10,250.
No. The nondependent taxpayer’s gross income, filing single and age 65 or over, is less than $11,950.
Must file or not?
Head of household (age 58), gross income $13,100.
No. The nondependent taxpayer’s gross income, filing HOH, is less than $13,400.
Must file or not?
Married filing jointly (ages 72 and 68), gross income $23,150.
No. The nondependent taxpayer’s gross income, filing MFJ and both at least age 65, is less than $23,300.
Must file or not?
Married filing jointly (ages 72 and 63), gross income $24,350.
Yes. The nondependent taxpayer’s gross income, filing MFJ and one spouse at least age 65, is greater than $22,050.
Must file or not?
Married filing separately (age 72), gross income $4,150.
Yes. The nondependent taxpayer’s gross income, filing MFS, is greater than $4,050.
Must file or not?
Unmarried dependent (age 18) of another taxpayer, gross income $5,650, all from wages.
No. The dependent taxpayer’s gross income, filing single, is less than $6,350.
Must file or not?
Unmarried dependent (age 2) of another taxpayer, gross income $1,150, all from interest.
Yes. The dependent taxpayer’s unearned income, filing single, was greater than $1,050. The parents may choose to report this income on their tax return rather than complete a separate return for their child.
Must file or not?
Unmarried dependent (age 16) of another taxpayer, gross income $1,000 [$800 wages plus $200 interest].
No. The dependent taxpayer’s gross income, filing single, was less than $1,150 [$800 earned income + $350].
Must file or not?
Unmarried dependent (age 16) of another taxpayer, gross income $1,075 [$700 wages plus $375 interest].
Yes. The dependent taxpayer’s gross income, filing single, was greater than $1,050 [$700 earned income + $350].
Filing status?
Joseph and Megan were married on October 8, 2017. They wish to file only one return.
Joseph and Megan will file as married filing jointly.
Filing status?
Sean and Cynthia were divorced on September 21, 2017. Neither had dependents they could claim for 2017
Sean and Cynthia must each file as single.
Filing status?
Michael and Jenna entered into a common-law marriage in 2011. They have not divorced. Neither Michael nor Jenna have dependents they could claim for 2017. Michael does not know the whereabouts of Jenna, and has not spoken with her in two years.
Michael must file as married filing separately.
Filing status?
David and Lynette had been married for 53 years. David died on March 2, 2017. Lynette did not remarry and wants to file only one return.
Lynette will file as married filing jointly with David.
Filing status?
William and Kathleen were married on June 7, 2017. They legally separated on December 15, 2017. Neither is willing to file a return with the other.
William and Kathleen must each file as single.
A taxpayer in the 10% tax bracket saves how much for each allowable exemption?
$405
Tim (23) and his brother, Dave (21), lived together all through 2017. Tim is a full-time student and is not disabled. Can Dave claim Tim as a QC?
No. Dave may not claim Tim as a qualifying child since Dave is younger than Tim, which fails the age test.
Mike’s 23-year-old brother, Paul, who is a full-time student and unmarried, lives with Mike and Mike’s spouse. Paul is not disabled. Mike is 21, and his spouse is 24 years old. Can Mike claim Paul as a QC?
Yes. Because Mike’s brother, Paul, is younger than Mike’s spouse, and Mike and his spouse are filing a joint return, Paul meets the age test to be Mike’s qualifying child.
Dakota, a child actress, has significant income and pays over half of her own support. Can Dakota be claimed as a QC?
No. She fails the support test.
Tony (28) and Adam (27) are cousins and lived in the same home throughout 2017. Adam only earned $2,500 in 2017. Tony earned $25,000 in 2017. Can Tony claim Adam as a QR?
Adam meets the relationship and member of household test for Tony, since Adam lived with Tony the entire year. Assuming that Adam meets the remaining tests, Tony may be able to claim Adam as a qualifying relative dependent.
Being cousins alone will not meet the relationship test for qualifying relative, because a cousin is not listed as a specific relative relationship. However, a cousin, like other non-relatives, may meet the relationship test for qualifying relative if the individual lived in the taxpayer’s home for the entire year.
John lives with Robert, his father. John provides 30% of Robert’s support. Can John claim Robert?
No. John may not claim Robert as a dependent, because John failed the qualifying relative support test.
Yolanda lives with her daughter, Elizabeth. Elizabeth is the qualifying child of Yolanda. Can Yolanda claim Elizabeth?
No. Neither Yolanda nor anyone else can claim Elizabeth as their qualifying relative, since Elizabeth meets the definition of a qualifying child.
Ron (35) and Sue (35) are married and have two children, Todd (8) and Tracy (6). Neither child has income. Stacy (13), Sue’s child from a previous marriage, came to live with them on July 4, 2017. Prior to moving in with Ron and Sue, Stacy was supported by and lived with her father. Can Stacy be claimed by Ron and Sue?
No. Todd and Tracy are qualifying children of Ron and Sue. Stacy is neither a qualifying child nor a qualifying relative of Ron and Sue. Because she was supported by and lived with her father for more than six months, she cannot be a qualifying child for Sue (residency test) and is not a qualifying relative of Ron and Sue (qualifying child test).
What relationship? QC/QR/Neither
Michael and Tameka are married and have a daughter, Kayla (14). They all lived together for all of 2017. Kayla had no income.
QC
Kayla meets all of the tests for a qualifying child.
What relationship? QC/QR/Neither
Dale (25) is single. His brother, Jeff (27), lived with him for all of 2017. Jeff earned $3,100, all from wages, and had no other income. Dale provided more than half of Jeff’s support. Jeff is not permanently or totally disabled. No one else lived with Dale.
QR
Jeff meets all of the tests for a qualifying relative.
What relationship? QC/QR/Neither
Cassandra is single. Her son, William (3), lived with her for all of 2017. William had no income.
QC
William meets all of the tests for a qualifying child.
What relationship? QC/QR/Neither
Harold and Helen are married and have a son, Hank (22). Hank is a full-time student at Your City College. Hank earned $4,000, all from wages, and had no other income. Harold and Helen provided 80% of Hank’s support. Hank lives on campus while school is in session. During the summer, Hank lives with Harold and Helen.
QC
Hank meets all of the tests for a qualifying child.
What relationship? QC/QR/Neither
Megan (27) is single. Her cousin, Pam (29), moved in with her in February of 2017. Pam earned $3,600, all from wages, and had no other income. Megan provided 60% of Pam’s support. Pam is not permanently or totally disabled. No one else lived with Megan.
Neither
Pam did not live with Megan the entire year, and cousins do not meet the relationship test for qualifying child or relative.
What relationship? QC/QR/Neither
Martin is single. His mother, Agnes (61), came to live with him in August of 2017. Agnes earned $14,100, all from wages, and had no other income. Martin provided 25% of Agnes’ support. Agnes is not permanently or totally disabled. No one else lived with Martin.
Neither
Martin did not meet the qualifying relative gross income and support tests to claim Agnes as a qualifying relative dependent on his return.
What relationship? QC/QR/Neither
Teresa is single. Her daughter, Roberta (21), lived with her for all of 2017. Roberta is not a full-time student. Roberta earned $1,800, all from wages, and had no other income. Teresa provided 75% of Roberta’s support. Roberta is not permanently or totally disabled. No one else lived with Teresa.
QR
Roberta does not qualify as a qualifying child, because her age is over 18 and she is not a full-time student. She does, however, meet all of the tests for a qualifying relative.
What relationship? QC/QR/Neither
George and Amanda are married and adopted a daughter, Sue Linn (4). The adoption was finalized in February of 2017, and Sue Linn came to live with George and Amanda that same month. Sue Linn had no income.
QC
An adoptive daughter is treated the same as a birth daughter would be treated. Sue Linn meets all of the tests for a qualifying child.
What relationship? QC/QR/Neither
Ashley is single. Victoria (5) was lawfully placed in her care by the court of Your State in November of 2017. Victoria had no income and did not provide more than half of her own support. Prior to living with Ashley, Victoria lived with her mother for ten months. Ashley provided 20% of Victoria’s support. No one else lived with Ashley.
Neither
Ashley did not meet the qualifying child residency test to claim Victoria as a qualifying child, because Victoria lived with her birth mother for more than half the year. Ashley did not meet the qualifying child support test either to claim Victoria as a qualifying relative on her return.
What relationship? QC/QR/Neither
Jeremy and Joan are married. Their daughter, Jessica (29), lived with them for all of 2017. Jessica had no income. Jessica is permanently and totally disabled.
QC
Because Jessica is permanently and totally disabled, she meets all tests.
What relationship? QC/QR/Neither
Mike (33) and Janet (34) are not married but lived together for all of 2017, and Mike provided the total support of the home, as Janet had no income. Living with them all year were Janet’s two children, Tim (12) and Sally (9). Neither child had any income. Sally’s father is Mike’s brother. When Mike files his return, will Sally qualify as his QC, QR, or neither?
QC
Since Sally is Mike’s niece and meets all other requirements, Sally is Mike’s qualifying child.
Lori (18) and her qualifying child, Cheryl (5 months), lived together with Lori’s mother, Brenda (41), for all of 2017. Who can claim who?
Lori is Brenda’s qualifying child, and Brenda will claim Lori as a dependent on her tax return. Lori cannot claim herself, nor can she claim Cheryl. Brenda may also claim Cheryl if she meets all the required tests.
Amparo (32) and her qualifying child, Miguel (3), lived together for all of 2017. No one else can claim Amparo on their return. Can Amparo claim Miguel?
Yes, Amparo may claim Miguel on her return, assuming the other tests are met.
Ian (51) lived together with his qualifying child, Robert (21), for all of 2017. In October 2017, Robert married Veronica (21), and both lived with Ian for the remainder of the year. Robert, a full-time student, did not work in 2017, and Veronica earned only $3,000. Robert and Veronica filed a joint return to get a refund of $102 withheld from Veronica’s wages. May Ian claim Robert as his dependent?
Yes. Neither Robert nor Veronica claimed his or her own exemption. Ian may still claim Robert as his dependent.
Ronald (54) and Wendy (52) are married and lived with their qualifying relative, Gwyn (26), for all of 2017. In November 2017, Gwyn married Tim (27), and both lived with Ronald and Wendy for the rest of the year. Gwyn earned $2,400, and Tim earned $20,500 in 2017. Can Ronald and Wendy claim Gywn?
Ronald and Wendy may not claim Gwyn as their dependent on their return if Tim and Gwyn file a joint return.
Dependent or No Dependent?
Leslie is single. Jack is Leslie’s qualifying child. No one can claim Leslie on their tax return. Jack is not married. Both Leslie and Jack are U.S. citizens.
Dependent
Jack is clearly a dependent in this case.
Dependent or No Dependent?
Marcus is single. Quinta is Marcus’s qualifying relative. Marcus may be claimed by his mother, but she is not going to claim him. Quinta is not married. Both Marcus and Quinta are U.S. citizens.
No dependent
Since Marcus can be claimed by his mother, Marcus cannot claim any dependents, whether his mother claims him or not.
Dependent or No Dependent?
Carl and Carrie are married. Carol is their qualifying child. No one can claim Carl or Carrie on their tax return. Carol is married to Paul. Neither Carol nor Paul is required to file a tax return. Carol had no income. Paul is filing a joint return with Carol only to claim a refund of the tax withheld. Carl, Carrie, Carol, and Paul are all U.S. citizens.
Dependent
Carol meets all the requirements to be claimed as a dependent on Carl’s and Carrie’s tax return.
Dependent or No Dependent?
Tomas is single. Lucinda is Tomas’ qualifying child. No one can claim Tomas on their tax return. Lucinda is not married. Tomas is a U.S. citizen. Lucinda is a resident of Mexico.
Dependent
A resident of Mexico can be claimed as a dependent as long as other tests are met.
Dependent or No Dependent?
Orville and Marsha are married. Kevin is their qualifying relative. No one can claim Orville on their tax return. Marsha may be claimed by her father, but he is not going to claim her. Kevin is not married. Orville, Marsha, and Kevin are all U.S. citizens.
No Dependent
Since Marsha can be claimed by her father, she and Orville cannot claim a dependent on their return.
Dependent or No Dependent
Mai is single. Lee is her qualifying child. No one can claim Mai on their tax return. Lee is married to Sonja. Neither Lee nor Sonja is required to file a tax return. Lee had no income. Lee and Sonja will not be filing a joint return. Mai, Lee, and Sonja are all U.S. citizens.
Dependent
Since it states that Lee and Sonja did not file a joint return, the joint return test is clearly met. Therefore, since Lee meets all of the other requirements, he is Mai’s dependent.
Richard and Petra Nelson’s allowable amount of child tax credit would start to phase out if their AGI was more than what?
$110000
Must a paid preparer require a child’s birth certificate and social security card when preparing a return claiming the CTC?
No. This is not part of the due diligence responsibility.
Must a paid preparer complete and submit form 8867 with a return claiming the CTC?
Yes
Must a paid preparer complete and keep copies of CTC worksheets?
Yes
File as HoH? Yes/No
Scott is single. His daughter Rita is his QC. They lived together all of 2017. Scott pays more than 50% of the cost of maintaining their home
Yes. Scott meets all requirements.
File as HoH? Yes/No
Wanda is single. Her mother, Anita, is her QR. Anita lived in her own home apart from Wanda for all of 2017. Wanda pays more than 50% of the cost of maintaining Anita’s home each year.
Yes. Wanda qualifies, since Anita is a parent.
File as HoH? Yes/No
Laura is married. Her husband, Alan, moved out in October 2017. Her son, Edward, is her QC. She lived together with Edward for all of 2017. Laura pays more than 50% of the cost of maintaining their home.
No. Laura does not qualify since her husband was not out of the home for the last six months of the year.
File as HoH? Yes/No
Kaitlyn is single. Her friend, Leah, is her QR. Kaitlyn and Leah lived together for all of 2017. Kaitlyn pays more than 50% of the cost of maintaining their home.
No. A QR does not qualify a taxpayer for HoH unless they meet one of the relationship tests.
File as HoH? Yes/No
Julie is married. Her husband, Gary, moved out in Feb 2017. Her daughter, Kelli, is her QC. She lived together with Kelli for all of 2017. Julie pays more than 50% of the cost of maintaining their home.
Yes. Gary moved out in Feb. Therefore Julie is considered unmarried for tax purposes and she has a QC.
Toni lives in the home of her mother Jean, along with Toni’s three children. Jean owns the home, and the mortgage was paid off with benefits from her husband’s life insurance policy. Jean’s only income is from her deceased husband’s pension, which pays $856 per month. Toni is employed with W2 income of $13568.
The fair rental value of the home is $8400 and no rent is paid. The expenses of the home are $856 in real estate taxes, $266 in utilities, $3150 in food, and $1148 for Internet and phone. Since her mother provides the home, her mother pays the real estate tax and pays Tony $100 a month for food. Toni pays all the other expenses.
Can Toni file as HoH?
Yes. By completing Worksheet 2-1, Cost of Keeping Up a HOme, The total cost of keeping up the home was $7920 ($856 + 2766 + 3150 + 1148), of which Toni paid $5864 (2766 + 1950 + 1148) which is more than half.
File as HoH?
Amy (42) is unmarried and paid 56% of the cost of maintaining a home for her father, Ron (77), all year. Amy will claim Ron on her tax return in 2017.
Yes
File as HoH?
Bruce’s wife, Carrie, moved out in Jan 2017. Bruce paid 100% of the cost of maintaining a home for his girlfriend Kelly and their 12-year-old daughter Sydnee, from May through the end of the year
No. Since Kelly and her daughter, Sydnee are not related to Bruce, he is not considered unmarried for tax purposes, so he may not file as HoH.
File as HoH?
Crystal’s husband, Charlie, was deployed in May 2017. Crystal paid 70% of the cost of maintaining a home for their daughter, age 9.
No. Crystal is not legally separated or estranged from her husband. He is away from their home for military deployment, which does not meet HoH requirements.
File as HoH?
Harvey (34) is unmarried and paid 100% of the cost of maintaining a household for his cousin Clint (15) all year.
No. Harvey and Clint are related, and lived together all year, but cousins is not listed as specific relative relationship to qualify Harvey as HoH.
Helen and Charles were married for 15 years before Charles passed away in 2016. Helen has a dependent son, Dennis, who lives with her full time. If Helen does not remarry, what should her filing statuses be for the years 2016, 2017, 2018
2016 - MFJ
2017 - QW
2018 - QW
George and Ingrid were married 10 years before Ingrid died in 2015. George has a dependent daughter, Alice, who lives with him full time. George remarried in Jan 2017, and was divorced in Nov 2017. What would his filing statuses be for years 2016, 2017
2016 - QW
2017 - either Single or HoH (may no longer use QW since remarried)
Qualifying Widow(er) 2017? Y/N
Timothy and Francine were married for 10 years before Francine’s passing in 2017. Timothy paid all the costs of maintaining a home for himself and his dependent son, Quentin. Quentin lived with Timothy all of 2017. Timothy has not remarried
No - must MFJ as the surviving spouse
Qualifying Widow(er) 2017? Y/N
Liam and Bridget were married for 8 years before Liam’s death in 2016. Bridget paid over 50% of the cost of maintaining a home for herself and dependent daughter Diana. Diana lived with Bridget for all of 2017. Bridget filed a joint return in 2016. Bridget has not remarried.
Yes - Bridget meets all the QW filing requirements.
Qualifying Widow(er) 2017? Y/N
Lawrence and Helena were married for 11 years when Helena died unexpectedly in 2015. Lawrence paid over 50% of the cost of maintaining a home for himself and his dependent son, Leo. Leo lived with Lawrence all of 2017. Lawrence filed a joint return for 2015. Lawrence has not remarried.
Yes - Lawrence meets all of the QW filing requirements. This is the last year he may claim QW status.
Qualifying Widow(er) 2017? Y/N
Darren and Misty were married for 5 years before Darren passing in 2015. Misty paid all the cost of maintaining a home for herself and dependent son Vincent. Vincent moved out of the home in November 2017. Misty filed a joint return in 2015. Misty has not remarried.
No - Since Vincent did not live with Misty the entire year, Misty does not qualify to file as QW. Misty will file as HoH.
Qualifying Widow(er) 2017? Y/N
Connor and Jillian were married 15 years before Connor’s death in 2015. Jillian paid over 50% of the cost of maintaining a home for herself and dependent stepson, Keith. Keith lived with Jillian all of 2017. Jillian filed a joint return for 2015. Jillian has not remarried.
Yes - Jullian meets all of the QW filing requirements, because a stepson is a qualifying person to file as a QW.
QW 2017? Y/N
Christy and Daniel were married for 7 years before Christy passed away in June 2015. Christy’s son Trevor (Daniel’s stepson) continued to live with him after his mother died. In 2015, Daniel filed his tax return as MFJ. In 2016 Daniel filed as a QW. Daniel has not remarried. He paid 100% of the cost of maintaining a home for Trevor and himself.
Yes
QW 2017? Y/N
Allen and Barb were married 15 years before Barb died on March 2015. Allen has a dependent daughter, Ava, who lived with him all year long. in 2015, Allen filed his tax return as MFJ. In 2016 he filed as QW. Allen remarried in January 2017. Allen pays 100% of the cost of maintaining a home for Ava, his wife, and himself.
No. Because he is remarried, he is no longer eligible to use QW status.
QW 2017? Y/N
Mel and Opal were married 21 years before Mel passed away in 2017. Opal has a dependent son, Stuart, who lived with him all year. She has not remarried. Opal pays 100% of the cost of maintaining a home for Stuart and herself.
No. Opal should file MFJ with Mel for 2017, and then, if she has not remarried and still maintains a home for Stuart, she may be eligible to file as QW for 2018 and 2019.
QW 2017? Y/N
Corrine and John were married for 31 years before John died in 2016. John’s mother, Clara, lived with them for the past 5 years and continued to live with Corrine after John passed away. Corrine filed as MFJ with John in 2016. She has not remarried. Corrine pays 100% of the cost of maintaining a home for Clara and herself.
No. A taxpayer’s parent claimed as a dependent does not make the taxpayer eligible to file as QW.
Who is the custodial parent for 2017?
Tyree and Brenda were divorced in 2010. Their decree grants them joint legal custody of Adam (13). Brenda usually has Adam living with her, but Adam visits Tyree every weekend and for 4 weeks in the summer (124 nights in 2016). For 2016 Brenda was the custodial parent because Adam stayed with her for 242 days.
In 2017, Brenda was incarcerated for six months of the year.
Tyree is the custodial parent for 2017.
Who is the custodial parent for 2017?
Butch and Melanie were divorced in 2007. Their decree grants them joint custody of Brian.
Brian (16) lived with Melanie until June 24. Brian went to stay with Butch on June 25 and lived there the remainder of the year.
Butch is the custodial parent because Brian stayed with him for 190 nights which is more than the 175 nights he spent with Melanie.
Who is the custodial parent for 2017?
Butch and Melanie were divorced in 2007. Their decree grants them joint custody of Brian.
Brian (16) lived with Melanie until June 24. He stayed with his older sister for 3 weeks before moving in with Butch, where he stayed the remainder of the year.
Melanie is entitled to claim him as QC since Brian lived with his parents combined for more than half the year, and spent a longer amount of time with his mother Melanie. (Melanie 175 nights, sister 21 nights, Butch 169 nights).
Who can claim Tami?
Betty lives with her mother Stephanie. Stephanie’s AGI for 2017 is $32650. Betty’s AGI is $21350. They all live together. Tami is a QC for both Betty and Stephanie.
Betty has the right to claim Tami as QC because the tiebreaker rules state that the parent has a superior claim to the dependency exemption.
Who can claim Andrew?
In 2017 Margie and David were married and lived with Andrew from Jan 1 until June 30. On July 1, David moved out and filed for divorce. On Dec 1, their divorce was granted, and Margie was awarded residential custody of Andrew, but nothing was specified about the dependency exemption.
Prior to divorce being final, Andrew spent Aug and Oct with David. For Sept and Nov, Andrew lived with grandmother. Andrew lived with mother July and Dec.
After the separation, Andrew spent 62 nights with Margie and 62 with David. He spent 61 with Grandma. Margie’s AGI was $42000, David’s was $46500, and Grandma’s was $58900.
David may claim Andrew. Andrew spent an equal amount of time with David and Margie, and David’s AGI is higher, so he breaks the tie under the tiebreaker rules.
Who can claim Jane?
Jim, Linda, and Jane all live with Linda’s mother, Fran. Jane is Linda’s daughter, and Linda married Jim when Jane was 3 years old. Jane is an eligible qualifying dependent for either Linda or Jim or Fran.
Jim and Linda’s tax return shows AGI of $23000. Fran’s AGI is $21000.
Fran can claim Jane, since her AGI of $21000 is treated as higher than the total AGI of the parents divided between them ($23000/2=$11500)
Who can claim Trey?
Paula and her son Trey (5) lived all year with Paula’s mother, Carolyn, who paid the entire cost of keeping up the home. Paula’s AGI was $10000 and Carolyn’s AGI was $25000. Gary (Trey’s father) did not live with Paula or Trey at all in 2017. Paula signed form 8332 to release her claim to dependency exemption and CTC.
Gary can claim the dependency exemption and the CTC because of the form 8332.
However, Gary cannot claim Trey as a QC for HoH filing status, for the credit for child and dependent care expenses, as an exclusion for dependent care benefits, for the EITC.
Trey is a QC for both Paula and Carolyn for HoH filing status and EITC because Trey meets the relationship, age, residency, support, and joint return tests.
If Paula agrees to let Carolyn claim Trey, Carolyn can claim Trey for HoH filing status and the EITC, but only if she qualifies for each and if Paula does not claim Trey as a QC for the EITC.
Paula cannot claim HoH filing status, because Carolyn paid the entire cost of keeping up the home.
If Paula’s AGI is $25000 instead, and Carolyn’s is $21000, Carolyn cannot claim Trey and a QC for any purpose, because her AGI is not higher than Paula’s.
Who has the superior claim to the dependency exemption? (Name or No one)
Julie Ann (72) was claimed by both her son Mark, and other son Samuel. Mark and Samuel each provided 40% of support. Remaining 20% paid by niece. Samuel filed form 2120 with his return showing niece had waived her right to any exemption.
No one - since not all qualified taxpayers agree, then no one can claim her.
Who has the superior claim to the dependency exemption? (Name or No one)
Linda (17) was claimed by her grandmother, Nadine. Linda lived with her mother, Rose, and grandmother for all of 2017. Nadine’s AGI was $22450. Rose’s AGI was $34650. Rose did not claim any dependents in 2017.
No one - Since Rose did not claim any dependents, no one can claim Linda, since Rose’s AGI is greater than Nadine’s.
Who has the superior claim to the dependency exemption? (Name or No one)
Mario (5) was claimed by both his mother, Janice, and his father, Frank. Mario lived with both Janice and Frank for 3 months during 2017. Mario lived with his mother for five months separately. he lived with his father for four months separately.
Janice - He lived with his mother the greater amount of time.
Who has the superior claim to the dependency exemption? (Name or No one)
Camille (15) was claimed by mother Ida, and father Walter. Camille lived with each parent an equal amount of time. Ida’s AGI was $44255, Walter’s was $47525
Walter. He had the greater AGI
Who has the superior claim to the dependency exemption? (Name or No one)
Gina (8) was claimed by her mother, Debra, and her grandmother, Myrna
Debra - When only one is the child’s parent, the child is treated as the parent’s QC.
Who has the superior claim to the dependency exemption? (Name or No one)
Darrell (12) was claimed by his aunt, Felicia, and his older brother, Gerald. Darrell lived with both Felicia and Gerald for 4 months. He lived with Felicia for 5 months separately. Felicia’s AGI was $29290 and Gerald’s was $31205
Gerald. If no parent claims the child, then the person with the highest AGI will claim.
Who has claim to Blake’s dependency exemption?
Jamie and Matt divorced in 2010. Blake (son) lived with Jamie, Jamie’s mother Mary Ann, and Jamie’s best friend Angie, from Jan 1 to July 5 (157 nights). Blake stayed with Matt every other weekend Jan 1 - July 5 (28 nights) and on July 5, went to live with Matt for the rest of the year (154 nights). He visited Jamie, Mary Anne, and Angie every other weekend (26 nights). Jamie’s AGI was $31215, Mary Ann’s was $20731. Matt’s was $29628.
Jamie.
Blake lived with Jamie, Mary Ann and Angie for 183 days (157 + 26). He lived with his father Matt 182 days (28 + 154). As the parent with the greater number of nights, Jamie has the superior claim.
Taxable or non taxable?
Interest-bearing checking account, credited to account this year
Taxable
Taxable or non taxable?
Credit union savings account, credited to account this year
Taxable
Taxable or non taxable?
Your city municipal bond, pro rata earnings for this year
Non taxable
Taxable or non taxable?
1988 US Series EE Bond, cashed this year, without election to report interest annually
Taxable
Taxable or non taxable?
Corporate bond
Taxable
Taxable or non taxable?
Exempt-interest dividends from a municipal bond mutual fund
Non taxable
What would be reported for this scenario:
In January 2014, Margaret Webber invested $10000 in a five-year certificate of deposit with her bank. It pays 3% annually, but if Margaret cashes it in prematurely, she receives a 1/2% penalty.
In Feb 2017, Margaret cashed in the CD. The bank computed interest to be $25, but she had to pay a $50 penalty ($10000*.005).
Margaret reports $35 in taxable interest, and claim an adjustment to income by subtracting $50 from taxable income on form 1040 only.
If a minor child received Series EE bonds as gifts, what is the best tax-saving strategy for handling the interest?
Parents should file a return for the child, electing to report the interest annually. If the interest is her only income, it will probably be too little to trigger a tax liability. After the election is made, does not have to file if below filing requirements.
When bonds are cashed or reach maturity, the previously-reported interest will not be included in her income.
Itemize or not?
Missy (46) is single with no dependents. Missy’s total allowable itemized deductions are $7,010.
Yes
$7,010 of itemized deductions is more than Missy’s standard deduction of $6350
Itemize or not?
Ken (29) is married and filing a joint return with his wife Mary (28). Ken’s total allowable itemized deductions are $12,855, including $2,835 in real estate taxes.
Yes
$12,855 of itemized deductions is more than Ken and Mary’s standard deduction of $12,700.
Itemize or not?
Vicky (34) is married and is filing a joint return with her husband Charles (36). Vicky’s allowable itemized deductions are $13,190.
Yes
$13190 of itemized deductions is more than Vicky and Charles’ standard deduction of $12700
Itemize or not?
Hanna (26) is unmarried and filing head of household. Hanna’s allowable itemized deductions are $9,800.
Yes
$9,800 of itemized deductions is more than Hanna’s standard deduction of $9,350
Itemize or not?
Matt (66) is single. Matt’s total allowable itemized deductions are $7,150.
No.
$7,150 of itemized deductions is less than Matt’s standard deduction of $7,900.
Itemize or not?
Juan (34) is married, filing a joint return with his wife Lisa (29), and Juan is legally blind. Juan’s total allowable itemized deductions are $12,810.
No
$12,810 of itemized deductions is less than Juan and Lisa’s standard deduction of $13,950.
Itemize or not?
Clara (68) is married and filing a joint return with her husband James (63). Clara’s total allowable itemized deductions are $13,215.
No
$13,215 of itemized deductions is less than Clara and James’ standard deduction of $13,950.
Itemize or not?
Oliver (34) is married, is filing a separate return, and reports that his spouse itemized her deductions this year. Oliver’s total allowable itemized deductions are $2,605.
Yes
Oliver should itemize because his spouse did so. Otherwise, his standard deduction is $0.
Sandy, Roxanne, and Alice joined a well-known national weight-loss program that sells portion-controlled packaged food to its members. Sandy was diagnosed as obese by her physician. Roxanne’s doctor told her that losing weight would help her lower her high blood pressure. Alice is not obese and does not suffer from any weight-related health problems—she just wants to lose a few pounds.
Who may deduct the cost of the program?
Sandy and Roxanne. Not Alice. None may deduct the cost of food.
After an attempt at weight loss failed, Sandy had obesity surgery at the recommendation of her doctor.
May she deduct the medical expenses?
Yes
Steve Henderson, a hearing-impaired individual, purchased a TDD unit for $500. He also purchased some Braille books for his dependent daughter, who is blind. The books cost $350, but the same printed books would cost $190.
May Steve deduct any of his costs?
Steve may deduct $660 for these items [$500 + ($350 – $190) = $660].
On a doctor’s advice, a taxpayer who owns his home installs central air conditioning to alleviate his son’s severe allergies. The unit cost plus installation equals $5,000, but the unit increased the value of the home by $5,300.
Can any costs be deducted?
The cost and installation are not deductible, because it did not exceed the increase in property value [$5,000 cost – $5,300 increased value = –300 cost less home value].
Janice Rawlins accompanied her ten-year-old dependent daughter, Rachel, to Rochester, Minnesota, for some medical tests that Rachel needed to undergo at the Mayo Clinic. While in Rochester, Janice and Rachel stayed for three nights at a motel near the clinic while the tests were conducted. They spent $90 per night for the motel and a total of $130 for meals.
Can Janice deduct any of her expenses?
Janice may deduct $270 [$90 × 3 nights] for lodging, because the mother and daughter have separate $50-per-night limits. Janice cannot deduct the $130 for meals.
Lisa Curcio had her employer deposit $10 of her salary per week into her §125 plan. Lisa is under the care of a doctor to treat her arthritis. Her medical expenses for the year include $300 for four doctor visits and $220 for over-the-counter pain relievers prescribed by her doctor. Lisa may receive reimbursement from her §125 plan to cover the cost of the doctor visits and the pain relievers.
Can Lisa deduct anything?
No, because her costs were reimbursed under the cafeteria plan. If she did not have the plan, she could deduct the doctor bills but not the cost of the pain relievers.
Deductible or not?
April has a $900 hospital bill incurred on December 12, 2016, and charged to her credit card on January 22, 2017.
Yes
April may deduct the $900 hospital bill on her 2017 Schedule A, because the hospital bill was charged to her credit card in 2017.
Deductible or not?
In 2017, Xavier paid $350 out of pocket for glasses and an eye exam for his qualifying dependent, Xander.
Yes
Xavier may deduct the $350 spent on his dependent, Xander’s glasses and eye exam, because Xavier is allowed to deduct qualified medical and dental expenses paid for himself, his spouse, or his dependent claimed on his return. Also note that a child of divorced or separated parents may be treated as a dependent of both parents for the purpose of the medical expense deduction.
Deductible or not?
Catherine’s employer-sponsored health insurance plan premiums of $1,300 were paid by her employer with pre-tax dollars withheld from Catherine’s bi-weekly paychecks.
No
Catherine is not allowed to deduct her employer-sponsored health insurance plan premiums on her Schedule A, because these insurance premiums were paid on her behalf by the employer with pre-tax funds.
Deductible or not?
Jimmie is legally blind and paid $4,700 to purchase and maintain a seeing eye dog in 2017.
Yes
Jimmie may deduct the $4,700 of expenses related to purchasing and training his seeing eye dog, because he is legally blind, and the seeing eye dog is a qualified medical expense.
Deductible or not?
In 2017, Steve paid $5,500 for cosmetic surgery for his wife, Janice. Janice is having the surgery for personal reasons and it is not necessary to correct or improve an existing disease or abnormality.
No
Steve may not deduct the cost of cosmetic surgery for his wife, Janice, because the surgery was for personal reasons, and was not required or necessary to correct or improve an existing disease or abnormality.
Deductible or not?
Garrett used his HSA account to pay $800 for dental expenses incurred in 2017.
No
Garrett may not deduct qualified medical expenses paid with an HSA account, because an HSA account is funded with pre-tax money.
Wes (25) and Kara (24) are filing jointly. Their 2017 AGI is $46,747.
What is Wes and Kara’s AGI threshold amount for medical and dental expenses?
Their AGI threshold amount for medical and dental expenses on Schedule A is $3,506 [$46,747 × 7.5% = $3,506].
What is Bill’s medical and dental expense AGI threshold?
Bill is 26 years old, and his 2017 AGI is $24,597.
Bill’s AGI threshold amount is $1,845 [$24,597 × 7.5% = $1,845].
What is the medical and dental expense AGI threshold?
In 2017, Sally is 46 years old, and her AGI is $148,221.
Sally’s AGI threshold amount is $11,117 [$148,221 × 7.5% = $11,117].
What is the medical and dental expense AGI threshold?
Derek, age 65, and Kate, age 64, are filing jointly. Their 2017 AGI is $77,946.
Derek and Kate’s AGI threshold amount is $5,846 [$77,946 × 7.5% = $5,846].
What is the medical and dental expense AGI threshold?
June is 85 years old, and her 2017 AGI is $32,741.
June’s AGI threshold amount is $2,456 [$32,741 × 7.5% = $2,456].
What is the medical and dental expense AGI threshold?
Glen, age 59, and Maggie, age 65, are filing jointly. Their 2017 AGI is $98,534.
Glen and Maggie’s AGI threshold amount is $7,390 [$98,534 × 7.5% = $7,390].
What is the medical and dental expense AGI threshold?
Rick is 59 years old, and his 2017 AGI is $67,355.
Rick’s AGI threshold amount is $5,052 [$67,355 × 7.5% = $5,052].
What is the medical and dental expense AGI threshold?
Bruce, age 36, and Megan, age 38, are filing jointly. Their 2017 AGI is $88,267.
Bruce and Megan’s AGI threshold amount is $6,620 [$88,267 × 7.5% = $6,620]
Maggie Colt was a resident of Nebraska in 2017. She made four state estimated tax payments of $45 to Nebraska for the 2017 tax year on:
April 30, 2017
July 31, 2017
October 31, 2017
January 31, 2018
Maggie did not make state estimated tax payments for the 2016 tax year.
What is deductible on Maggie’s 2017 return?
She is only allowed to include three of the four $45 state estimated tax payments she made on her Schedule A, since these payments were made during the 2017 tax year.
Your state imposes an annual registration fee on motor vehicles. The fee is equal to $25 plus 2% of the assessed value of the vehicle and $1 for every 100 pounds of the vehicle’s weight.
Your registration fee for 2017 is $175 [$25 + ($6,000 value × 2%) + (3,000 pounds ÷ 100 × $1) = $175].
How much may be deducted?
You may deduct $120 of the fee as personal property tax [$6,000 value × 2% = $120]. The remaining $55 is not deductible because it is not based on the value of the vehicle.
In 2013, Lisa Wilcox purchased her principal residence for $250,000. In 2017, when she owed $180,000 on the original mortgage, she borrowed an additional $60,000 secured by the home and used the proceeds to build a sunroom and install an indoor pool.
What is deductible?
On her 2017 return, Mary may deduct, as qualified home mortgage interest, the interest she pays on her original mortgage as well as the additional $60,000 loan. Both loans are considered acquisition debt, because the loan funds are used to buy, build, or improve Lisa’s primary residence.
In 2014, Jim Myers purchased his home for $180,000. In 2017, his debt remaining on his original mortgage used to acquire the house is $70,000, and the fair market value of the house is $185,000. Jim decides to open a home equity line of credit in 2017 to borrow $25,000 to purchase a new car.
What is deductible?
All of the interest paid in 2017 on the original mortgage (acquisition debt) and on the $25,000 car loan (home equity debt) are deductible as qualified home mortgage interest.
Ellen took out a $200,000 loan to build a home.
Type of debt?
Acquisition debt
Frank used his main home as collateral on a $25,000 loan to purchase a sailboat.
Type of debt?
Home equity debt
Isabella took out a $50,000 loan to build a sunroom and a pool on her house.
Type of debt?
Acquisition debt
Logann used her main home as collateral on a $15,000 loan to have a new roof installed on her main home.
Type of debt?
Acquisition debt
Natalie took out a $150,000 loan to buy a new home.
Type of debt?
Acquisition debt
Paul used his home as collateral to purchase a vacation home on the beach with a $100,000 loan. The $100,000 mortgage loan is also secured by the vacation home. The vacation home is the taxpayer’s second residence.
Type of debt?
Acquisition debt
James Dean donated $400 to Habitat for Humanity on March 20, 2017.
What is needed for this to be deductible?
If he has written substantiation of the contribution from Habitat for Humanity.
James made two separate donations of $200 to Habitat for Humanity on different dates.
What is needed for this to be deductible?
The canceled checks or other written documentation substantiate his charitable deduction.
In 2012, George Harris purchased 100 shares of XYZ stock for $2,000. In 2017, when he gave the stock to his church, the stock was worth $2,500.
What is deductible?
George may deduct the full $2,500, because he held the stock for more than one year.
In January 2017, Bessie Philips purchased 100 shares of ADC stock for $500. In October 2017, when she gave the stock to United Way, it was worth $1,000.
What is deductible?
Bessie may deduct only $500 because she did not own the property more than one year.
Charles Yates is an attorney. Without charge, he drew up a trust agreement for his church. The work took him five hours. He normally charges $200 per hour for such work.
Is this deductible?
No, because the value of time is not deductible.
Ken Adams accompanies a group of Boy Scouts on a camping trip. During the trip, he is on duty as a supervisor of the scouts, in a real and substantive sense, most of the time.
Are his travel expenses deductible?
Ken may deduct his travel expenses for this excursion. The fact that he enjoys this type of activity does not disqualify his deduction.
Deductible or not?
In 2017, Quincy made a $2,600 cash contribution to his local church.
Yes
Quincy’s $2,600 cash contribution to the local church is deductible, because the church is a qualified organization.
Deductible or not?
In 2017, Thomas, a veterinarian, provided $4,350 of free animal care to a local qualified charitable animal shelter. The animal shelter provided all the tools and supplies Thomas needed to provide his services, as well as reimbursement of actual transportation costs he incurred driving to and from the shelter.
No
The donated value of Thomas’ time or service is not deductible as a charitable contribution.
Deductible or not?
In 2013, Ulysses purchased 50 shares of XYZ stock for $2,000. In 2017, he donated the 50 shares of XYZ stock to Habitat for Humanity. The stocks were worth $4,000 at the time he donated the stock.
Yes
Ulysses’ donation of stock is a deductible donation of property, because the property was donated to a qualified organization. Also, note that Ulysses is allowed to deduct the FMV of the stock, because the stock was held long-term.
Deductible or not?
In 2017, Wesley gave a homeless person $50 cash.
No
Wesley’s donation to a homeless person is not deductible, because the homeless person is not a qualified organization.
Deductible or not?
In 2017, Yvonne donated $150 of gently-used clothing and household items to a local qualified charity thrift store. All the clothing and household items were in good, used condition.
Yes
Yvonne’s donation of gently-used clothing and household items is a deductible donation of property, because the items were donated to a qualified organization, and all the items were in good, used condition.
In 2017, Kyle Rollins paid $54 to prepare and electronically file his 2016 federal and state return himself using online software.
What can Kyle claim on his 2017 return?
When Kyle prepares his 2017 return, he can include the $54 he paid to prepare his 2016 returns on his Schedule A, line 22. However, Kyle will only be allowed to deduct the total of miscellaneous deductions reported on lines 21 through 23 that exceed 2% of his AGI as an itemized deduction.
