CHAPTER 3 Tax Formula and Tax Determination, An Overview of Pro 52. Lo.3,4 For t
ID: 2331786 • Letter: C
Question
CHAPTER 3 Tax Formula and Tax Determination, An Overview of Pro 52. Lo.3,4 For tax year 2018, determine the number of dependents in each of the fol- lowing independent situations: a. Leo and Amanda (ages 48 and 46, respectively) are husband and wife and furnish more than 50% of the support of their two children, Elton (age 18) and Trista (age 24). During the year, Elton earns $4,500 providing transportation for elderly persons with disabilities, and Trista receives a $5,000 scholarship for tuition at the law school she attends. Audry (age 45) was divorced this year. She maintains a household in which she, her ex-husband (Clint), and his mother (Olive) live and furnishes more than b. furnishes 50% of their support. Olive is age 91 and blind. s age 91 and blind C. Crystal, age 45, furnishes more than 50% of the support of her married son Andy (age 18), and his wife, Paige (age 19) who live with her. During the year Andy earned $8,400 from a part-time job. All parties live in lowa (a com law state). mon d. Assume the same facts as in part (), except that all parties live in Washington (a community property state). 33, LO.3.4 Compute the number of dependents in each of the following independentExplanation / Answer
Answer a) Four = Two personal and two dependency exemptions.
Reason:- Elton is a qualifying child, so his gross income does not matter. Trista is not a qualifying child – although a full-time student, she is not under age 24. However, Trista fits under the qualifying relative category. She passes the gross income test because the tuition portion ofa scholarship is nontaxable.
Answer b) Two = one personal exemption and one dependency exemptions.
Reason :- Clint cannot qualify as a member of Audry’s household in the year of the divorce. Olive meets the relationship test.
Answer C) Three = One personal and two dependency exemption.
Reason :- Andy is a qualified child who is under 19 age, he is not subject to gross income test. Paige who live in Iowa which is common law state that did not have income - splitting option, meet the gross income requirements of a qualifying relative.
Answer d) Two = one personal and one dependency exemptions.
Reason :- Andy is a qualified child who is under 19 age. In a community property situation, however, Paige is treated as having a gross income. Thus, she does not meet the gross income test and cannot be a qualifying relative.