Filing Requirements

Question 1

When preparing a current-year tax return, which of the following benefits are derived from the use of the previous year’s return?
I. Prevents gross mathematical errors
II. Identifies significant changes
III. Increases efficiency

A. I and II only.

B. I and III only.

C. II and III only.

D. I, II, and III.

Answer 1

I, II, and III.
Answer (D) is correct.
Use of the prior-year return helps to prevent gross mathematical errors or identify significant changes. The accuracy of the prior-year return increases efficiency in completing the current-year return. These are just a few of the benefits of obtaining a copy of the previous year’s return (Publication 17).

Question 2

Which taxpayer information is necessary to have before preparing a tax return?

A. Immigration status.

B. Age of an individual.

C. Marital status.

D. All of the information is needed.

Answer 2

All of the information is needed.
Answer (D) is correct.
Taxpayer biographical information (e.g., date of birth, age, marital status, dependents, etc.) is used to verify the identity of the taxpayer and related dependents. The age of an individual determines if (s)he qualifies for additional deductions (65 and over), retirement distributions, dependency, etc. MFJ status often increases beneficial dollar limits for deductions and credits. If a taxpayer is an alien (not a U.S. citizen), (s)he is considered a nonresident alien, unless either the green card test or the substantial presence test for the calendar year is met.

Question 3

All of the following are nondeductible expenses EXCEPT

A. Rent and insurance premiums paid for the taxpayer’s own dwelling.

B. Life insurance premiums paid by the insured.

C. Ordinary and necessary business expenses.

D. Payments for food.

Answer 3

Ordinary and necessary business expenses.
Answer (C) is correct.
A personal, living, or family expense is not deductible unless the Code specifically provides otherwise. Nondeductible expenses include rent and insurance premiums paid for the taxpayer’s own dwelling; life insurance premiums paid by the insured; payments for food, clothing, domestic help, and upkeep of an automobile; and personal interest. Ordinary and necessary business expenses, which are the costs of carrying on a trade or business, are deductible if the business is operated to make a profit.

Question 4

Which items from the prior-year return may be needed to complete the current-year return?
   I. State income tax refund
   II. AMT for credit
   III. AGI
   IV. Gain (loss) carryover

A. I and II only.

B. II and IV only.

C. I, II, and IV.

D. I, II, III, and IV.

Answer 4

I, II, and IV.
Answer (C) is correct.
Certain items from the prior year return may be needed to complete the current-year return [state income tax refund, AMT for credit, gain (loss) carryover, charitable gift carryover, etc.].

Question 5

All of the following income types are reported on Form 1099-MISC EXCEPT

A. Nonemployee compensation over $600.

B. Payments made to a physician or supplier or provider of medical or healthcare services of $600 or more made in the course of your trade or business.

C. Canceled debt payments of $600 or more.

D. Crop insurance proceeds of $600 or more.

Answer 5

Canceled debt payments of $600 or more.
Answer (C) is correct.
Form 1099-MISC, Miscellaneous Income, is used for reporting a variety of types of income that are not reported on a W-2 or other specific Form 1099, that are made in the course of a trade or business, and for which the taxpayer paid during the year
At least $10 in royalties or broker payments in lieu of dividends or tax-exempt interest or
At least $600, e.g., in medical and healthcare payments or crop insurance proceeds.
Form 1099-C, Cancellation of Debt, is utilized for canceled debt payments of $600 or more.

Question 6

Upon reviewing a new client’s prior year tax return, the preparer sees taxes paid for the First-Time Homebuyer Credit. The preparer should ask the taxpayer all of the following EXCEPT

A. What was the total amount of the original credit
received?

B. How much of the original credit was repaid on prior years’ returns?

C. Was the entire credit used towards the purchase of their main home?

D. Are the taxpayers still using the home that generated the credit as their main home?

Answer 6

Was the entire credit used towards the purchase of their main home?
Answer (C) is correct.
Between April 8, 2008, and May 1, 2010, a credit for qualifying first-time homebuyers was available. Taxpayers who claimed it in 2008 and experience situations which include but are not limited to the following are required to repay the credit over 15 years:
1. The taxpayer sold the home (including through foreclosure);
2. The taxpayer converted the entire home to business or rental property;
3. The taxpayer abandoned the home (except in connection with a sale or foreclosure);
4. The home was destroyed, condemned, or disposed of under threat of condemnation; or
5. The taxpayer who claimed the credit died in 2019.
Form 5405, Repayment of the First-Time Homebuyer Credit, is used by taxpayers to notify the IRS that the home the taxpayer purchased in 2008 and for which the credit was claimed has been disposed of or ceased to be the taxpayer’s. Questions regarding the use of the credit are not addressed per Form 5405.

Question 7

Which of the following is true regarding the Report of Foreign Bank and Financial Accounts (FBAR) requirements?

A. The FinCEN Form 114 (FBAR) must be filed by anyone with a financial interest in or signature authority over a foreign bank account.

B. The due date for the FBAR filing is generally July 15 of the current tax year for individuals.

C. The FinCEN Form 114 (FBAR) is filed with your current tax year individual income tax return.

D. The FinCEN Form 114 (FBAR) is filed online with the Financial Crimes Enforcement Network.

Answer 7

The FinCEN Form 114 (FBAR) is filed online with the Financial Crimes Enforcement Network.
Answer (D) is correct.
FinCEN Form 114, Report of Foreign Bank and Financial Accounts, is filed online with the Financial Crimes Enforcement Network.

Question 8

When e-filing their federal return, a taxpayer who meets the requirements to file both Form 8938, Statement of Specified Foreign Financial Assets, and Form 114, Report of Foreign Bank and Financial Accounts, should

A. Attach both forms to their federal return.

B. Attach only the Form 8938 to their federal return and file the Form 114 through the Financial Crimes Enforcement Network’s e-filing system.

C. Attach only the Form 114 to their federal return as it contains the 8938 information.

D. Send both forms in separately to the Internal Revenue Service.

Answer 8

Attach only the Form 8938 to their federal return and file the Form 114 through the Financial Crimes Enforcement Network’s e-filing system.
Answer (B) is correct.
Certain domestic corporations, partnerships, and trusts that are considered formed or availed of for the purpose of holding, directly or indirectly, specified foreign financial assets (specified domestic entities) must file Form 8938 if the total value of those assets exceeds $50,000 on the last day of the tax year or $75,000 at any time during the tax year. Attach Form 8938 to your annual return and file by the due date (including extensions) for that return.
The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) requires a FinCEN Form 114 [ Report of Foreign Bank and Financial Accounts (FBAR)] to be filed by taxpayers who had an interest in or signature or other authority over a financial account located outside the U.S., such as a bank, securities, or other financial account, or owned more than 50% of the stock of a corporation that owns one or more bank accounts located outside the U.S. FinCEN Form if (1) the aggregate value of all foreign accounts is $10,000 or less at all times during the year or (2) the accounts are at a U.S. military banking facility. FinCEN Form 114 is not attached to Form 1040. Instead, it must be filed on a calendar-year basis, electronically, using the Bank Security Act (BSA) e-filing system. The FBAR due date is April 15. A 6-month extension is allowed.

Question 9

The requirement to file the FinCEN Form 114 applies to U.S. persons with a financial interest in or signature authority over any foreign financial account(s), if the aggregate value of these accounts, at any time during the calendar year, exceeds

A. $1,000

B. $5,000

C. $7,500

D. $10,000

Answer 9

$10,000
Answer (D) is correct.
FinCEN Form is not required if (1) the aggregate value of all foreign accounts is $10,000 or less at all times during the year or (2) the accounts are at a U.S. military banking facility.

Question 10

John and Linda Smith are a childless married couple with no other dependents who lived apart for all of the current year. On December 31 of the current year, they were legally separated under a decree of separate maintenance. Based on the facts, which of the following is the only filing-status choice available to them for the current year?

A. Married filing joint return.

B. Married filing separate return.

C. Head of household.

D. Single.

Answer 10

Single.
Answer (D) is correct.
The determination of whether an individual is married is made as of the close of the taxable year, so John and Linda are both single for the current year (Publication 17). Couples under a separate maintenance agreement are not considered married.

Question 11

Which of the following is NOT a requirement that must be met in determining whether a taxpayer is considered unmarried for head of household filing-status purposes?

A. An individual must file a separate return.

B. An individual must pay more than one-half the cost of keeping up a home for the tax year.

C. An individual’s home must be, for the entire year, the main home of his or her child, stepchild, or qualified foster child whom (s)he or the noncustodial parent can properly claim as a dependent.

D. An individual’s spouse must not have lived in their home for the last 6 months of the tax year.

Answer 11

An individual’s home must be, for the entire year, the main home of his or her child, stepchild, or qualified foster child whom (s)he or the noncustodial parent can properly claim as a dependent.
Answer (C) is correct.
In determining if a taxpayer qualifies for head of household filing status, the taxpayer is considered unmarried if all the following requirements are met:
1. The taxpayer filed a separate return.
2. The taxpayer paid more than half the cost of keeping up the home for the tax year.
3. The taxpayer’s spouse did not live in the home during the last 6 months of the tax year.
4. The home was, for more than half the year, the main home of the taxpayer’s child, stepchild, or adopted child whom the taxpayer or the noncustodial parent can properly claim as a dependent.
5. The taxpayer must be able to claim the child as a dependent.
Therefore, this answer is correct because the requirement is that the home be the main home of the child, stepchild, or qualified foster child for more than half the year, not the entire year [Publication 17 and Sec. 2(b)].

Question 12

In 2019, Lisa was married and had two dependent children. Her husband died in April, and she did not remarry before the end of 2019. Which filing status should Lisa use for her tax return in 2019?

A. Single.

B. Married Filing Jointly.

C. Head of Household.

D. Qualifying Widow(er) with Dependent Child.

Answer 12

Married Filing Jointly.
Answer (B) is correct.
Two individuals are treated as legally married (Publication 504) for the entire tax year if, on the last day of the tax year, they are
1. Legally married and cohabiting as husband and wife
2. Legally married and living apart but not separated pursuant to a valid divorce decree or separate maintenance agreement
3. Separated under a valid divorce decree that is not yet final
If a spouse dies, status is determined when the spouse dies unless the surviving spouse remarries before the end of the tax year (Publication 17).

Question 13

All of the following are requirements to claim head of household filing status EXCEPT

A. You are unmarried or considered unmarried on the last day of the year.

B. Your spouse did not live in your home during the last 6 months of the tax year.

C. Your parent must live in your home at least 6 months.

D. You paid more than half of the cost of keeping up your house for the entire year.

Answer 13

Your parent must live in your home at least 6 months.
Answer (C) is correct.
A taxpayer with a dependent parent may qualify for head of household status even if the parent does not live with the taxpayer, provided that the taxpayer pays more than half the cost of maintaining the main home for the parent. (Publication 17.)

Question 14

Joe is 37 years old. His wife died during the tax year, and he has not remarried. His deceased wife had no income. He has two minor children living with him. Joe paid all of the costs for keeping up his home for the tax year, and he has paid for all of the support of his wife and these children. The filing status with the lowest tax rate for which Joe qualifies is

A. Qualifying widower with dependent child.

B. Married filing separately.

C. Head of household.

D. Married filing jointly.

Answer 14

Married filing jointly.
Answer (D) is correct.
Publication 501 states, “If your spouse died during the year, you are considered married for the whole year for filing status purposes. If you didn’t remarry before the end of the tax year, you can file a joint return for yourself and your deceased spouse. For the next 2 years, you may be entitled to the special benefits described later under Qualifying Widow(er)” (Publication 17).

Question 15

For 2019, Jane is unmarried and paid more than half the cost of keeping up her home. All of the following dependents would qualify Jane to file as head of household EXCEPT

A. Jane’s grandson, who lived with her but was absent from her home for 9 months in 2019 while attending boarding school.

B. Jane’s father, whom she can claim as a dependent and whose main home for 2019 was a home for the elderly for which Jane paid more than one-half the cost.

C. Jane’s married son, who could properly be claimed as a dependent on his father’s return only.

D. Jane’s sister, whom Jane can claim as a dependent and who lived with Jane until she died in May 2019.

Answer 15

Jane’s married son, who could properly be claimed as a dependent on his father’s return only.
Answer (C) is correct.
A taxpayer qualifies for head of household filing status if (s)he is not married or is considered unmarried at the close of the tax year, is not a surviving spouse, and maintains a household that is also the principal place of abode for more than half of the year for any one of certain qualifying individuals.
A married son, stepson, daughter, or stepdaughter is a qualifying individual only if the taxpayer is entitled to claim the person as a dependent or the taxpayer by written declaration allows the noncustodial parent to claim the person as a dependent.

Jane must have been able to claim the married son as a dependent in order to qualify as head of household.

Question 16

Milton is 39 years old. He is divorced from his wife since March 1 of the tax year. They have two minor children. One child lives with Milton, and the other child lives with the mother. The children have been with their respective parents from March through December of the tax year. Milton provides all of the support for the minor child living with him. The filing status with the lowest rate that Milton qualifies for is

A. Married filing separately.

B. Single.

C. Head of household.

D. Married filing jointly.

Answer 16

Head of household.
Answer (C) is correct.
The determination of whether an individual is married is made as of the close of the taxable year, so Milton is deemed unmarried for the tax year. Milton is not a surviving spouse, and the tax rates for a head of household are lower than those for a single taxpayer. In determining if a taxpayer qualifies for head of household filing status, the taxpayer is considered unmarried if all the following requirements are met:
1. The taxpayer filed a separate return.
2. The taxpayer paid more than half the cost of keeping up the home for the tax year.
3. The taxpayer’s spouse did not live in the home during the last 6 months of the tax year.
4. The home was, for more than half the year, the main home of the taxpayer’s child, stepchild, or adopted child whom the taxpayer or the noncustodial parent can properly claim as a dependent.
Therefore, the filing status with the lowest rate that Milton qualifies for is head of household (Publication 17).

Question 17

Who would NOT be a qualifying person for purposes of filing as head of household in 2019?

A. Your mother, whom you can claim as a dependent.

B. Your adopted child who lives with you, is married, and can be claimed as your dependent.

C. Your foster child who lived with you all year and is your dependent.

D. Your aunt, related to you by blood. She does not live with you but is your dependent.

Answer 17

Your aunt, related to you by blood. She does not live with you but is your dependent.
Answer (D) is correct.
The taxpayer must maintain a household that constitutes the principal place of abode for more than half of the taxable year for at least one qualifying individual who is
An unmarried son or daughter, unmarried grandchild, or unmarried stepchild, or
Any other relative eligible to be claimed as a dependent, except for those eligible under a multiple-support agreement.
Thus, your aunt, who is your dependent, would not be a qualifying individual because she does not live in the principal place of abode (Publication 17).

Question 18

Phil is unmarried in 2019. His dependent daughter, Susan, lived with him all year. Property taxes of $2,500 and mortgage interest of $5,000 on the home where he and Susan live are divided equally with his ex-wife. Phil paid the utilities of $200 per month. What amount may Phil use as the costs of keeping up a home to qualify for head of household filing status?

A. $6,150

B. $4,950

C. $3,750

D. $9,900

Answer 18

$6,150
Answer (A) is correct.
An individual must maintain a household that is the principal place of abode for a qualifying individual. To maintain a household for federal filing status purposes, an individual must furnish more than 50% of the costs of maintaining the household during the tax year. Qualifying expenditures include property tax, mortgage interest, rent, utilities, upkeep, repair, property insurance, and the food consumed on the premises (Publication 17).
Phil pays 50% of the property taxes and mortgage interest, as well as 100% of the utilities. Since all of these are qualified expenditures, he may use the amounts he paid for purposes of determining if he furnished more than 50% of the costs of maintaining the household. Thus, the amount that Phil may use as the costs of keeping up a home to qualify for head of household filing status is $6,150 [($5,000 mortgage interest × 50%) + ($2,500 property taxes × 50%) + ($200 utilities × 12 months)].

Question 19

Matt has a certified statement from his optometrist on December 1, 2019, that confirms he can see no better than 20/250. For tax year 2019, which is correct?

A. Matt is not eligible for the additional standard deduction for blindness as he is only partially blind.

B. Matt is eligible for the additional standard deduction for blindness in 2019.

C. Matt is eligible for the additional standard deduction for blindness in 2019, the first full year of his blindness.

D. Matt is not eligible for the additional standard deduction for blindness as he can see better than 20/300.

Answer 19

Matt is eligible for the additional standard deduction for blindness in 2019.
Answer (B) is correct.
A taxpayer who has vision of 20/200 is considered legally blind for federal tax purposes. Married taxpayers who are legally blind are entitled to an additional standard deduction of $1,300 ( $1,650 for those whose filing status is unmarried or head of household). Thus, Matt is entitled to the additional deduction (Publication 501).

Question 20

Ms. N, who is married, wants to file as head of household for the current year. Which of the following will prevent her from filing as head of household?
A. Her spouse lived in her home for the final 6 months of the current year.
B. She and her husband did not commingle funds for support purposes.
C. She paid more than half the cost of keeping up her home for the tax year.
D. Her home was, for more than 6 months of the year, the principal home of her son, whom she can claim as a dependent.

Answer 20

Her spouse lived in her home for the final 6 months of the current year.
Answer (A) is correct.
A married person may qualify for head of household status if the conditions for “considered unmarried” are met. A married individual who lives with a dependent apart from the spouse will be considered unmarried and qualify for head of household status if, for the tax year, (1) the individual files separately; (2) the individual pays more than 50% toward maintaining the household; (3) the spouse is not a member of the household for the last 6 months; (4) the household is the principal home of the individual’s child, stepchild, or qualified foster child for more than half the year; and (5) the individual can claim the child as a dependent.

Question 21

Malcolm and Glenda were married, but they got divorced on June 1 of the current year. Their one minor child lived with Glenda all of the year. Glenda worked all year and provided more than half the cost of keeping up the home for herself and her minor child. Glenda signed Form 8332, Release of Claim to Exemption for Child of Divorced or Separated Parents, allowing Malcolm to claim their child as his dependent on his separately filed return. Glenda’s proper filing status is

A. Single.

B. Married filing jointly.

C. Married filing separately.

D. Head of household.

Answer 21

Head of household.
Answer (D) is correct.
The determination of whether an individual is married is made as of the close of the taxable year, so Glenda is unmarried. Glenda is not a surviving spouse, and the tax rates for a head of household are lower than those for a single taxpayer. To qualify for head of household rates, she must maintain (furnish over half the cost of) a household as her home that is also the domicile of her unmarried child, and she must be entitled to the dependency exemption for the child [Sec. 2(b)]. Glenda is allowed to grant the exemption to the other parent [Publication 17 Chapter 2 Head of Household (considered unmarried items)]. Glenda meets these requirements for head of household status.

Question 22

For federal income tax purposes, an individual is considered married for the whole year in all of the following situations EXCEPT

A. If on the last day of the tax year the individual has not remarried after being widowed during the tax year.

B. If on the last day of the tax year the individual is separated under an interlocutory (not final) decree of divorce.

C. Lived with another individual over half the year as husband and wife in a state that does not recognize a common-law marriage.

D. The individuals are married with no dependents and lived apart the whole year but are not legally separated under a decree of divorce or separate maintenance.

Answer 22

Lived with another individual over half the year as husband and wife in a state that does not recognize a common-law marriage.
Answer (C) is correct.
For federal income tax purposes, an individual is considered to have been married for the entire year if on the last day of the tax year the taxpayer is living together in a common-law marriage that is recognized in the state where the taxpayer is currently living or the state where the common-law marriage began. A taxpayer who lived with another individual over half the year as husband and wife in a state not recognizing common-law marriage is not considered to be married for federal income tax purposes.

Question 23

A husband and wife can file a joint return even if

A. The spouses have different tax years, provided that both spouses are alive at the end of the year.

B. The spouses have different accounting methods.

C. Either spouse was a nonresident alien at any time during the tax year, provided that at least one spouse
makes the proper election.

D. They were divorced before the end of the tax year.

Answer 23

The spouses have different accounting methods.
Answer (B) is correct.
There is no provision disallowing spouses to file a joint return because they have different accounting methods (Publication 17).

Question 24

Mr. W died early in the current year. Mrs. W remarried in December of the same year and therefore was unable to file a joint return with Mr. W. What is the filing status of the decedent, Mr. W?

A. Single.

B. Married filing separate return.

C. Married filing joint return.

D. Head of household.

Answer 24

Married filing separate return.
Answer (B) is correct.
Generally, a surviving spouse may file a joint return for himself or herself and the decedent. In that case, the decedent’s filing status on the final return would be married filing jointly. However, a joint return with the deceased spouse may not be filed if the surviving spouse remarried before the end of the year of the decedent’s death. In this case, the filing status of the deceased spouse is that of married filing separate return [Publication 17 and Sec. 6013(a)(2)].

Question 25

Mrs. W’s husband died in Year 1. She has not remarried and has maintained a home for herself and her dependent son, whom she can claim. In the summer of Year 3, the son was killed in an automobile accident. What is Mrs. W’s best filing status for Year 3? A. Single. B. Married filing separate return. C. Qualifying widow. D. Head of household.

Answer 25

Qualifying widow. Answer (C) is correct. A qualifying widow(er) is a taxpayer whose spouse died in either of the 2 preceding taxable years and who maintains a household that constitutes the principal place of abode of a dependent who is a child or stepchild of the taxpayer and with respect to whom the taxpayer is entitled to a dependency deduction [Sec. 2(a)]. Reg. 1.2-2(c)(1) provides that a dependent’s death during the year will not prevent the taxpayer from qualifying as a surviving spouse (Publication 17). Mrs. W is a qualifying widow and can file as such.

Question 26

Ms. Doe, by herself, maintains her home in which she and her unmarried daughter resided for the entire year. Her daughter is a qualifying child, but does not qualify as her dependent because she assigned the exemption to her ex-husband. Ms. Doe divorced her husband last year. What is Ms. Doe’s best filing status for the current year? A. Qualifying widow. B. Married filing jointly. C. Single. D. Head of household.

Answer 26

Head of household. Answer (D) is correct. The daughter does not have to qualify as Ms. Doe’s dependent for Ms. Doe to qualify as head of household.

Question 27

Which of the following is NOT a requirement you must meet to claim head of household filing status? A. Your spouse did not live in your home during the last 6 months of the tax year. B. You paid more than half of the cost of keeping up your home for the entire year. C. Your home was the main home of your foster child for the entire year. D. You are unmarried or considered unmarried on the last day of the year.

Answer 27

Your home was the main home of your foster child for the entire year. Answer (C) is correct. In determining if a taxpayer qualifies for head of household filing status, the taxpayer is considered unmarried if all the following requirements are met: 1. The taxpayer filed a separate return. 2. The taxpayer paid more than half the cost of keeping up the home for the tax year. 3. The taxpayer’s spouse did not live in the home during the last 6 months of the tax year. 4. The home was, for more than half the year, the main home of the taxpayer’s child, stepchild, or eligible foster child. 5. The taxpayer must be able to claim the child as a dependent. The requirement is that the home be the main home of the child, stepchild, or eligible foster child for more than half the year [Publication 17 and Sec. 2(b)].

Question 28

Which dependent relative does NOT have to live in the same household as the taxpayer claiming head of household filing status? A. Daughter. B. Mother. C. Uncle. D. Sister or brother.

Answer 28

Mother. Answer (B) is correct. Section 2(b) provides head of household status for an unmarried taxpayer who maintains a household that constitutes the principal place of abode of the taxpayer’s father or mother, but only if the taxpayer is entitled to claim the parent as a dependent. The taxpayer is considered as maintaining a household only if (s)he furnishes over half of the cost of maintaining it. In the case of anyone other than the taxpayer’s father or mother, such person(s) must actually occupy the taxpayer’s own household for the taxpayer to be considered a head of household (Publication 17).

Question 29

James and Edna Evans are a childless married couple with no other dependents who lived apart for all of the year. On December 31, they were legally separated under a decree of separate maintenance. Which of the following is the only filing-status choice available to them for the year? A. Married filing joint return. B. Married filing separate return. C. Head of household. D. Single.

Answer 29

Single. Answer (D) is correct. The determination of whether an individual is married is made as of the close of the taxable year, so James and Edna are both single for the current year (Publication 17).

Question 30

Which of the following is a requirement that must be met in determining whether a taxpayer is considered unmarried for head of household filing-status purposes? A. The individual must be divorced or legally separated for over one year. B. An individual must pay less than one-half the cost of keeping up a home for the tax year. C. An individual’s home must be, for at least 6 months, the main home of his child, stepchild, or qualified foster child whom he or the noncustodial parent can properly claim as a dependent. D. An individual’s spouse must not have lived in their home for the entire tax year.

Answer 30

An individual’s home must be, for at least 6 months, the main home of his child, stepchild, or qualified foster child whom he or the noncustodial parent can properly claim as a dependent. Answer (C) is correct. In determining if a taxpayer qualifies for head of household filing status, the taxpayer is considered unmarried if all the following requirements are met: 1. The taxpayer filed a separate return. 2. The taxpayer paid more than half the cost of keeping up the home for the tax year. 3. The taxpayer’s spouse did not live in the home during the last 6 months of the tax year. 4. The home was, for more than half the year, the main home of the taxpayer’s child, stepchild, or qualified foster child. 5. The taxpayer must be able to claim the child as a dependent. Therefore, the answer is correct because the requirement is that the home be the main home of the child, stepchild, or adopted child for more than half the year [Sec. 2(b)]. (Publication 17.)

Question 31

Mr. A, a calendar-year taxpayer, died January 15 of Year 2. His widow, Mrs. A, remarried December 15 of Year 2. The last year for which a joint return may be filed by or for Mr. and Mrs. A is A. Year 1. B. Year 2. C. Year 3. D. Year 4.

Answer 31

Year 1. Answer (A) is correct. The determination of whether an individual is married is made as of the close of the taxable year, except that, if his or her spouse dies during the taxable year, such determination is made as of the time of the death [Sec. 7703(a)]. Since the decedent was married at the time of his death, he is considered married for purposes of filing status. A decedent (through a personal representative) and a surviving spouse may file a joint return under Sec. 6013(a)(2) unless the surviving spouse remarries before year end. Since Mrs. A remarried prior to the end of Year 2, they may not file a joint return for Year 2. The last year they could file a joint return was Year 1 (Publication 17).

Question 32

Mr. Todd, who is 43 years old, has lived apart from his wife since May 2019. For 2019, his two children, whom he can claim as dependents, lived with him the entire year, and he paid the entire cost of maintaining the household. Assuming that Mr. Todd cannot qualify to file a joint return for 2019, he must, nevertheless, file a return if his gross income is at least A. $5 B. $24,400 C. $12,200 D. $18,350

Answer 32

$18,350 Answer (D) is correct. Generally, a taxpayer must file a tax return if the taxpayer’s gross income equals or exceeds his or her standard deduction [Sec. 6012(a)]. Standard deductions in 2019 are $24,400 for married filing jointly, $18,350 for heads of household, and $12,200 for single individuals (Publication 501). A taxpayer who has two children and files as head of household must file a return if his or her gross income equals or exceeds $18,350.

Question 33

Ms. Maple, a single woman age 65, retired in 2019. Prior to her retirement, she received a $6,000 bonus plus $4,850 in wages. After her retirement, she received $9,000 in Social Security benefits. Which of the following is true? A. Ms. Maple does not have to file a 2019 income tax return. B. Ms. Maple has to file a 2019 income tax return. C. Ms. Maple has to file a 2019 income tax return but may exclude the $6,000. D. Ms. Maple has to file a 2019 income tax return but may exclude the $9,000 in Social Security benefits from income.

Answer 33

Ms. Maple does not have to file a 2019 income tax return. Answer (A) is correct. In general, a taxpayer does not have to file a return if his or her gross income is less than his or her standard deduction [Publication 501 and Sec. 6012(a)]. For single individuals who are 65 or over, the standard deduction increases by $1,650. Therefore, the filing threshold will be $13,850 ( $12,200 basic standard deduction + $1,650 additional standard deduction). Ms. Maple’s income does not qualify her Social Security benefits for gross income inclusion in determining her filing requirement.

Question 34

John Stith, whose father died June 15, 2019, is the executor of his father’s estate. John is required to file a final income tax return for his father. When is this return due if he does not file for an extension (ignoring Saturdays, Sundays, and holidays)? A. October 15, 2019. B. March 15, 2020. C. April 15, 2020. D. June 15, 2020.

Answer 34

April 15, 2020. Answer (C) is correct. The final return of a decedent is due by the date on which the return would have been due had death not occurred. Thus, the final return is generally due by April 15 (Publication 17).

Question 35

In which of the following situations is no return required to be filed for 2019? A. Single, filing status single, under age 65, gross income $18,200. B. Married, filing joint status, both spouses under age 65, gross income $29,400. C. Single, filing status single, age 70, gross income $13,450. D. Married, separate filing status, age 65, gross income $10,000.

Answer 35

Single, filing status single, age 70, gross income $13,450. Answer (C) is correct. Generally, a taxpayer must file a tax return if the taxpayer’s gross income equals or exceeds his or her standard deduction [Sec. 6012(a)]. Standard deductions in 2019 are $24,400 for married filing jointly, $12,200 for married filing separately, $18,350 for heads of household, and $12,200 for single individuals. For single individuals or heads of household who are over 65, the standard deduction increases by $1,650. Married taxpayers filing separately must file a return when their gross income equals or exceeds the amount of $5. They are not allowed to use the standard deduction amount (Publication 501). The threshold for a single individual over age 65 is $13,850 [$12,200 standard deduction + $1,650 (65+ additional standard deduction)].

Question 36

Which of the following is true regarding the filing of Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return? A. Filing Form 4868 provides an automatic 2-month extension of time to file and pay income tax. B. Any U.S. citizen who is out of the country on April 15, 2020, is allowed an automatic 6-month extension of time to file his or her 2019 return and pay any federal income tax due. C. Interest is charged on tax not paid by the due date of the return even if an extension is obtained. D. Electronic filing cannot be used to get an extension of time to file.

Answer 36

Interest is charged on tax not paid by the due date of the return even if an extension is obtained. Answer (C) is correct. An automatic extension of 6 months is provided for an individual who files Form 4868 or uses a credit card to make the required tax payment on or before the initial due date. Tax liability must be paid on the original due date of the tax return. Automatic extension for filing the return does not extend time for payment. Interest will be charged from the original due date. If the required payment is made by the regular due date for the return, the return can be filed anytime before the 6-month extension period ends.

Question 37

Which of the following statements is true regarding the filing of a Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, for your 2019 tax return? A. Interest is not assessed on any income tax due if a Form 4868 is filed. B. Form 4868 provides the taxpayer with an automatic additional 8-month extension to file. C. Even though you file Form 4868, you will owe interest and may be charged a late payment penalty on the amount you owe if you do not pay the tax due by the regular due date. D. A U.S. citizen who is out of the country on April 15 will be allowed an additional 12 months to file as long as “Out of the Country” is written across the top of Form 4868.

Answer 37

Even though you file Form 4868, you will owe interest and may be charged a late payment penalty on the amount you owe if you do not pay the tax due by the regular due date. Answer (C) is correct. An automatic extension of 6 months is provided for an individual who files Form 4868 or uses a credit card to make a required tax payment on or before the initial due date. The tax liability, however, must be paid when the return must be filed. Automatic extension for filing the return does not extend time for payment. Interest will be charged from the original due date, and penalties may accrue (Publication 17).

Question 38

Ms. Alexander properly executed a request for an automatic extension of time to file her 2019 tax return. She must file her 2019 return on or before (ignoring Saturdays, Sundays, and holidays) A. April 15, 2020. B. July 15, 2020. C. August 15, 2020. D. October 15, 2020.

Answer 38

October 15, 2020. Answer (D) is correct. An individual may obtain an automatic extension of 6 months for filing Form 1040 if the individual files, on or before the due date of the return, an application (Form 4868) accompanied by a proper estimate of tax due for the year (Publication 17).

Question 39

Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, will provide the taxpayer with the following: A. An automatic extension of 2 months for taxpayers out of the country on April 15. B. An automatic extension of 6 months to pay the taxes due. C. An automatic extension of 6 months to file the return. D. An automatic extension of 8 months to file the return.

Answer 39

An automatic extension of 6 months to file the return. Answer (C) is correct. An automatic extension of 6 months is provided for an individual who files Form 4868 or uses a credit card to make the required tax payment on or before the initial due date (Publication 17).

Question 40

Ensign Beleau, a calendar-year taxpayer, was assigned a post of duty on the U.S.S. Eisenhower. The ship went on a 6-month cruise of the Mediterranean Sea, leaving February 15, 2020. Ensign Beleau did not file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Beleau is automatically granted an extension of time to file his 2019 income tax return and pay any tax due until (ignoring Saturdays, Sundays, and holidays) A. June 15, 2020. B. August 15, 2020. C. October 15, 2020. D. No automatic extension is granted. Beleau must file and pay tax due by April 15, 2020.

Answer 40

June 15, 2020. Answer (A) is correct. A U.S. citizen or resident who, on April 15, is in military or naval service on duty outside the U.S. and Puerto Rico is given an automatic 2-month extension without the necessity of filing Form 4868 (Publication 17).

Question 41

During 2019, Hanya was a nonresident alien engaged in a business in the United States. All of her income was from self-employment. Hanya is a calendar-year taxpayer. When is Hanya’s income tax return due if she does not apply for an extension of time to file (ignoring weekends and holidays)? A. April 15, 2020. B. June 15, 2020. C. August 15, 2020. D. October 15, 2020.

Answer 41

June 15, 2020. Answer (B) is correct. A nonresident alien not subject to wage withholding generally may file a return as late as the 15th day of the 6th month after the close of the tax year (Publication 17).

Question 42

All of the following concerning extension of time to file are correct EXCEPT A. An automatic 6-month extension can be requested by filing Form 4868. B. If the required payment is made by credit card by the regular due date for the return, the return can be filed any time before the 6-month extension period ends. C. Requesting an automatic 6-month extension before the regular due date for the return postpones the requirement to make payment of any tax due. D. A U.S. citizen or resident who is on military or naval duty outside the U.S. (or Puerto Rico) on April 15 is given an automatic 2-month extension without the necessity of filing Form 4868.

Answer 42

Requesting an automatic 6-month extension before the regular due date for the return postpones the requirement to make payment of any tax due. Answer (C) is correct. An individual who is required to file an income tax return is allowed an automatic 6-month extension of time to file the return by filing Form 4868. However, no extension of time is allowed for payment of the tax due. A taxpayer desiring an extension of time to file his or her tax return and avoid the failure to pay penalty must file Form 4868, accompanied by the payment of tax estimated to be owed for the year and not yet paid, by the normal due date of the tax return (Publication 17).

Question 43

Filing Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, gives you A. An extension of time to pay the amount of taxes due. B. A 6-month extension to file the tax return. C. A penalty-free period of 4 months if you cannot pay the taxes due by the filing date. D. No interest on the amount due from the original due date of the return, which for most taxpayers is April 15.

Answer 43

A 6-month extension to file the tax return. Answer (B) is correct. An automatic extension of 6 months to file an income tax return is provided for an individual who files Form 4868 or uses a credit card to make the required tax payment on or before the initial due date. (Publication 17.)

Question 44

Which of the following statements regarding extensions of time to file is true? A. An automatic 2-month extension can be obtained by filing Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. B. An additional automatic 6-month extension can be obtained by filing Form 2688, Application for Additional Extension of Time To File U.S. Individual Income Tax Return. C. A penalty for late payment may still be charged even if an extension is granted. D. An extension request for a Year 1 individual income tax return must be filed by October 15, Year 2.

Answer 44

A penalty for late payment may still be charged even if an extension is granted. Answer (C) is correct. No extension of time is allowed for payment of the tax due. A taxpayer desiring an extension of time to file his or her tax return and avoid the failure to pay penalty must file Form 4868, accompanied by the payment of tax estimated to be owed for the year and not yet paid, by the normal due date of the tax return. A penalty and interest will be charged from the original due date, generally April 15, on any unpaid portion as of that date (Publication 17).

Question 45

Mr. T is age 21, is single, and cannot be claimed as a dependent by another taxpayer. For 2019, he must file a federal income tax return if he had gross income of at least A. $4,200 B. $12,200 C. $1,100 D. $1,650

Answer 45

$12,200 Answer (B) is correct. Generally, a taxpayer must file a return if his or her gross income equals or exceeds his or her standard deduction amount applicable to the taxpayer’s filing status [Sec. 6012(a)(1)]. For a single taxpayer, the standard deduction is $12,200 in 2019 [Sec. 63(c)]. Mr. T must file a tax return if his gross income is at least $12,200 (Publication 501).

Question 46

Mr. and Mrs. X plan to file a joint return for 2019. Neither is over 65 or blind, nor do they have any dependents. What is the amount of gross income required before they must file a return? A. $4,200 B. $25,700 C. $27,000 D. $24,400

Answer 46

$24,400 Answer (D) is correct. In general, a return must be filed if a taxpayer’s gross income equals or exceeds his or her standard deduction amount applicable to the taxpayer’s filing status [Publication 501 and Sec. 6012(a)(1)]. For a joint return, the standard deduction is $24,400 in 2019, and no additional standard deductions are allowed for taxpayers who are not over age 65 or blind. The couple must file a return if their gross income equals or exceeds $24,400.

Question 47

Mr. and Mrs. Jones, both over age 65, elect joint return status. They must file a return for 2019 if their combined gross income equals or exceeds A. $24,400 B. $1 C. $25,700 D. $27,000

Answer 47

$27,000 Answer (D) is correct. In general, a return must be filed if the taxpayer’s gross income equals or exceeds his or her standard deduction [Publication 501 and Sec. 6012(a)]. For a joint return, the basic standard deduction is $24,400 in 2019. In addition, Mr. and Mrs. Jones are allowed two additional standard deductions of $1,300 each for being age 65 or over [Sec. 63(f)]. The couple must file a return if their gross income equals or exceeds $27,000 {$24,400 basic standard deduction + [$1,300 (65+ additional standard deduction) × 2]}.

Question 48

Which of the following taxpayers must file a return for 2019? A. Married taxpayers filing jointly who have income of $24,000 for the year and one child who is a dependent. B. A single taxpayer, age 67, with interest and dividend income of $13,000. C. A single taxpayer, claimed as a dependent by his parents, who earns $12,000 from a part-time job and has no unearned income. D. A taxpayer who files as a head of household with two dependents and who earns $20,000.

Answer 48

A taxpayer who files as a head of household with two dependents and who earns $20,000. Answer (D) is correct. Generally, a taxpayer must file a tax return if the taxpayer’s gross income equals or exceeds his or her standard deduction [Publication 501 and Sec. 6012(a)]. Standard deductions in 2019 are $24,400 for married filing jointly, $18,350 for heads of household, and $12,200 for single individuals. A taxpayer who files as a head of household must file a return if his or her gross income equals or exceeds $18,350.

Question 49

Bryce, who is 44 years old, has lived apart from his wife since May 2019. For 2019, his three children, whom he can claim as dependents, lived with him the entire year, and he paid the entire cost of maintaining the household. Assuming that Bryce cannot qualify to file a joint return for 2019, he must, nevertheless, file a return if his gross income is at least A. $12,200 B. $18,350 C. $4,200 D. $24,400

Answer 49

$18,350 Answer (B) is correct. Generally, a taxpayer must file a tax return if the taxpayer’s gross income equals or exceeds his or her standard deduction [Pub. 501 and Sec. 6012(a)]. Standard deductions in 2019 are $24,400 for married filing jointly, $18,350 for heads of household, $12,200 for single individuals, and $12,200 for married filing separate taxpayers. A taxpayer who has three children and files as a head of household must file a return if his or her gross income equals or exceeds $18,350.

Question 50

Midshipman Mike, a calendar-year taxpayer, was assigned a post of duty on the U.S.S. Enterprise. The ship went on a 6-month cruise of the Mediterranean Sea, leaving February 15, Year 2. Mike did not file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Mike is automatically granted an extension of time to file his Year 1 income tax return and pay any tax due until A. October 15, Year 2. B. August 15, Year 2. C. June 15, Year 2. D. No automatic extension is granted. Mike must file and pay tax due by April 15, Year 2.

Answer 50

June 15, Year 2. Answer (C) is correct. A U.S. citizen or resident who, on April 15, is in military or naval service on duty outside the U.S. and Puerto Rico is given an automatic 2-month extension without the necessity of filing Form 4868 (Publication 17).

Question 51

During 2019, student D, who is single, was claimed as a dependent by his parents. D earned $1,500 from a part-time job at a gas station. How much interest or other unearned income would D have to receive at a minimum to require him to file an income tax return for 2019? A. $1 B. $351 C. $12,201 D. $10,000

Answer 51

$351 Answer (B) is correct. In general, an individual must file an income tax return if his or her gross income equals or exceeds his or her standard deduction [Sec. 6012(a)]. But in the case of an individual who is claimed as a dependent on another’s tax return, (s)he must file if unearned income exceeds $1,100 or total income exceeds the standard deduction. For such a person, the standard deduction is limited to the greater of (1) $1,100 or (2) the individual’s earned income plus $350 [Sec. 63(c)(5)]. Since D was claimed as a dependent by his parents, his standard deduction is limited to his earned income of $1,500 plus $350 ($1,850). Therefore, if D receives $351 of unearned income, his total income will exceed his standard deduction, and he must file a tax return.

Question 52

All of the following are true EXCEPT A. A brother-in-law must live with the taxpayer the entire year to be claimed as a dependent even if the other tests are met. B. A son, age 21, was a full-time student who earned $4,300 from his part-time job. The money was used to buy a car. Even though he earned $4,300, his parents can claim him as a dependent if the other dependency tests were met. C. For each person claimed as a dependent, the Social Security number, adoption taxpayer identification number, or individual taxpayer identification number must be listed. D. If a married person files a separate return, (s)he cannot claim his or her spouse as a dependent even if the spouse had no gross income and was not the dependent of another taxpayer.

Answer 52

A brother-in-law must live with the taxpayer the entire year to be claimed as a dependent even if the other tests are met. Answer (A) is correct. The relationship requirement is satisfied by existence of an extended (by blood) or immediate (by blood, adoption, or marriage) relationship. The relationship need be present to only one of the two married persons who file a joint return. Any relationship established by marriage is not treated as ended by divorce or by death. An individual must satisfy either a relationship or a residence requirement but does not have to satisfy both (Publication 501).

Question 53

Section 152 of the Code contains two sets of tests, “qualifying child” and “qualifying relative,” either of which may be applied to determine whether an individual has dependency status and may therefore be claimed as a dependent by a taxpayer. Which of the following is NOT a test under both classifications? A. Citizenship test. B. Residence test. C. Joint return test. D. Gross income test.

Answer 53

Gross income test. Answer (D) is correct. The four tests under the “qualifying child” classification are (1) relationship, (2) age, (3) principal residence, and (4) support. The four tests under the “qualifying relative” classification are (1) relationship or residence, (2) gross income, (3) support, and (4) dependency. Both the qualifying child and qualifying relative tests require that the dependent not file a joint return, meet the citizenship requirement, and provide his or her taxpayer identification number. The gross income test only applies to the qualifying relative (Publication 501).

Question 54

Jill and John, married filing jointly, have provided more than 50% of the support for two minor children and Jill’s mother. The children each had interest income of less than $700. Jill’s mother received a taxable pension of $2,750, dividends of $1,500, and interest of $1,000. How many dependents can the taxpayers claim on their 2019 tax return? A. 1 B. 3 C. 2 D. 0

Answer 54

2 Answer (C) is correct. Jill and John receive one exemption for each dependent they claim. The children meet the definition of “qualifying child.” There are five requirements that a qualifying relative must meet to be classified as a dependent of the taxpayer. 1. The taxpayer must provide more than 50% of the dependent’s support. 2. The dependent must earn less than $4,200 or be the taxpayer’s child that meets one of the following requirements: a. Is under age 19 b. Is under age 24 and full-time student 3. The dependent must be related to or reside with the taxpayer. 4. If the dependent is married, (s)he must not file a joint return. 5. The dependent must be a U.S. citizen, national, resident, or must reside in Canada or Mexico (Publication 17).

Question 55

John is the sole support of his mother. To claim her as a dependent on his Form 1040 for 2019, she must be a resident of which of the following countries for some part of calendar year 2019? A. United States. B. Mexico. C. Canada. D. Any of the answers are correct.

Answer 55

Any of the answers are correct. Answer (D) is correct. In order to qualify as a dependent, an individual must be a citizen, national, or resident of the United States or a resident of Canada or Mexico at some time during the calendar year in which the tax year of the taxpayer begins (Publication 17). Therefore, John’s mother would qualify as a dependent if she was a resident of Canada, Mexico, or the United States for some part of the 2019 calendar year.

Question 56

Thomas and Rebecca are the parents of four children, ages 10, 12, 15, and 22. Their 22-year-old child is a full-time student with income of $5,950. Thomas and Rebecca provided more than 50% of the support for all their children. If they file a joint return, how many dependents can they claim for the above family members? A. 3 B. 6 C. 4 D. 2

Answer 56

4 Answer (C) is correct. For each child to qualify as a dependent, the following tests must be met in addition to the taxpayer’s providing the correct Taxpayer Identification Number (TIN). 1. Relationship – The child must be the taxpayer’s son, daughter, stepson, stepdaughter, brother, sister, stepbrother, stepsister, or any descendant of any such relative. Adopted individuals and eligible foster children meet the relationship test. 2. Age – The child must be under the age of 19 or under the age of 24 and a full-time student. 3. Principal Residence – The child must have the same principal place of abode as the taxpayer for more than half of the year. 4. Not Self-Supporting – The child must not have provided over half of his or her own support. Since Thomas and Rebecca provided more than 50% of the support for all of their children and their 22-year-old child is a full-time student, each child qualifies as a dependent. Thus, Thomas and Rebecca can claim each of their four children as a dependent (Publication 17).

Question 57

In meeting the “gross income” test for claiming his father as a dependent, a taxpayer had to consider the income received by his father. This income included gross rents of $4,000 (expenses were $2,000), mutual fund municipal bond interest of $1,200, corporate bond interest of $1,000, dividends of $1,400, wages of $2,000, and Social Security of $4,000. What is the father’s gross income for dependency test purposes? A. $2,000 B. $8,400 C. $9,600 D. $11,600

Answer 57

$8,400 Answer (B) is correct. Gross income used for the test of dependency is defined in Sec. 61 and Publication 501. It is all income except that specifically excluded in the code. Some of the exclusions are listed in Sec. 101-139. A few examples of income that are excluded from gross income are nontaxable scholarships, tax-exempt bond interest, and nontaxable Social Security benefits. The father does not qualify as a dependent as he has more than $4,200 in gross income ($4,000 rent + $1,000 corporate bond interest + $1,400 dividends + $2,000 wages).

Question 58

In meeting the gross income test for claiming his father as a dependent, Doug considered the income received by his father. This income included gross rents of $4,000 (expenses were $2,000), municipal bond interest of $1,200, dividends of $1,400, and Social Security of $4,000. What is Doug’s father’s gross income for dependency test purposes? A. $3,400 B. $5,400 C. $9,400 D. $8,600

Answer 58

$5,400 Answer (B) is correct. Gross income defined for the purposes of the gross income dependency test is all income that is received but is not exempt from tax. In addition, any expenses from rental property should not be deducted for the purposes of this computation. Any tax-exempt income, such as Social Security, is not included in gross income for this purpose (Publication 501). Doug should only consider the gross rents and the dividends in the computation of gross income from his father for the purposes of the gross income for dependency test. Thus, the total income of Doug’s father is $5,400 ($4,000 + $1,400).

Question 59

John and Joanne are the sole support of the following individuals, all U.S. citizens, none of whom lives with them. None of these individuals files a joint return or has any gross income. Jennie, John’s mother Julie, Joanne’s stepmother Jonathan, father of John’s first wife How many dependents may John and Joanne claim on their joint return? A. 3 B. 2 C. 1 D. 0

Answer 59

3 Answer (A) is correct. To qualify for dependency, the taxpayer must provide over 50% of the support of a U.S. citizen who meets certain relationship tests stated in Sec. 152(a). Section 152 allows dependency for fathers, mothers, stepfathers, and stepmothers. Relationships established by marriage are not ended by death or divorce (Publication 501). Thus, each of the individuals listed qualifies under the relationship test of Sec. 152.

Question 60

Luis and Rosa, citizens of Costa Rica, moved in 2017 to the United States, where they both lived and worked. In 2019, they provided the total support for their four young children (all under the age of 10). Two children lived with Luis and Rosa in the U.S., one child lived with his aunt in Mexico, and one child lived with her grandmother in Costa Rica. None of the children earned any income. All of the children were citizens of Costa Rica. The child in Mexico was a resident of Mexico, and the child in Costa Rica was a resident of Costa Rica. How many total dependents may Luis and Rosa claim on their 2019 joint income tax return? A. 0 B. 2 C. 3 D. 4

Answer 60

3 Answer (C) is correct. In order to qualify as a dependent, an individual must be a citizen, national, or resident of the United States or a resident of Canada or Mexico at some time during the calendar year in which the tax year of the taxpayer begins (Publication 501). Therefore, Luis and Rosa may claim the two children living in the United States and the child living in Mexico as dependents, for a total of three dependents.

Question 61

For 2019, Mr. and Mrs. Randall filed a joint return. During the year, they provided more than 50% of the support for the following individuals: I. The Randalls’ single son, age 18, was a full-time student for 4 months. He lived with them all year and earned $5,150, which was spent on his support. II. The Randalls’ single daughter, age 25 and a full-time student for 12 months, lived with them all year. She earned $2,950, which was spent on her support. III. The Randalls’ granddaughter, age 3, lived with them from June through December. IV. Mrs. Randall’s mother, age 68, a Canadian citizen living in Canada, received Social Security benefits of $5,250. V. Mrs. Randall’s cousin, age 16, lived with them all year and earned $1,750, which was spent on her support. How many dependents may Mr. and Mrs. Randall claim on their 2019 tax return? A. 2 B. 3 C. 4 D. 5

Answer 61

5 Answer (D) is correct. To qualify as a dependent, the taxpayer must provide over 50% of the support of a U.S. citizen who meets certain relationship or residence tests stated in Sec. 152(a). Each of the individuals listed qualifies under the relationship test of Sec. 152, except for the cousin. However, the cousin meets the residence requirement because (s)he lived with the taxpayers for the entire year. Section 151(c) imposes additional limitations on the dependency claim. These include a limit on gross income for each dependent of less than the statutory amount ( $4,200), unless (s)he is a child of the taxpayer and is under 19 years of age or a full-time student under 24 years of age (Publication 501). Mr. and Mrs. Randall are entitled to one dependency claim each for the single son because he is under 19, their single daughter because she lived with them all year, the granddaughter because she is under 19, and Mrs. Randall’s cousin because she was a member of the taxpayer’s household for the entire year. Mrs. Randall’s mother also qualifies as a dependent because there is an exception that allows non-U.S. citizens to be claimed as dependents if they are residents of Canada or Mexico.

Question 62

For 2019, Mr. and Mrs. White filed a joint return. During 2019, they provided more than 50% of the support for the following individuals, all of whom are U.S. citizens: I. The Whites’ single daughter, age 22, was a full-time student for 8 months. During the summer, she earned $5,350, which was spent on her support. II. Mr. White’s cousin, age 15, lived with them from May to December. III. Mr. White’s widowed mother, age 70, lived with them and had no income. IV. The Whites’ single daughter, age 20, lived with them the full year. She had gross income of $5,550. V. Mrs. White’s widowed father, age 64, lived alone, and his sole source of income was Social Security of $5,450. VI. The Whites’ legally adopted son, age 10, lived with them from February to December. How many dependents may Mr. and Mrs. White claim on their 2019 tax return? A. 3 B. 4 C. 5 D. 6

Answer 62

4 Answer (B) is correct. To qualify as a dependent, the taxpayer must provide over 50% of the support of a U.S. citizen who meets certain relationship tests stated in Sec. 152(a). Each of the individuals listed qualifies under the relationship test of Sec. 152 except for Mr. White’s cousin because (s)he was not a member of the household for the entire year. Section 151(c) imposes additional limitations on the dependency claim. These include a limit on gross income for each dependent of less than the statutory amount ( $4,200), unless (s)he is a child of the taxpayer and is under 19 years of age or a full-time student under 24 years of age. The dependency claim is not allowed if a dependent has filed a joint return with his or her spouse for the taxable year unless the joint return is filed solely to receive a refund (Publication 501). Mr. and Mrs. White are entitled to claim as dependents their single daughter who is a full-time student, their legally adopted son, Mr. White’s widowed mother, and Mrs. White’s widowed father, for a total of four. Each qualifies as a dependent by passing all the dependency tests. Social Security is not included in gross income at his level of income, so Mrs. White’s father does not fail the gross income test. The Whites are not entitled to a dependency claim for their 20-year-old single daughter, since she earned more income during the year than the allowed amount ( $4,200 in 2019), or for Mr. White’s cousin, who fails to qualify as a member of the extended family and did not meet the residence requirement of an entire tax year (and is not a dependent).

Question 63

Holly and Harp Oaks were divorced in 2018. The divorce decree was silent regarding dependency for their 12-year-old daughter, June, for 2019. Holly has legal custody of her daughter and did not sign a statement releasing the dependent claim. Holly earned $8,150, and Harp earned $80,000. June had a paper route and earned $5,150. June lived with Harp 4 months of the year and with Holly 8 months. Who may claim the dependent for June in 2019? A. June may, since she had gross income over $4,200 and files her own return. B. Since June lived with both Holly and Harp during the year, they both may claim her as a dependent. C. Holly may, since she has legal custody and physical custody for more than half the year. D. Harp may, since he earned more than Holly and therefore is presumed to have provided more than 50% of June’s support.

Answer 63

Holly may, since she has legal custody and physical custody for more than half the year. Answer (C) is correct. A divorced or separated individual need not meet the support test if (s)he and the (ex-)spouse met the following conditions: 1. Provided more than 50% of the support 2. Had (between them) custody for more than 50% of the year 3. Lived apart for the last half of the year 4. Did not have a multiple support agreement in effect The parent having custody for more than 50% of the year is entitled to claim the dependent. But the dependent may be claimed by the noncustodial parent if there is an agreement signed by both parents and attached to the noncustodial parent’s return. Since there was no agreement or statement that would allow Harp to claim the dependent and Holly has custody for the majority of the year, Holly may claim June as a dependent (Publication 501).

Question 64

Under Pete’s divorce decree, he must pay $500 a month to Laura, his former spouse, for the support of their two children. In 2018, he paid $5,500 instead of the $6,000 he was required to pay. In 2019, he paid $6,000 child support for 2019 and $500 towards child support he neglected to pay in 2018. For purposes of determining whether Pete may claim his children as dependents, which of the following statements accurately represents the amount of support attributable to each year? A. $5,500 for 2018; $6,500 for 2019. B. $6,000 for 2018; $6,000 for 2019. C. $5,500 for 2018; $6,000 for 2019. D. $5,500 for 2018; $6,000 for 2019; $500 for 2017.

Answer 64

$5,500 for 2018; $6,000 for 2019. Answer (C) is correct. A taxpayer must furnish one-half of the total support provided during the calendar year before claiming a dependent under the qualifying relative rules. Amounts received as arrearages in payment for support of a child for a previous year are not considered contributions in the current year in determining whether the husband furnished more than half of the support for the taxable year. There are three exceptions to the rule about claiming the dependent: first, when there is a multiple support agreement; second, when a parent releases his or her right to the dependent with Form 8332; and finally, when the exception applies to certain pre-1985 divorce decrees (Publication 501). Authors’ note: The amount Pete pays each year is irrelevant if the children are qualifying children of the former spouse and he has Form 8332 signed by his former spouse.

Question 65

For 2019, Mr. and Mrs. Garcia filed a joint return. During 2019, they provided more than 50% of the support for the following individuals, all of whom are U.S. citizens. Mr. Garcia’s Aunt Maria, age 63, lived with them all year and had no income. Aunt Maria’s single daughter, Julia, lived with the Garcias all year. Julia worked and earned $2,000, her only income for the year. The Garcias’ son, age 21, was a full-time student for 9 months. During the summer, he worked and earned $4,500. How many dependents may Mr. and Mrs. Garcia claim on their 2019 tax return? A. 0 B. 1 C. 3 D. 5

Answer 65

3 Answer (C) is correct. To qualify as a dependent, the taxpayer must provide over 50% of the support of a U.S. citizen who meets certain relationship tests stated in Sec. 152(a). Each of the individuals listed qualifies under the relationship test, including Julia because she was a member of the household for the entire year (not because she is Mr. and Mrs. Garcia’s cousin). Section 151(c) imposes additional limitations on the dependency claim. These limitations include a limit on gross income for each dependent of less than the statutory amount ( $4,200), unless (s)he is a child of the taxpayer and is under 19 years of age or a full-time student under 24 years of age. Mr. and Mrs. Garcia are entitled to claim Aunt Maria; Julia, because she did not earn more than the allowed amount; and their son, because he is a full-time student under 24 years of age (Publication 501).

Question 66

Mrs. Brown had taxable income of $600, Social Security benefits of $1,800, and tax-exempt interest of $200. She used all of these amounts for her own support. Her son paid the rest of her support. Which of the following amounts of support paid by her son would meet the support test to allow him to claim Mrs. Brown as a dependent? A. $900 B. $1,800 C. $2,100 D. $2,700

Answer 66

$2,700 Answer (D) is correct. A dependent under the qualifying relative rules is defined in Sec. 152(a), which requires the taxpayer to provide over one-half of the support of the individual. Mrs. Brown’s son must give her more than $2,600 ($600 + $1,800 + $200) of support in order to satisfy this requirement (Publication 501).

Question 67

Ada lived with her son Robert and his wife Barbara. Ada’s only source of income was a $1,500 fully taxable pension, which she spent on clothes and recreation. Robert and Barbara paid Ada’s medical and drug expenses of $600 for the year. Robert and Barbara’s total food expense for the household was $6,000. The fair rental value of the lodging provided Ada was $1,200 for the year, based on the cost of similar room facilities. What was Ada’s total support for the year for purposes of determining whether Robert and Barbara can claim Ada as a dependent? A. $1,800 B. $3,300 C. $5,300 D. None of the answers are correct.

Answer 67

$5,300 Answer (C) is correct. A taxpayer must furnish more than one-half of the total support provided during the calendar year before claiming a dependent under the qualifying relative rules (Reg. 1.152-1 and Publication 501). Total support is determined on a yearly basis and is the sum of (1) the fair rental value of lodging, (2) the costs of all items of expense paid out directly by or for the benefit of the dependent, and (3) a proportionate share of expenses incurred in supporting the whole household. Ada’s total support for the year is $5,300 [$600 medical expenses + $1,200 lodging + 1/3 ($6,000) + $1,500 clothes/recreation].

Question 68

Don and Joyce have adjusted gross income of $85,000. Their two children, Mary, age 14, and David, age 20 (who completed his education in the prior year), lived with them all year. Mary had interest income of $300. David had interest income of $600 and wages of $ 7,200. The parents provided over 50% of the support of both children. How many dependents can Don and Joyce claim? A. 0 B. 1 C. 2 D. 3

Answer 68

1 Answer (B) is correct. An individual’s claim of dependents is the sum of each qualified dependent. Sec. 151(c) imposes additional limitations on the dependency claim. These include a limit on gross income for each dependent of less than the statutory amount ( $4,200), unless (s)he is a child of the taxpayer and is under 19 years of age or a full-time student under 24 years of age. Mary qualifies as a dependent because she is under 19 years of age. However, David does not qualify as a qualifying child because he is over 19 and not a student, and he is not a qualifying relative because his gross income exceeds $4,200. Therefore, Don and Joyce are entitled to claim one dependent (Publication 501).

Question 69

With regard to claiming a dependent, all of the following statements are true EXCEPT A. A person does not meet the member-of-the-household test if at any time during the tax year the relationship between the taxpayer and that person violates local law. B. A person who died during the year, but was a member of your household until death, will meet the member-of-the-household test. C. To meet the citizenship test, a person must be a U.S. citizen or resident, or a resident of Canada or Mexico. D. In calculating a person’s total support, do not include tax-exempt income used to support that person

Answer 69

In calculating a person’s total support, do not include tax-exempt income used to support that person. Answer (D) is correct. A taxpayer must furnish more than one-half of the total support provided during the calendar year before claiming the person as a dependent. The support may come from taxable income, tax-exempt receipts, or loans (Publication 501).

Question 70

For the year, Mr. and Mrs. Cunningham filed a joint return. During the year, they provided more than 50% of the support for the following individuals: The Cunninghams’ single son, age 20, lived with them all year and earned $5,450, which was spent on his support. The Cunninghams’ single daughter, age 28 and a full-time student for 12 months. She earned $5,250, which was spent on her support. Mrs. Cunningham’s mother, age 68, a Mexican citizen living in Mexico, received Social Security benefits of $5,450. How many dependents may Mr. and Mrs. Cunningham claim on their tax return? A. 0 B. 1 C. 2 D. 3

Answer 70

1 Answer (B) is correct. To qualify as a dependent, the taxpayer must provide over 50% of the support of a U.S. citizen who meets certain relationship tests stated in Sec. 152(a). Each of the individuals listed qualifies under the relationship test of Sec. 152. Section 151(c) imposes additional limitations on the dependency claim. These include a limit on gross income for each dependent of less than the statutory amount ( $4,200), unless (s)he is a child of the taxpayer and is under 19 years of age or a full-time student under 24 years of age. Mr. and Mrs. Cunningham are entitled to claim Mrs. Cunningham’s mother as a dependent because there is an exception that allows non-U.S. citizens to be claimed as dependents if they are residents of Canada or Mexico. The Cunninghams’ son does not qualify because he earns more money than the allowed amount. The daughter does not qualify because she is over 24 years old and earns more than the allowed amount (Publication 501).

Question 71

Mr. and Mrs. Green filed a joint return. During the year, they provided more than 50% of the support for the following individuals, all of whom are U.S. citizens: The Greens’ daughter, age 23, was a full-time student for 8 months. During the summer, she earned $5,000, which was spent on her support. Mr. Green’s cousin, age 16, lived with them from March through December. Mr. Green’s widowed mother, age 70, lived with them and had no income. The Greens’ daughter, age 22, lived with them the full year. She had gross income of $4,500. Mrs. Green’s widowed father, age 64, lived alone, and his sole source of income was Social Security of $4,600. How many dependents may Mr. and Mrs. Green claim on their tax return? A. 0 B. 3 C. 4 D. 5

Answer 71

3 Answer (B) is correct. To qualify as a dependent, the taxpayer must provide over 50% of the support of a U.S. citizen who meets certain relationship or residence tests stated in Sec. 152(a). Each of the individuals listed qualifies under the relationship test of Sec. 152 except for Mr. Green’s cousin because (s)he was not a member of the household for the entire year. Section 151(c) imposes additional limitations on the dependency claim. These include a limit on gross income for each dependent of less than the statutory amount, unless (s)he is a child of the taxpayer and is under 19 years of age or a full-time student under 24 years of age. The dependency claim is not allowed if a dependent has filed a joint return with his or her spouse for the taxable year unless the joint return is filed solely to receive a refund. Mr. and Mrs. Green are entitled to claim their 23-year-old daughter because she is a full-time student, their widowed mother, and Mrs. Green’s father because Social Security is not included in determining the gross income limit. The cousin does not qualify as a member of the household, and the 22-year-old daughter does not qualify because her income exceeds the allowed amount (Publication 501).

Question 72

Which of the following is included in determining the total support of a dependent? A. Fair rental value of lodging provided. B. Allocable portion of mortgage payment on lodging facility. C. Social Security benefits added to savings account. D. Life insurance premiums.

Answer 72

Fair rental value of lodging provided. Answer (A) is correct. A taxpayer must provide over one-half of the support for a person to be considered a dependent [Sec. 152(a)]. The term support includes food, shelter, clothing, medical and dental care, education, and other items contributing to the individual’s maintenance and livelihood [Reg. 1.152-1(a)(2)]. Shelter or lodging is determined as the fair rental value of the room, apartment, or house in which the person lives (Publication 501).

Question 73

All of the following are included in calculating the total support of a dependent EXCEPT A. Child care even if the taxpayer is claiming the credit for the expense. B. Amounts veterans receive under the GI bill for tuition and allowances while in school. C. Medical insurance benefits, including basic and supplementary Medicare benefits received. D. Tax-exempt income, savings, or borrowed money used to support a person.

Answer 73

Medical insurance benefits, including basic and supplementary Medicare benefits received. Answer (C) is correct. A taxpayer must provide over one-half of the support for a person to be considered a dependent [Sec. 152(a)]. The term support includes food, shelter, clothing, medical and dental care, education, and other items contributing to the individual’s maintenance and livelihood [Reg. 1.152-1(a)(2)]. Although medical care is an item of support, medical insurance benefits are not included. Medical insurance premiums are included (Publication 501).

Question 74

Jim Planter, who reached age 65 on January 1 of the current year, filed a joint return for the year with his wife, Rita, age 50. Mary, their 21-year-old daughter, was a full-time student at a college until her graduation on June 2 of the current year. The daughter had $8,300 of income and provided 25% of her own support during the year. In addition, during the year the Planters were the sole support for Rita’s niece, who had no income and resided with the Planters. How many dependents should the Planters claim on their current-year tax return? A. 0 B. 1 C. 2 D. 4

Answer 74

2 Answer (C) is correct. The Planters are entitled to claim a dependency exemption for both Mary and the niece because Sec. 151(c) provides it for each dependent whose gross income for the taxable year is less than the statutory amount ( $4,200 in 2019) or who is a child of the taxpayer and is a full-time student (under age 24) at an educational organization during at least 5 months of the taxable year. Thus, the Planters are entitled to claim two dependents (Publication 501).

Question 75

Mr. and Mrs. P are filing a joint return for the current year. They have three children. Ben is 7 and has no income. Marie, who is 18, earned $2,500 from a part-time job. James, who is 25 and attends college as a full-time student, earned $5,150 during the summer. Mr. and Mrs. P provide over one-half of their children’s support. Mr. P’s mother also lives with them but is self-supporting. How many dependents can Mr. and Mrs. P claim on their current-year return? A. 1 B. 2 C. 3 D. 4

Answer 75

2 Answer (B) is correct. Section 151(c) allows a claim for each dependent whose gross income for the taxable year is less than the statutory amount ( $4,200 in 2019) or who is a child of the taxpayer and either has not attained the age of 19 or is a student under age 24. Mr. and Mrs. P are not permitted to claim Mr. P’s mother because she is not a dependent (she is self-supporting). They are permitted to claim their son Ben and daughter Marie, since neither has attained age 19. James is not a qualifying child because he is not under 24. He is not a qualifying relative because he earned more than $4,200 and is not a student under 24. The Ps are allowed to claim two dependents (Ben and Marie).

Question 76

In the current year, Sam Dunn provided more than half the support for his wife, his father’s brother, and his cousin. Sam’s wife was the only relative who was a member of Sam’s household. None of the relatives had any income, nor did any of them file an individual or a joint return. All of these relatives are U.S. citizens. Which of these relatives should be claimed as a dependent or dependents on Sam’s current-year joint return? A. Only his wife. B. Only his father’s brother. C. Only his cousin. D. His wife, his father’s brother, and his cousin.

Answer 76

Only his father’s brother. Answer (B) is correct. Section 152(a) lists those relatives who may be claimed as dependents if they receive over half of their support from the taxpayer. The taxpayer’s uncle is included in this list, so Sam’s father’s brother may be claimed by him as a dependent (Publication 501).

Question 77

During the current year, Robert Moore, who is 50 years old and single, maintained his home in which he and his widowed father, age 75, resided. His father had $3,150 interest income from a savings account and also received $3,000 from Social Security during the current year. Robert provided 60% of his father’s total support for the current year. What is Robert’s filing status for the current year, and how many dependents should he claim on his tax return? A. Head of household and one dependent. B. Single and one dependent. C. Head of household and zero dependents. D. Single and zero dependents.

Answer 77

Head of household and one dependent. Answer (A) is correct. Robert’s father has less than $4,200 of gross income in the current year, so he qualifies as Robert’s dependent [Sec. 151(c)(1)]. Only the interest income is considered when determining the amount of gross income (Publication 501). Since his father qualifies as a dependent, Robert qualifies for head of household filing status [Sec. 2(b)]. Robert may file as a head of household with one dependent (his father).

Question 78

For 2019, Mr. and Mrs. Taxpayer filed a joint return. During 2019, they provided more than 50% of the support for the following individuals, all of whom are U.S. citizens: I. The Taxpayers’ single daughter, age 22, was a full-time student for 8 months. During the summer, she earned $4,350, which was spent on her support. II. Mr. Taxpayer’s cousin, age 16, lived with them from May to December. III. Mr. Taxpayer’s widowed mother, age 72, lived with them and had no income. IV. The Taxpayers’ single daughter, age 19, lived with them the full year. She had gross income of $3,650. V. Mrs. Taxpayer’s widowed father, age 64, lived alone, and his sole source of income was Social Security of $5,650. VI. The Taxpayers’ legally adopted son, age 10, lived with them from February to December. How many dependents may Mr. and Mrs. Taxpayer claim on their 2019 tax return? A. 5 B. 4 C. 3 D. 6

Answer 78

5 Answer (A) is correct. To qualify as a dependent, the taxpayer must provide over 50% of the support of a U.S. citizen who meets certain relationship tests stated in Sec. 152(a). Each of the individuals listed qualifies under the relationship test of Sec. 152, except for Mr. Taxpayer’s cousin because (s)he was not a member of the household for the entire year. Section 151(c) imposes additional limitations on the dependency claim. These include a limit on gross income for each dependent of less than the statutory amount ( $4,200), unless (s)he is a child of the taxpayer and is under 19 years of age or a full-time student under 24 years of age. The dependency claim is not allowed if a dependent has filed a joint return with his or her spouse for the taxable year unless the joint return is filed solely to receive a refund. Mr. and Mrs. Taxpayer are entitled to claim their single daughter who is a full-time student, their legally adopted son, their single daughter who lived with them, Mr. Taxpayer’s widowed mother, and Mrs. Taxpayer’s widowed father, for a total of five dependents. Each qualifies as a dependent by passing all the dependency tests. Social Security is not included in gross income at his level of income, so Mrs. Taxpayer’s father does not fail the gross income test. The Taxpayers are entitled to claim their 19-year-old daughter because she earned less income during the year than the allowed amount ( $4,200 in 2019). Since she is 19 (i.e., over 18) and not a student, she does not qualify as a child but does as a relative. The Taxpayers are not entitled to claim Mr. Taxpayer’s cousin, who fails to qualify as a member of the extended family (and is not dependent on them) (Publication 501).

Question 79

Paula filed a separate return and paid more than half the cost of keeping up her home. Her spouse did not live in her home during the last 6 months of the tax year. Which one of the following dependents would qualify Paula to file as head of household? A. Paula’s son, who lived with her but was absent from her home for 9 months during the year while attending boarding school. B. Paula’s uncle, whom she can claim as a dependent and whose main home during the current year was a home for the elderly for which Paula paid more than one-half the cost. C. Paula’s married son, who could properly be claimed as a dependent on his father’s return only. D. Paula’s sister, whom Paula cannot claim as a dependent and who lived with Paula until she died in May.

Answer 79

Paula’s son, who lived with her but was absent from her home for 9 months during the year while attending boarding school. Answer (A) is correct. In determining if a married taxpayer is considered unmarried and thus qualifies for head of household filing status, the taxpayer’s home must be, for more than half the year, the main home of the taxpayer’s child, stepchild, or adopted child whom the taxpayer can properly claim as a dependent. However, the taxpayer can still meet this test if the taxpayer cannot claim the dependent only because the noncustodial parent is allowed to claim the dependent. Time spent at school is deemed temporary and does not apply to the 6-month test (Publication 501).

Question 80

All of the following qualify as a dependent EXCEPT A. Your deceased wife’s stepmother, who lived with you for 7 months during the tax year. She had no income and filed no tax return. You provided more than half of her total support. B. Your son who filed a joint return with his wife to receive a refund of all his withholding. No tax liability would have been due even if they had filed separate returns. All other dependent tests are met. C. Your 23-year-old daughter who is not a student and earned $4,350. She lived with you all year, and you provided more than half of her total support. D. Your 17-year-old niece who is a resident of Canada but lived with you for 10 months. She earned $500 during the summer, and you provided more than half of her total support.

Answer 80

Your 23-year-old daughter who is not a student and earned $4,350. She lived with you all year, and you provided more than half of her total support. Answer (C) is correct. Section 151(c) imposes additional limitations on the dependency claim. These include a limit on gross income for each dependent of less than the statutory amount ( $4,200), unless (s)he is a child of the taxpayer and is under 19 years of age or a full-time student under 24 years of age. Gross income of the individual (to be claimed as a dependent) must be less than the amount of the allowed amount ( $4,200 for 2019). The individual is over 19, is not a student, and earns over $4,200. Hence, the daughter does not qualify as a dependent (Publication 501).

Question 81

Which of the following forms is used to claim a dependent when there is more than one eligible person who can claim the dependent? A. Form 2555 (calculating Foreign Earned Income and Housing exclusion). B. Form 2106 (reporting Employee Business Expenses). C. Form 2120 (Multiple Support Declaration). D. Form 8282 (Donee Information Return; sell $500 donated property within 3 years).

Answer 81

``` Form 2120 (Multiple Support Declaration). Answer (C) is correct. Form 2120, Multiple Support Declaration, is used to claim a dependent when there is more than one eligible person. The person claiming the dependent must be eligible to claim the dependent and must provide more than 10% of the support. No other person may provide more than 50% of the support, and each other person in the group who provided more than 10% of the support must sign a written consent filed with the return of the person who claims the dependent. ```

Question 82

When can a minor’s income be taxed at the ordinary and capital gain rates of estates and trusts or the parent’s marginal rate? A. When a child has any income and is under age 18. B. When a child has net unearned income regardless of his or her age. C. When a child has unearned income and is under age 18. D. When a child has net unearned income and is under age 18 with at least one living parent.

Answer 82

When a child has net unearned income and is under age 18 with at least one living parent. Answer (D) is correct. For 2018 and 2019, net unearned income of a child is taxed at either the parent’s marginal rate or the ordinary and capital gain rates of estates and trusts, whichever the taxpayer chooses. For this purpose, a minor is any child under 18 years of age at the end of the tax year, or 18 (under 24 and a full-time student) and not having earned income in excess of one-half of his or her support. The provision applies to net unearned income, which is specially defined (Publication 17).

Question 83

Jamie is 13 years old. She received income in the current year from the following sources: Babysitting for neighbor---------------------------------------$80 A trust created and funded by her grandparents-2,000 Dividends from stocks given to her by her parents-200 Interest on a bank account (deposits from last year’s babysitting)-----------------------------------------------------------50 What is Jamie’s unearned income for the year? A. $200 B. $2,200 C. $2,250 D. $2,330

Answer 83

$2,250 Answer (C) is correct. Unearned income is simply income that is not earned. The only earned income of Jamie is the $80 from babysitting for neighbors. All the rest of the income is considered unearned income. The source of the unearned income and whether it was from assets provided by third parties or from parents does not matter. Unearned income may commonly come from a trust, from a bank account, or from assets held by a custodian or guardian under the Uniform Gifts to Minors Act. Jamie’s unearned income is $2,250 ($2,000 from the trust + $200 from dividends + $50 interest). (Publication 17.)

Question 84

Marcy, age 12, earned $400 from babysitting during 2019. Her parents claim her as a dependent. She also had interest and dividends of $2,700 during the year. She did not itemize deductions. What is her net unearned income for 2019? A. $3,100 B. $2,700 C. $1,600 D. $500

Answer 84

$500 Answer (D) is correct. Net unearned income is defined in Sec. 1(g)(4) as unearned income less the sum of (1) $1,100, plus (2) the greater of $1,100 or, if the child itemizes, the amount of allowable deductions directly connected with the production of the unearned income. However, unearned income may not exceed the child’s taxable income (Publication 929). Marcy’s unearned income consists of $2,700 of interest and dividends. Her net unearned income is $500 [$2,700 unearned income – ($1,100 first $1,100 clause + $1,100 kiddie standard deduction)].

Question 85

Chris, age 5, has $3,600 of interest income and no earned income this year. Assuming the current applicable standard deduction is $1,100, how much of Chris’s income may be taxed at the ordinary income tax rates of estates and trusts or his parents’ marginal rate? A. $0 B. $1,400 C. $2,500 D. $3,600

Answer 85

$1,400 Answer (B) is correct. Net unearned income of a dependent child is taxed to the dependent at the ordinary and capital gain rates of estates and trusts or the dependent’s parents’ marginal rate, whichever the taxpayer chooses. Net unearned income is unearned income minus the sum of 1. $1,100 (first $1,100 clause) and 2. The greater of (a) $ 1,100 of the standard deduction or $ 1,100 of itemized deductions or (b) the amount of allowable deductions directly connected with the production of unearned income. Chris’s net unearned income is $1,400 [$3,600 unearned income – ( $1,100 + $1,100 std. ded.)].

Question 86

The standard deduction for a dependent with unearned income is limited to which of the following? A. The lesser of $ 1,100 or the amount of earned income plus $ 350. B. The greater of $ 1,100 or the amount of unearned income plus $ 350. C. The lesser of $ 1,100 or the amount of unearned income plus $ 350. D. The greater of $ 1,100 or the amount of earned income plus $ 350.

Answer 86

The greater of $ 1,100 or the amount of earned income plus $ 350. Answer (D) is correct. The standard deduction for a dependent with unearned income is limited to the greater of $ 1,100 or the amount of earned income plus $ 350.

Question 87

How is the net unearned income of a dependent under the age of 19 taxed? A. It is taxed to the dependent at the ordinary and capital gain rates of estates and trusts or at the dependent’s parents’ marginal rate. B. It is taxed to the dependent at 30%. C. It is taxed to the taxpayer who claimed the dependent at the ordinary and capital gain rates of estates and trusts or at the dependent’s parents’ marginal rate. D. Net income is not taxed unless it is earned.

Answer 87

It is taxed to the dependent at the ordinary and capital gain rates of estates and trusts or at the dependent’s parents’ marginal rate. Answer (A) is correct. Net unearned income (NUI) of a dependent under 19 (under 24 for full-time students) at the close of the tax year is taxed to the dependent at the ordinary and capital gain rates of estates and trusts or at the dependent’s parents’ marginal rate, whichever the taxpayer chooses.

Question 88

Muhammad’s father claimed him as a dependent on his tax return. Muhammad had unearned income of $3,100 in the most recent tax year. What is the minimum allowed reduction in unearned income that Muhammad is eligible to receive? A. $0 B. $ 1,100 C. $3,100 D. $2,200

Answer 88

$2,200 Answer (D) is correct. A dependent is allowed at least a $2,200 reduction in unearned income.

Question 89

Net unearned income of a dependent is unearned income minus the sum of $ 1,100 and which of the following? A. The excess of allowable deductions that are directly connected with the production of unearned income over $ 1,100. B. The amount of the standard deduction or the itemized deductions only. C. The greater of $ 1,100 of the standard deduction or $ 1,100 of itemized deductions or the amount of allowable deductions that are directly connected with the production of unearned income. D. The amount of the standard deduction only.

Answer 89

The greater of $ 1,100 of the standard deduction or $ 1,100 of itemized deductions or the amount of allowable deductions that are directly connected with the production of unearned income. Answer (C) is correct. Net unearned income is unearned income minus the sum of (1) $ 1,100 and (2) the greater of (a) $ 1,100 of the standard deduction or $ 1,100 of itemized deductions or (b) the amount of allowable deductions that are directly connected with the production of unearned income.

Question 90

Which of the following is an example of unearned child income? A. Bonuses. B. Dividends. C. Salary. D. Tips.

Answer 90

Dividends. Answer (B) is correct. Unearned income is all taxable income other than earned income. Earned income is payment received for performance of personal services and is usually reported on Form W-2. Therefore, dividends are considered unearned child income.

Question 91

Jean Blanc, a citizen and resident of Canada, is a professional hockey player with a U.S. hockey club. Under Jean’s contract, he received $68,500 for 165 days of play during the current year. Of the 165 days, 132 days were spent performing services in the United States and 33 playing hockey in Canada. What is the amount to be included in Jean’s gross income on his Form 1040NR? A. $0 B. $34,250 C. $54,800 D. $68,500

Answer 91

$54,800 Answer (C) is correct. A nonresident alien must include in U.S. gross income that income from U.S. sources effectively connected with the conduct of a trade or business in the United States (Sec. 871). Under Sec. 864, the performance of personal services in the U.S. constitutes a trade or business in the United States. If income is derived therefrom, it is considered to be from a U.S. source (Publication 17). According to the IRS and the courts, services of a professional hockey player are allocable to U.S. and non-U.S. time periods during the preseason training camp, the regular season, and post-season playoffs, but not the off-season. Therefore, Jean must include the portion of his income that is attributable to the performance of personal services in the U.S., i.e., 80% (132 ÷ 165 days). Eighty percent of $68,500 is $54,800, which must be reported as U.S. income.

Question 92

Mr. H is a foreign student studying for a degree in the United States. There is no income tax treaty between his country and the United States. During the 9 months of the school year, Mr. H is employed part-time by a corporation incorporated in his home country doing business in the United States. During summer vacation, Mr. H returns home, where he is employed by the same company. Which of the following statements is true regarding U.S. taxes? A. All income is taxable on a U.S. tax return. B. All income is excludable, and filing a U.S. tax return is not required. C. Only income earned for services in the United States is taxable. D. All income is taxable on a U.S. tax return, and credit is allowed for foreign taxes paid on his summer income.

Answer 92

Only income earned for services in the United States is taxable. Answer (C) is correct. Under Sec. 871, income from U.S. sources effectively connected with a U.S. trade or business must be included in a nonresident alien’s U.S. gross income. The performance of personal services in the United States constitutes a trade or business in the United States (Publication 17 and Sec. 864). Therefore, the income earned by Mr. H while employed part-time in the United States is taxable.

Question 93

Rhett, a U.S. resident, and his wife, Florencia, a nonresident alien, both make the proper election to file a joint return. As a corporate pilot, Rhett has earned income from both domestic and foreign sources. Florencia has earned income from both her part-time job in the U.S. and from video arcades her family owns and operates in her native Venezuela. The couple also has foreign sourced interest income. On what income will the couple be taxed? A. Rhett’s domestic and foreign income. B. Rhett’s income and Florencia’s part-time job. C. All income except for the foreign sourced interest. D. All of their worldwide income.

Answer 93

All of their worldwide income. Answer (D) is correct. Once both spouses make the election required for filing a joint return when one spouse is a nonresident alien and the other is a resident, then both are taxed on their worldwide income. The exclusion of foreign source income for a nonresident no longer applies (Publication 17).

Question 94

If a nonresident alien receives income that is effectively connected with U.S. trade or business, which itemized deductions may be taken? A. Casualty and theft losses from a federally declared disaster. B. Federal income taxes. C. A charitable contribution to a charitable organization in Germany. D. Mortgage interest on a primary residence.

Answer 94

Casualty and theft losses from a federally declared disaster. Answer (A) is correct. Nonresident aliens can deduct certain itemized deductions if income is received that is effectively connected with U.S. trade or business. These deductions include state and local income taxes, charitable contributions to U.S. organizations, casualty and theft losses, and miscellaneous deductions.

Question 95

Most types of U.S. source income received by a foreign person are subject to A. No U.S. tax. B. U.S. tax at a 30% rate. C. U.S. tax at a 15.3% rate. D. U.S. tax at a rate equal to the rate applied by the taxpayer’s country of residence.

Answer 95

U.S. tax at a 30% rate. Answer (B) is correct. Most types of U.S. source income received by a foreign person are subject to U.S. tax at a 30% rate (Publication 515).

Question 96

A nonresident alien received a $50,000 scholarship from a U.S. corporation to go to a gymnastic camp in the individual’s resident country, which has a 20% flat tax. How much U.S. tax must be paid on the scholarship? A. $0 B. $15,000 C. $10,000 D. $7,650

Answer 96

$0 Answer (A) is correct. A scholarship, fellowship, grant, etc. received by a nonresident alien for activities conducted outside of the U.S. is treated as foreign source income (Publication 515). Because the scholarship will not be treated as U.S. source income, there is no U.S. tax.

Question 97

Flavia Tillen is a German citizen who had never before been in the United States. She entered the United States on a visa on May 5, 2019, and stayed the rest of the year. Her residential status for 2019 is A. Single-status alien. B. Dual-status alien. C. U.S. citizen. D. Nonresident alien.

Answer 97

Dual-status alien. Answer (B) is correct. Flavia Tillen was both a nonresident and resident alien during 2019. She meets the substantial presence test because she was physically present in the U.S. for at least 31 days during the year and 183 days after totaling all days of physical presence in 2019, one-third of the number of days in 2018, and one-sixth of the number of days in 2017. She is a nonresident alien from January 1 to May 4 and a resident alien from May 5 to December 31. Thus, she is a dual-status alien in 2019.

Question 98

Tamar Zimmermann is a nonresident alien for the 2019 tax year. Which of the following statements is false? A. Tamar is required to file a return if he earns any wages effectively connected with a U.S. trade or business. B. If Tamar receives a scholarship for activities conducted outside the U.S., it is treated as foreign source income and therefore is not subject to taxation. C. Tamar can deduct certain itemized deductions if he receives income that is effectively connected with a U.S. trade or business. D. Tamar is not eligible for the credit for the elderly or the education credits if he elects to be treated as a U.S. resident.

Answer 98

Tamar is not eligible for the credit for the elderly or the education credits if he elects to be treated as a U.S. resident. Answer (D) is correct. This statement is false because if Tamar elects to be treated as a U.S. resident, then he is eligible for the credit for the elderly and the education credits, as long as he meets the other requirements for these credits. A nonresident alien is not eligible for the credit for the elderly or the education credits unless (s)he elects to be treated as a U.S. resident.

Question 99

Rike and Jorie Kistner are married. Rike is a U.S. citizen, and Jorie is a nonresident alien. They have elected to treat Jorie as a resident of the U.S. Jorie’s nonresident alien status can be terminated by all of the following means EXCEPT A. Death. B. Divorce or legal separation. C. Conviction of a misdemeanor. D. Inadequate records.

Answer 99

Conviction of a misdemeanor. Answer (C) is correct. The conviction of a misdemeanor does not terminate elected nonresident alien status. Either spouse may choose to revoke resident status of the nonresident alien spouse. Other means by which the status is ended include death, divorce or legal separation, and inadequate records.

Question 100

The spouse who revokes the resident status of the nonresident alien spouse must attach a signed statement declaring that the choice is being revoked. The statement revoking the choice must include all of the following EXCEPT A. The reason for status termination. B. The name, address, and Social Security number (or taxpayer identification number) of each spouse. C. The name and address of any person who is revoking the choice for a deceased spouse. D. A list of states, foreign countries, and possessions that have community property laws in which either spouse is domiciled or where real property is located from which either spouse receives income.

Answer 100

The reason for status termination. Answer (A) is correct. The reason for status termination is not required to be included on the signed statement declaring that the choice is being revoked.