Olivia provided support for the following individuals.

She provided greater than 50% of their

support unless otherwise noted.
- Her 10-year-old son lived in her home for 3 months out of the year. The remainder of the time
he was enrolled in a boarding school for exceptionally bright individuals, and lived in the
school's dorm.
- Her 25-year-old daughter lived in the home for the entire year. She is enrolled at the local
university and is a full-time student. She earned $1,500 completing online paid surveys
- Her ex-husband lived in the home for the entire year. They were divorced on January 15th, but
they have maintained a civil relationship for the sake of their children. He does not work.
- Olivia's mother is currently living in an assisted living faculity. Olivia pays for 25% of her
support and Olivia's sister pays for the other 25%. Olivia's mmother provides the remaining
50%. Olivia and her sister have an agreement that allows Olivia to claim the mother as a
dependent if she qualifies.

How many personal and dependency exemptions are available to Olivia?

A. 2
B. 3
C. 4
D. 5

Answer: B

Olivia can claim herself and the two children. The son qualifies as a qualifying child. Even
though he does not live in the home, the IRC provides an exception for individuals away from
school. The daughter is a qualifying relative; however, she isn't a qualifying child because she is
above the age limit. Olivia cannot take a dependency exemption for her ex-spouse in the year of
divorce; otherwise, he would qualify as a qualifying relative. She cannot claim the mother
because Olivia and her sister do not provide more than 50% of the mother's support; therefore,
the multiple support agreement is not available.

Ethan age 17, had a total income of $20,000 for 2016 - $10,000 was from his papoer route, $3,000 was
from local city bonds, and $7,000 was dividends from investments. How much of his income will be
taxed to him at his rate?

A. $5,800
B. $8,800
C. $10,070
D. $13,700

Answer: A

$10,000 + $7,000 = $17,000 in gross income. The local onds are municipal bonds and are not
taxable. His standard deduction is the greater of $1,050 or earned income plus $350 limited to
$6,300; in this case$6,300. Unearned income over $2,100 will be taxed at his parent's highest
marginal rate since he is subject to the kiddie tax. Therefore, $4,900 ($7,000 - $2,100) will be
taxed at his parent's rate. Thus $17,000 - $4,900 taxed at parents rate - $6,300 standard
deduction = $5,800.