1.

In the current tax year, Blake Smith provided more than half of the support for his cousin,

niece, and a close family friend. Blake lives alone and sends a monthly support check to

each person. None of the individuals whom Blake supports has any income or files a tax

return. All three individuals are U.S. citizens. Which of the three people Blake supports can

he claim as a dependent on his tax return?

a. Niece

2. Rebecca sells her personal scooter for $2,250. She purchased the scooter for $2,700 three

years ago. She also sells a painting for $3,888 that she acquired five years ago for $3,240.

What are the tax implications of these sales?

a. Rebecca has a $450 realized loss on the scooter and a $648 realized gain on the

painting. Rebecca will recognize the gain or loss associated with only the painting

3. QR=Qualifying Relative, QC=Qualifying Child, B= Both, N=Neither

a. Answers for:

i. a=B

ii. j=QC

4. Caden and Lily are divorced on March 3, 2018. For financial reasons, however, Lily continues

to live in Caden's apartment and receives her support from him. Caden does not claim Lily as

a dependent on his 2018 Federal income tax return but does so on his 2019 return. Under

what circumstances, if any, can a taxpayer claim an ex-spouse as a dependent?

 a. An ex-spouse can qualify as a dependent by being a member of the taxpayer's

household for the entire year (other than the year of divorce).

5.

6. Match the definitions:

a. Collectibles-special type of capital asset, the gain from which is taxed at a

maximum rate of 28 percent if the holding period is more than 1 year

b. Abandoned spouse- this provision enables a married taxpayer with a

dependent child whose spouse did not live in the taxpayer’s home during

the last 6 months of the tax year to file as HOH rather than as married

filing separately

c. E-file-electronic filing of a tax return

d. Child tax credit- this is based solely on the number of qualifying children

under age 12, maximum available is $2000 per child

7. Answer:
8.

9.
10.
11. Jeff and Rhonda are married and have two children, Max and Jen. Max is 20, attends college in
the Los Angeles area full-time, and works as a stunt double for a television show while he is in
school. Max earns $15,000 per year as a stunt double and lives at home when school is not in
session. Jeff and Rhonda pay for Max’s tuition and all of his living expenses. Jen, who lives at
home, is 18 years old and makes $18,000 per year working full-time as an office
administrator. Jeff and Rhonda pay for 65 percent of Jen’s living expenses. In addition,
Rhonda’s mother, Joanne (a widow), resides with the family, earns $3,000 per year in interest
and dividends from her investments, and receives $9,000 per year in Social Security benefits.
Jeff and Rhonda receive no rent from Joanne and provide all the support she needs for the
year. Everyone mentioned is a U.S. citizen. How many people qualify as dependents for Jeff
and Rhonda’s income tax return?
a. Three

12.
13. Sam and Abby are dependents of their parents, and each has income of $8,760 for the year.

Sam's standard deduction for the year is $1,100, and Abby's is $9,110. Because their income

is the same, what causes the difference in the amount of the standard deduction?

a. Sam's $8,760 is unearned income, and Abby's $8,760 is earned income.

14.

15.
16.

17. Ninette, age 16, has dividend income of $2,800 and interest income of $935. She has no
investment expenses. Determine the net unearned income for the purpose of the kiddie tax.
a. Net unearned income is $1535 .
i. Ninette's net unearned income is $1,535, computed as follows:
ii. Unearned income: $3,735 ($2,800 + $935)
iii. Less: $1,100
iv. Less: $1,100 of the standard deduction
v. Equals: $1,535
18.
19. Bill and Anne Chambers are married and file a joint return. They have no children. Their
college friend Ryan lived with them for the entire current tax year. Ryan is 40 years old and
earned $2,000 at a part-time job and received $25,000 in municipal bond interest. Ryan is a
citizen of the United States and is unmarried. Which of the following statements is true
regarding claiming Ryan as a dependent on the Chamberses' tax return?
a. As long as the Chamberses provide more than half of Ryan's support, he
qualifies as a dependent for the Chamberses under the qualifying relative
rules.

20. Paul and Sonja, who are married, had itemized deductions of $8,440 and $2,650,

respectively, during 2019. Paul suggests that they file separately—he will itemize his

deductions from AGI, and she will claim the standard deduction.

a. Is Paul's suggestion correct?

i. No. Sonja is ineligible to use the standard deduction and must

itemize.

b. What should they do to ensure the maximum tax benefit?

i. Both should take the standard deduction

21. Bob provides more than half of his mother's support. His mother earns $6,000 per year as a

hairdresser. She lives in an apartment across town. Bob is unmarried and has no children.

What is Bob's most advantageous filing status?

a. Single

22. Mark and Lisa were divorced in 2018. In 2019, Mark has custody of their children, but Lisa

provides nearly all of their support. Who is entitled to claim the children as dependents?

a. Mark

23. Jonathan Jones is a 19-year-old full-time college student at the local community college. He

lives in an apartment near campus during the school year and returns home for the summer

break and holidays. Jonathan earned $5,000 this year working at the campus bookstore. His

parents gave him $20,000 and his grandparents gave him $10,000 this year in support.

Which of the following statements is true?

a. Jonathan's parents can claim him as a dependent.

24.
25. Katherine and Bill Grant have two children. Kelly is 22 years old and is a full-time student. She
lives on campus at an out-of-state university but will return home for the summer. Kelly earns
$5,000 a year working part-time. Her parents provide her with $15,000 of support, and her
grandparents provide her with $15,000 of support. Jake is 15 years old and lives at home. He
is fully supported by his parents. Jake’s friend Luke also lives with the Grants. Luke is 15 years
old and moved into the Grant home in April. The Grants pay all of Luke’s support. How many
total dependents may Katherine and Bill Grant claim for the current year?
a. Two
26.

27. Susie, John, Luke, and Will provide support for their 80-year-old mother, Joyce. Joyce lives by
herself in an apartment in Miami, Florida. Joyce earned $5,000 this year working at her
church. Joyce provides 5% of her own support. Susie provides 30% of Joyce’s support, John
provides 10% of Joyce’s support, Luke provides 15% of Joyce’s support, and Will provides
40% of Joyce’s support. Under a multiple support agreement, who may claim Joyce as a
dependent?
a. Susie, Luke, and Will

28.
29.

30. The Tiller family has an adjusted gross income of $200,000. The Tillers have two children,
ages 12 and 13, who qualify as dependents. All of the Tillers’ income is from wages. What is
the Tillers’ child tax credit and what portion of their child tax credit is refundable?
a. Child Tax Credit: $4000
b. Refundable Portion: $2800
31.

32.
33.

34.

35.
36.

37. Madison and Nick Koz have two children, ages 8 and 10. Both children meet the definition of
qualifying child. The Koz family has adjusted gross income of $300,000. What is the amount of
the child tax credit on the couple’s income tax return?
a. $4000

38. Heather is single and has one son, Rhett, who is 19 years old. Rhett lived at home for four
months of the current tax year before moving away to take a full-time job in another city.
Heather provided more than half of Rhett’s support for the taxable year. Rhett earned $20,000
in gross income and is unmarried. Which of the following statements regarding the
dependency rules for Rhett is true?
a. Rhett fails the age limit test for a qualifying child.
39.

40.
41. Mario, who is single, is a U.S. citizen and resident. He provides almost all of the support of his

parents and two aunts, who are citizens and residents of Guatemala. In 2018, Mario's parents

and aunts are seriously considering moving to and becoming residents of Mexico. Complete

the following paragraph regarding how such a move would impact Mario's ability to claim his

parents and aunts as dependents.

a. To be a dependent, the individual must be a U.S. citizen, a U.S. resident, or a

resident of Canada or Mexico for some part of the calendar year in which the

taxpayer’s tax year begins. However, for 2018 through 2025, a taxpayer may

not claim a dependent credit unless the individual is a U.S. citizen or a U.S.

resident.

42.
43. There is an important distinction between tax credits and tax deductions. Tax deductions
reduce taxable income on which the tax liability is based. Tax credits reduce the tax liability
dollar for dollar.

44. Calculate Taxable Income:

45.
46. Complete the following statements regarding the gross income and support tests for the

category of dependency exemption designated as the qualifying relative.

 a. Gross Income Test:

i. A dependent's gross income must be less than $4200 , the exemption

amount . Gross income is determined by the income that is taxable .

b. Support Test:

i. Over 50 % of the support of the qualifying relative must be furnished

by the taxpayer. If the individual does not spend funds that have been

received from any source, the unexpended amounts are not counted

for purposes of the support test. Under a multiple support agreement

one member of a group of taxpayers who furnish support for a

qualifying relative may claim a dependency exemption if together the

group provides over 50 % of the support. Any person who contributed

more than 10 % of the support is entitled to claim the exemption if

each person in the group who contributed more than 10 % files a

written consent.

47. Heather, age 12, lives in the same household with her mother, grandmother, and uncle.

a. Who is eligible to claim Heather as a dependent?

i. All three

b. Who takes precedence?

i. Her mother
48.
a. Simon's net unearned income is $3,980, computed as follows:
b. Unearned income: $6,180
c. Less: $1,100
d. Less: $1,100 of the standard deduction
e. Equals: $3,980
49.
50.

51.

52. Jane is 20 years old and is a sophomore at Lake University. She is a full-time student and
does not have any gross income. Jane spends the holidays and summers at home with her
parents. Her total support for the current tax year is $30,000, including a scholarship for
$5,000 to cover her tuition. Jane used $12,000 of her savings, and her grandparents provided
$13,000. Which of the following statements regarding the dependency rules for Jane is true?
a. Jane's grandparents cannot claim her as a dependent because Jane provided
more than half of her own support.
53.

54.
55.

56.

57.
58.

59.