1) Rob attended school during most of 2014, during which time he was supported by his parents. In December 2014, Rob married Ann. He graduated and started working in 2015. Ann worked during 2014 and earned $18,000. Robs only income was $1,100 of interest. Robs parents are in the 28% federal income tax bracket. Thus, claiming Rob as a dependent would save his parents $1,106 (.28 * $3,950) on their 2014 federal income tax return.

(a) What is Rob and Anns federal income tax liability if they file a joint 2014 tax return?

(b) What is Anns federal income tax liability if she files a Married Filing Separate 2014 return to enable Robs parents to claim him as a dependent?

(c) Which of the above alternatives would be better for the family? In other words, will filing a joint return save Rob and Ann more than $1,106?

2) In 2014, George helped to support his mother Maria, his son Joe, and his niece Wanda. How many dependency exemptions can George claim on his 2014 federal income tax return given these additional facts?

Maria lived with George and received $12,000 in Social Security benefits that she used to pay for food, clothing, medical expenses, and other living expenses. George provided Marias room, which has a rental value of $5,000, and paid an additional $4,000 toward her support.

Joe, age 12, lived with his mother, Laura. George paid $12,000 in child support, and Laura provided an additional $4,000 of support.

Wanda, age 20, is a part-time college student who lived in an apartment. She earned $6,000 working part-time and received a scholarship of $2,000. Wandas father provided $4,000 toward her support, and George provided $7,000.

3) In the following cases, does the taxpayer qualify for head-of-household filing status.

(a) Fernando is divorced from his wife. He maintains a household for himself and his dependent mother.

(b) Beverly is divorced from her husband. She maintains a home for herself and supports an elderly aunt who lives in a retirement home.

(c) Cynthia was widowed last year. She maintains a household for herself and her dependent daughter who lived with her during the year.

(d) Dwayne is not divorced, but lived apart from his wife for the entire year. He maintains a household for himself and his dependent daughter. He receives no financial support from his wife.

4) Sanjays salary is $44,000, and he received dividends of $600. He also received a statement from SK partnership showing his share of the partnership income was $4,000. The partnership also distributed $1,000 to Sanjay during the year and $600 after year-end. Sanjay won $2,000 in the state lottery, but he spent $50 on lottery tickets. Which of the above amounts are taxable?

5) Which taxpayers must use the Tax Computation Worksheet and which taxpayers must use the Tax Tables to figure their tax?

6) If Mitch and Maude file a joint return, and Mitch earned $31,000 during the year before losing his job and Maude received social security benefits of $5,000, what portion of the social security benefits are taxable on their 2014 joint tax return? If Mitch earned $46,000, rather than $31,000, what portion of the social security benefits would be taxable on their 2014 joint tax return?

7) Which of the following constitutes constructive receipt in the year ended December 31, 2014?

(a) A salary check received at 6:00 pm on 12/31/14, after all banks have closed.

(b) A rent check received on 12/30/14 by the manager of an apartment complex. The manager normally collects the rent for the owner. The owner was out of town.

(c) A paycheck received on 12/29/14 that was not honored by the bank because the employers account did not have sufficient funds.

(d) A check received on 12/30/14. The check was postdated 1/02/15.

(e) A check received on 1/02/15. The check had been mailed on 12/30/14.

8) Which of the following would be includable in gross income? A $5,000 prize won on a television quiz show; $500 received from your employer because you developed an idea that reduced your employers operating costs; $500 borrowed from your mother to finance your last year in college. As a graduation gift, mom told you that you did not have to repay the $500.

9) Jack is the beneficiary of a life insurance policy taken out by his father several years ago. Jacks father passed away, and Jack has the option to receive the $100,000 face value of the policy in cash or to receive annual payments of $1,000 per month for the rest of his life. Jack is now 65, and his father paid $32,000 in premiums over the years. How much must Jack include in gross income this year if he takes the $100,000 face amount of the policy this year? Assume that Jack elects to take the annual payments and that his life expectancy is 20 years, what amount of the annual payments, if any, can he exclude from gross income? How much must he include in gross income, if any? Explain.

10) An individual reports the following capital transactions in the current year:

Short-term capital gain $ 1,000

Short-term capital loss $ (11,000)

Long-term capital gain $ 10,000

Long-term capital loss $ (6,000)

What amount is deductible in arriving at adjusted gross income?

a. $10,000

b. $6,000

c. $3,000

d. $0