Attached is Federal Income Tax I Quiz 1. Please help me out to find the answers for each questions.

ACCT 323 6380 INCOME TAX I (Fall 2016) QUIZ I 1) Under a divorce agreement executed this year, an ex-wife receives from her ex-husband cash of $25,000 annually for ten years. The agreement does not say that the payments are excludible from gross income. Does the ex-wife have gross income and, if so, how much? Can the exhusband deduct the annual payments and, if so, is the deduction For AGI or From AGI? What Internal Revenue Code Sections answer these questions? 2) According to the AICPA's Statements on Standards for Tax Services, what duties does a tax practitioner owe to her client? 3) Why is a thorough knowledge of tax law sources important to a professional tax practitioner? 4) May a taxpayer claim a dependency exemption for a person if the taxpayer provides 50% or less of the person's support. If so, under what circumstances? 5) In 2015, Justin, a single 18-year old taxpayer, received a salary of $1,800 and interest income of $1,600. He had $600 in itemized deductions. Calculate Justin's taxable income assuming he is (a) self-supporting and (b) a dependent of his parents. 6) Jerry and Jenny are a married couple. They provided financial assistance to several persons during 2015. For the situations below, determine whether the individuals qualify as dependency exemptions for Jerry and Jenny on their 2015 Married Filing Joint tax return. Assume in each case that dependency tests not mentioned have been satisfied. (a) Brian, age 24, is Jerry and Jenny's son. Brian is a full-time student, and he lives in an apartment near the college. Jerry and Jenny provide over 50% of Brian's support. Brian worked as a stock clerk in a super market and earned $4,500. (b) Same facts as above, except that Brian is a part-time student. (c) Sheila, age 22, is Jerry and Jenny's daughter. She's a full-time student and lives in a college dormitory. Jerry and Jenny provide over 50% of Sheila's support. Sheila works part-time as an accounting clerk, and she earned $5,000. (d) Same facts as in (c), except that Sheila is a part-time student. (e) Grandma, age 82, is Jenny's grandmother, and she lives with Jerry and Jenny. In 2015, Grandma's only income was her Social Security of $4,800 and interest on U.S. bonds of $4,500. Grandma uses her income to pay 45% of her total support, and Jerry and Jenny provide the rest of Grandma's support. 7) In general what factors determine who must file a federal income tax return? Is an individual required to file a tax return if he or she owes no tax? If an individual is not required to file a federal income tax return, are there situations in which the individual might want to file. Explain. 8) John and Joan had been married for 20 years before John died in October 2013. Joan and her son Marley, age 21, continued to live at home in years 2013 - 2016. Marley worked part-time (earning $5,000 in each of the four years). He also attended college on a part-time basis. Joan provided more than 50% of Marley's support in each year. What is Joan's filing status for 2013, 2014, 2015, and 2016? Would Joan's filing status change if Marley attended school full-time rather than part-time? If so, how? 9) Wanda is a single parent who maintained a household for her unmarried son Jordan, age 19, who worked full-time and earned $16,000. Wanda provided about 40% of Jordan's support but provided all the expenses of maintaining the household. What is Wanda's 2015 tax filing status? 10) Tom and Mary are married and have one dependent son. In April, Tom left Mary a note that he needed his freedom and was leaving her. As of December, Mary has neither heard from nor seen Tom. Mary fully supported her son and completely maintained the household. What is Mary's filing status? 11) Jake and Janice are a married couple with two dependent children. In 2015, their salaries totaled $130,000, and they suffered a capital loss of $8,000. They also received $1,000 of taxexempt interest. They paid home mortgage interest of $10,000, state income taxes of $4,000, and medical expenses of $3,000. They also contributed $5,000 to charity. On their 2015 Married Filing Joint tax return what is their (a) adjusted gross income; (b) their total itemized deductions; (c) the amount of their exemptions; and (d) their taxable income. 12) Chinita is a single taxpayer, whose salary was $51,000 in 2015. In that year, she also suffered a $5,000 short-term capital loss. Her itemized deductions for the year totaled $4,000. What are Chinita's 2015 (a) adjusted gross income; (b) taxable income; and (c) tax liability? 13) In general, when is income treated as earned by an accrual basis taxpayer? 14) Jean owns a small unincorporated business. Her 15-year-old son Bernardo works part-time in the business and was paid wages of $3,000 in the current year. Who is taxed on his earnings, Bernardo or Jean? Explain. 15) Geraldo rented an office building to Brian for $3,000 per month. On 12/29/14, Geraldo received a deposit of $4,000 in addition to the first and last months' rent. Brian commenced occupancy of the building on 1/02/15. On 7/15/15, Brian closed his business and filed for bankruptcy. Geraldo collected rent for February, March, and April on the first day of each month. He received the May rent on 5/10/15, but collected no payments thereafter. Geraldo withheld $800 from Brian's deposit because of damage to the property and $1,500 for unpaid rent. He refunded the balance of the deposit to Brian. What amount of the above payments should Geraldo have reported as gross income in 2014 and 2015? 16) Flowers, a married taxpayer, purchased an annuity for $64,400 that will pay $700 per month over the life of Flowers and Flowers' spouse. At the time of purchase, the couple's joint life expectancy was 23 years. Flowers received payment beginning April 1, Year 1, amounting to $6,300 in the first year of the annuity contract. How much is includable in Flowers' gross income in the first year? a. $0 b. $2,100 c. $4,200 d. $6,300 17) Ingrid inherited $10,000 of City of Baltimore, Maryland bonds in February. In March she received interest of $500 on the bonds, and in April she sold the bonds for a $200 gain. Ingrid redeemed Series EE U.S. Savings Bonds that she had purchased several years ago. The accumulated interest totaled $800. Ingrid also received $300 of interest on bonds issued by the City of Montreal, Canada. What amount of these receipts, if any, should Ingrid include in her gross income. 18) For each of the following, indicate whether the amount is taxable: (a) Katrina won $3000 in the state lottery. (b) Robert won a $500 prize for his entry in a poetry contest. (c) Lizbeth was awarded $2,000 when she was selected \"Teacher of the Year\" by her local school district. 19) In each of the following situations, what amount must be included in the taxpayer's gross income? (a) Laverne received a $1,500 tuition scholarship to attend Fredonia Law School. In addition, Fredonia paid Laverne $4,000 per year to work part-time in the campus cafeteria. (b) Marvin received a $10,000 football scholarship for attending Western University. His scholarship covered tuition, room, board, laundry, and books. $4,000 of the scholarship was designated for room and board and laundry. It was understood that Marvin would participate in the school's intercollegiate football program, but he was not required to do so. (c) Nightingale Nursing School requires all third-year students to work 20 hours per week at an affiliated local hospital. Each student is paid $10 per hour. Ruth, a third-year student, earned $10,000 for such work during the year. 20) Lamar Corp. has four employees, for whom it provides group life insurance in accordance with a non-discrimination policy. The details are: Employee Sandy Randy Mandy Candy Age 62 52 33 33 Key Employee Yes Yes No No Coverage $200,000 40,000 80,000 40,000 Premiums $4,000 700 600 300 (a) How much may Lamar deduct for group term life insurance premiums? (b) How much income must be reported by each employee? Question 1 The amount which is paid by ex-husband to ex-wife is treated as alimony and the same will be taxable in the books of ex-wife and ex-husband. Ex-wife will have a gross income of $25,000. Husband will also deduct the annual payments from AGI. Question 2 The tax practitioner owes the client the following duties: (1) to inform the client of (a) the potential adverse consequences of a tax return position, (b) how the client can avoid a penalty through disclosure, (c) errors in a previously filed tax return, and (d) corrective measures to be taken; (2) to inquire of the client (a) when the client must satisfy conditions to take a deduction and (b) when information provided by him or her appears incorrect, incomplete, or inconsistent on its face, and (3) not to disclose tax- related errors without the client's consent. pp. C:1-35 through C:1-37 Question 3 Tax practitioners assist their clients or taxpayers in adhering to their tax obligation as established by legal frameworks within their jurisdiction. Clients engage tax practitioners in order to receive professional advice and services toward filing accurate returns. The tax practitioner is responsible for accurately advising the client as per the taxation laws within their jurisdiction. The tax practitioner should ensure that the information required is delivered in an honest manner clear of misrepresentation. The tax practitioner is responsible for informing the client of any conflict of interest arising by conducting the services. In order to fulfill the duties and responsibilities towards their clients, they need to have a thorough and expert knowledge of the prevailing tax laws. Question 4 Yes, the taxpayer can claim dependency exemption if the person claimed to be as dependent is the qualifying child or qualifying relative of the tax payer. Also following conditions shall apply: 1. The person either (a) must be related to the taxpayer, or (b) must live with taxpayer all year as a member of your household. 2. The person's gross income for the year must be less than $4,000. Question 5 (a) self-supporting: Salary income $1800 Interest income $1600 Adjusted Gross Income $3400 Minus Standard Deduction limit (5800) Taxable Income $0 (b) a dependent of his parents: Adjusted Gross Income $3400 Minus Standard Deduction limit (5800) Minus No exemption allowed Taxable Income $0 Question 6 A) Brian's age is 24 years. child must be under age 19 or, if a full-time student, under age 24 for qualifying the dependency exemption. So HE does not qualify for exemption B) Brian's age is 24 years. child must be under age 19 or, if a full-time student, under age 24 for qualifying the dependency exemption. So HE does not qualify for exemption C) Sheila, age 22, child must be under age 19 or, if a full-time student, under age 24 for qualifying the dependency exemption. So HE does not qualify for exemption D) Qualify for exemption E) Your relative must live at your residence all year or be on the list of \"relatives who do not live with you\" in Publication 501. About 30 types of relatives are on this list. Your relative cannot have a gross income of more than $3,950 and be claimed by you as a dependent. hence she will not qualify Question 7 Individuals fulfilling following any of the following must file tax return: 1. Gross income exceeds $10,000 as a single filer (or over $20,000 as a married couple filing jointly) 2. Earned over $400 from self-employment 3. Sale of home during the tax year 4. Taxes owed because of retirement account, either from distributions or excess contributions 5. Social Security and Medicare taxes owed on tips not reported to the employer, or on wages that employer did not withhold these taxes from. In following cases, an individual is required to file return even if no taxes are due: 1. Children and dependents 2. Self-employed business owners 3. Filing for tax refunds Individuals not required to file the federal tax return may opt to file the return in their interest. The common benefits to file the return is to claim the refundable tax credits which can exceeds the tax liability and result in tax refund. The other main benefit is in case of applying for loan of any government benefits where a copy of most recent tax return is often required. Question 8 Joan had a dependent child with whom she kept up a home. Also, she is providing for more than 50% of the total cost of keeping the home. Hence, Joan's filing status shall be "Qualifying widow" for the year of death of spouse and two years thereafter. After the completion of two years from the year of death of spouse, Joan shall be considered as single and her filing status shall be "Single". For years 2013, 2014and 2015 Joan's filing status shall be "Qualifying widow" and for year 2016 filing status shall be "Single". Filing status will not change if Marley attended full time college because in the period 2013 to 2015, Marley is under the age of 24 and will still be considered as dependent. Question 9 Wanda's filing status shall be as \"Single\". Since Jordan provides more than half of his support himself, Wanda cannot file the return as \"head of the household\". Question 12 Salary income $51,000 Less Maximum capital loss allowed to single filer $1,500 Adjusted gross income $49,500 Less itemized Deduction $5,000 Taxable income $5,000 Question 13 (1) all the events have occurred that fix the right to receive the income (2) the amount can be determined with reasonable accuracy. For taxing purposes, it does matter who is the employer. It matters who is the employee. Thus, although the employer is Bernardo 's mother, the employeeJean should be taxed. Even if the wages are paid to Bernardo 's parent, it is the employeeJean who should be taxed. If a child under age 18, or a full-time student under age 24, has unearned income over $2,000, then the income is taxed at the parents' tax rates. Note that Bernardo is under age 18. Thus, Bernardo 's parents can elect to include Bernardo 's unearned income on their own tax return. The wages of $3,000 are not subject to the kiddie tax rules and are not included on the parent's return because Jane's wages are earned income. 15 Rent / Month 3000 Received on 29 dec 4000 Deposit 3000 Rent for 2nd Jan Particulars 2013 Gross Income would not include Deposit and Rent received Rent for on 29th Dec As this is for Jan month and Deposit is an advance. Particulars 2014 1-Jan 3000 1-Feb 3000 1-Mar 3000 1-Apr 3000 10-May 3000 15-Jul 15000 Rent 800 Deposit Less Damages 800 31600 Gross Income Question 16 Choice "c" is correct. The investment amount is divided over the number of months of expected recovery. $64,400 / 276 = $233.33 (23 years 12 months = 276 months). This is the amount of each payment that is a cost recovery and not taxable. Payments began in April of this year, resulting in 9 payments this year ($233.33 9 = $2,100). This is the portion of the $6,300 that is not taxable. So the taxable amount is $4,200 ($6,300 - $2,100 = $4,200). Question 17 Statement of amount to be shown under gross income Amount in Particulars $ Interest on Mariland bonds 500 Capital gain on Bond 200 Interest om Series EE US Saving Bonds 800 Interest on City of montreal bond 300 Gross Income 1,800 Note: Question only ask what should include in her Gross Income. If question ask What should be include in her Gross Taxable Income, then there will be different treatment. Question 18 (a) State lottery is exempt from tax, so it will not be taxable. (b) Taxable (c) Taxable but could be excluded from income if the receipt of the award is not conditioned on substantial future services and the amount is paid by the school district to a tax-exempt organization designated by Lizbeth. Question 19 If scholarship doesnt exceed tuition it is not included in gross income . Part (a) $1500 will not be included in gross income but $4000 will form the part of gross income. Total Gross income is $4000 Part(b) since $4000 is not for tuition so it will form the part of gross income . Total Gross income is $4000 . $6000 is exempted since it is for tuition fees. Part(c) (365/7)*20*10 = $10400 as per calculation $10400 is what ruth would have got from the work but since he received $10000 only , $10000 will form the part of his total gross income. Question 20 a) Lamar will deduct the entire premium paid for their employees irrespective of whether the employee is a key employee or not. b) Key employees are eligible for premium deductions from their salary and shall show their salary for income-tax purposes less of premium paid by their employers and not the other two employees who are not key employees. Question 10 Mary can file return under abandoned spouse only if he fulfills following conditions * The taxpayer does not file a joint return * The taxpayer paid more than one half of the cost of maintenance of his/ her home for the tax year. *the taxpayer spouse does not live in the home during the last six months of the tax year. * The home was the principal residence of the taxpayer's son, daughter, stepson, stepdaughter, foster child or adopted child for more than half the year and the child can be claimed as dependent. Though the tax burden is relatively favorable, head of household status is lower than when using the married filing separately rate schedule but Mary cannot file under the same since he does not fulfill all of the above conditions. So Mary should file a joint return since he can claim two personal exemptions, so if he does file a separate return he cannot claim an exemption for his wife since she has gross income. Question 11 A Their AGI is $130,000-$8000=$122,000 b) their total itemized deductions Charity $5000 State income tax $ 4000 home interest mortgage $10,000 $19,000 c) Total exemptions are $29,000 Question 14 For taxing purposes, it does matter who is the employer. It matters who is the employee. Thus, although the employer is Bernardo 's mother, the employeeJean should be taxed. Even if the wages are paid to Bernardo 's parent, it is the employeeJean who should be taxed. If a child under age 18, or a full-time student under age 24, has unearned income over $2,000, then the income is taxed at the parents' tax rates. Note that Bernardo is under age 18. Thus, Bernardo 's parents can elect to include Bernardo 's unearned income on their own tax return. The wages of $3,000 are not subject to the kiddie tax rules and are not included on the parent's return because Jane's wages are earned income