During the year, Addison is involved in the following transactions:

Lost money gambling on a recent trip to a casino.

Helped pay for her neighbors dental bills. The neighbor is a good friend who is unemployed.

Received from the IRS a tax refund due to Addisons overpayment of last years Federal income taxes.

Paid a traffic ticket received while double parking to attend a business meeting

Contributed to the mayors reelection campaign. The mayor had promised Addison to have some of her land rezoned. The mayor was reelected and got Addisons land rezoned.

Borrowed money from a band to make a down payment on an automobile.

Sold a houseboat and a camper on eBay. Both were personal use items, and the gain from one offset the loss from the other.

Her dependent grandfather died on June 3 of the year.

Paid for dependent grandfathers funeral expenses.

Paid premiums on her dependent sons life insurance policy.

Paid premiums on her dependent sons life insurance policy.

What are the possible income tax ramifications of these transactions?

2. Which of the following items are inclusions in gross income?

During the year, stock that the taxpayer purchased as an investment doubled in value.

Amount an off- duty motorcycle police officer received for escorting a funeral procession.

While his mother was in the hospital, the taxpayer sold her jewelry and gave the money to his girlfriend.

Child support payments received.

A damage deposit the taxpayer recovered when he vacated the apartment he had rented.

Interest received by the taxpayer on an investment in general purpose bonds issued by IBM.

Amounts received by the taxpayer, a baseball Hall of Famer, for autographing sports equipment (e.g., balls and gloves).

Tips received by a bartender from patrons. (Taxpayer is paid a regular salary by the cocktail lounge that employs him.)

Taxpayer sells his Super Bowl tickets for three times what he paid for them.

Taxpayer receives a new BMW from his grandmother when he passes the CPA exam.

5. In choosing between the standard deduction and itemizing deductions from AGI, what effect, if any, does each of the following have? (included on top question)

The age of the taxpayer(s).

The health (i.e., physical condition) of the taxpayer.

Whether taxpayers rent or own their residence.

Taxpayers filing status (e. g., single, married, filing jointly).

Whether married taxpayers decide to file separate returns.

The taxpayers uninsured personal residence was recently destroyed by fire.

The number of personal and dependency exemptions the taxpayer can claim.

11. Mark and Lisa were divorced in 2015. In 2016, Mark has custody of their children, but Lisa provides nearly all of their support. Who is entitled to claim the children as dependents?

17. Jayden calculates his 2016 income tax by using both the Tax Tables and the Tax rate Schedules. Because the Tax Rate Schedules yield a slightly lower tax liability, he plans to pay this amount.

Why is there a difference?

Is Jaydens approach permissible? Why or why not?

24. Paul and Sonja, who are married, had itemized deductions of $ 8,200 and $ 400, respectively, during 2016. Paul suggests that they file separately-he will itemize his deductions from AGI, and she will claim the standard deduction.

Evaluate Pauls suggestion.

What should they do?

29. Compute the taxable income for 2016 in each of the following independent situation.

Drew and Meg, ages 40 and 41, respectively, are married and file a joint return. In addition to four dependent children, they have AGI of $ 65,000 and itemized deductions of $ 15,000.

Sybil, age 40, is single and supports her dependent parents who live with her, as well as her grandfather who is in a nursing home. She has AGI $ 80,000 and itemized deductions of $8,000.

Scott, age 49, is a surviving spouse. His household includes two unmarried step-sons who qualify as his dependents. He has AGI of $ 75,000 and itemized deductions of $ 10,100.

Amelia, age 33, is an abandoned spouse who maintains a household for her three dependent children. She has AGI of $ 58,000 and itemized deductions of $ 9,500.

Dale, age 42 is divorced but maintains the home in which he and his daughter, Jill, live. Jill is single and qualifies as Dales dependent. Dale has AGI of $ 64,000 and itemized deductions of $9,900.

30. Compute the taxable income for 2016 for Emily on the basis of the following information. Her filing status is single.

Salary $ 85,000

Interest income from bonds issued by Xerox 1,100

Alimony payments received 6,000

Contribution to traditional IRA 5,500

Gift from parents 25,000

Short-term capital gain from stock investment 2,000

Amount lost in football office pool 500

Number potential dependents (two cousins, who live in Canada) ?

Age 40

32. Determine the amount of the standard deduction allowed for 2016 in the following independent situations. In each case, assume that the taxpayer is claimed as another persons dependent.

Curtis, age 18, has income as follows: $700 interest from a certificate of deposit and $ 6,100 from repairing cars.

Mattie, age 18, has income as follows: $ 600 cash dividends from a stock investment and $ 4,700 from handling a paper route.

Mel, age 16, has income as follows: $ 675 interest on a bank savings account and $ 800 for painting a neighbors fence.

Lucy, age 15, has income as follows: $400 cash dividends from a stock investment and $ 500 from grooming pets.

Sarah, age 67 and a widow, has income as follows: $ 500 from a Bank savings account and $ 3,200 from babysitting.

34. For tax year 2016, determine the number of personal and dependency exemptions in each of the following independent situations:

Leo and Amanda (ages 48 and 46, respectively) are husband and wife and furnish more than 50% of the support of their two children, Elton (age 18) and Trista (age 24). During the year, Elton earns $ 4,500 providing transportation for elderly persons with disabilities, and Trista receives a $ 5,000 scholarships for tuition at the law school she attends.

Audry (age 45) was divorced this year. She maintains a household in which she, her ex-husband (Clint), and his mother (Olive) live and furnishes more than 50% of their support. Olive is age 91 and blind.

Crystal age 45, furnishes more than 50% of the support of her married son, Andy (age 18), and his wife, Paige (age 19) who live with her. During the year, Andy earned $ 8,200 from a part-time job. All parties live in Iowa (a common law state).

Assume the same facts as in (c), except that all parties live in Washington (a community property state).

39. Wesley and Myrtle (ages 90 and 88, respectively) live in an assisted care facility and for 2015 and 2016 received their support from the following sources:

______________________________________________

Percentage of Support

______________________________________________

Social Security Benefits 16%

Son 20

Niece 29

Cousin 12

Brother 11

Family friend (not related) 12

Which person are eligible to claim the dependency exemptions under a multiple support agreement?

Must Wesley and Myrtle be claimed by the same person(s) for both 2015 and 2016? Explain.

Who, if anyone, can claim their medical expenses?

43. Morgan (age45) is single and provides more than 50% of the support of Rosalyn (a family friend), Flo (a niece, age 18), and Jerold (a nephew, age 18). Both Rosalyn and Flo live with Morgan, but Jerold (a French citizen) lives in Canada. Morgan earns a salary of $ 95,000, contributes$ 5,000 to a traditional IRA, and receives sales proceeds of $ 15,000 for an RV that cost $ 60,000 and was used for vacations. She has $ 8,200 in itemized deductions. Using the Tax Rate Schedules, compute the 2016 tax liability for Morgan.

44. Which of the following individuals are required to file a tax return for 2016? Should any of these individuals file a return even if filing is not required? Why or why not?

Patricia, age 19, is a self-employed single individual with gross income of $ 5,200 from an unincorporated business. Business expenses amounted to $ 4,900.

Mike is single and is 67 years old. His gross income from wages was $ 10,800.

Ronald is a dependent child under age 19 who received $ 6,500 in wages from a part-time job.

Sam is married and files a joint return with his spouse, Lana. Both Sam and Lana are 67 years old. Their combined gross income was $ 24,250.

Quinn, age 20, is a full-time college student who is claimed as a dependent by his parents. For 2016, Quinn has taxable interest and dividends of $ 2,500.

46. In each of the following independent situations, determine Winstons filing status for 2016. Winston is not married.

Winston lives alone, but he maintains a household in which his parents live. The mother qualifies as Winstons dependent, but the father does not.

Winston lives alone but maintains a household in which his married daughter, Karin, lives. Both Karin and her husband (Winstons son-in-law) qualify as Winstons dependents.

Winston maintains a household in which he and a family friend, Ward, live. Ward qualifies as Winstons dependent.

Winston maintains a household in which he and his mother-in-law live. Winstons wife died in 2015.

Same as (d), except that Winstons wife disappeared (i, e., she did not die) in 2014.

47. Christopher died in 2014 and is survived by his wife, Chloe, and their 18- year-old son, Dylan. Chloe is the executor of Christophers estate and maintains the household in which she and Dylan live. All of their support is furnished by Chloe while Dylan saves his earnings. Dylans status for 2014 to 2016 is as follows:

__________________________________________________________

Year Earnings Student Status

___________________________________________________________

2014 $ 5,000 Yes

2015 7,000 No

2016 6,000 Yes

What is Chloes filing status for:

2014?

2015?

2016?

50. Terri, age 16, is claimed as a dependent on her parents 2016 return. During the year, Terri earned $ 5,000 in interest income and $ 3,000 from part-time jobs.

What is Terris taxable income?

How much of Terris income is taxed at her rate? At her parents rate?

Can the parental election be made? Why or why not?