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Exam 3: Computing the Tax

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Question 101

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Match the statements that relate to each other. a.Available to a 70-year-old father claimed as a dependent by his son. b.Equal to tax liability divided by taxable income. c.The highest income tax rate applicable to a taxpayer. d.Not eligible for the standard deduction. e.No one qualified taxpayer meets the support test. f.Taxpayer's ex-husband does not qualify. g.A dependent child (age 18) who has only unearned income. h.Highest applicable rate is 39.6%. i.Applicable rate could be as low as 0%. j.Maximum rate is 28%. k.Income from foreign sources is not subject to tax. l.No correct match provided. -Territorial system of taxation

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Question 102

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A qualifying child cannot include:

A) A nonresident alien.
B) A married son who files a joint return.
C) A daughter who is away at college.
D) A brother who is 28 years of age and disabled.
E) A grandmother.

F) B) and D)
G) B) and C)

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Question 103

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Match the statements that relate to each other. Note: Some choices may be used more than once. a.Not available to 65-year old taxpayer who itemizes. b.Exception for U.S. citizenship or residency test (for dependency exemption purposes). c.Largest basic standard deduction available to a dependent who has no earned income. d.Considered for dependency exemption purposes. e.Qualifies for head of household filing status. f.A child (age 15) who is a dependent and has only earned income. g.Considered in applying gross income test (for dependency exemption purposes). h.Not considered in applying the gross income test (for dependency exemption purposes). i.Unmarried taxpayer who can use the same tax rates as married persons filing jointly. j.Exception to the support test (for dependency exemption purposes). k.A child (age 16) who is a dependent and has only unearned income of $4,500. l.No correct match provided. -Abandoned spouse

Regarding dependency exemptions, classify each statement in one of the four categories: a.Could be a qualifying child. b.Could be a qualifying relative. c.Could be either a qualifying child or a qualifying relative. d.Could be neither a qualifying child nor a qualifying relative. -A granddaughter,who lives with taxpayer,is 19 years old,earns $5,000,and is not a full-time student.

Mr.Lee is a citizen and resident of Hong Kong,while Mr.Anderson is a citizen and resident of the U.S.In the taxation of income,Hong Kong uses a territorial approach,while the U.S.follows the global system.In terms of effect,explain what this means to Mr.Lee and Mr.Anderson.

Many taxpayers who previously itemized will start claiming the standard deduction when they purchase a home.

Jason and Peg are married and file a joint return.Both are over 65 years of age and Jason is blind.Their standard deduction for 2017 is $16,450 ($12,700 + $1,250 + $1,250 + $1,250).