Leah Pasternak Federal Taxation ACC307 Chapter 3: Computing the Tax Homework Submission 3 a. Yes 3 b. Yes 3 c. No 3 d. Yes 3 e. No 3 f. No 3 g. No 3 h.

. Yes 3 i. Yes 3 j. Yes 5. No, Lucass approach is not effective in reducing his taxes because of the global system. Under the global system, gross income can be taxed from whatever source derived, including foreign income. 10 a. Yes, Abigail needs to file a Federal income tax return because an individual who is over 65 or blind, or both, is allowed the additional standard deduction. 10 b. If Abigail files a return the amount of personal exemption and standard deduction that she can claim is $950 + $1,450 = $2,400. 13. Patsy cannot claim her eldest son because he does not pass the qualifying child test due to his age. Patsy can claim her cousin as a dependent because her cousin passes the qualifying relative test. However, if you do not pass the qualifying child tests, you may be able to pass the qualifying relative tests. 15. Caden cannot claim Lily as a dependent in 2011 because they were married for a portion of that year, but in 2012 he may claim her as a dependent because she lives with him and receives more than half of her support from him. 24 a. If a child generates only earned income then they are not subject to the Kiddie Tax. 24 b. The Kiddie Tax would apply if the child has not reached the age of 19 by the close of the taxable year and has more than $1,900 of unearned income. 24 c. The Kiddie Tax does not apply to a child who is age 19 by the close of the taxable year. 24 d. The Kiddie Tax would not apply to a married child who files a joint return with their spouse. 24 e. If a parental election is made a child is treated as having no gross income and is not required to file a tax return. To make a parental election Form 8814 needs to be filed. 24 f. If a parental election is made, but the parents file separate returns, than the parent with the greater taxable income is the applicable parent to include the childs income on their return. 30. Aidans taxable income would be $60,000 40 a. Filing as surviving spouse

40 b. Filing as single 40 c. Filing as surviving spouse for her last year she is able to do so. 45 a. She is required to file even though her net earnings are less than the $400 amount. She should file a tax return to obtain a tax refund of amounts withheld. She also must file in order to obtain the benefits of the earned income credit which is allowed to taxpayers with little to no tax liability. 45 b. No Mike is not required to file because his gross income does not meet or exceed the sum of his exemption amounts plus his applicable standard deduction. 45 c. Yes Ronald must file a tax return even though he is claimed as a dependent because his gross income meets or exceeds the total standard deduction that is allowed for the year, in his case $5,950. 45 d. Yes they must file a return because their combined gross income is greater than the married, filing joint and both spouses over age 65, filing level of $21,800. 45 e. Quinn can either file his own return, and would be subject to the Kiddie Tax because Quinn is under the age of 24 and a full time student. Quinn can choose to file a separate return or he can report his unearned income on his parents return. If Quinn files a separate return he must file Form 8615 and the tax on his net unearned income is computed as though the income had been included on his parents return. 50 a. If Inez is in the 35% income tax bracket she has $2,100 in income taxes. 50 b. If Inez is in the 15% income tax bracket she has $750 in income taxes. 52 a. The Hundleys are alternating between using the standard deduction and itemizing. They are using the cash method to concentrate multiple years deductions in a single year and then using the standard deduction in alternate years. 52 b. In 2012 their taxable income is reduced by $3,000 ($12,000 x 25%), then in 2013 they can use the standard deduction amount of $11,900 which they can use as their deduction and which would reduce their taxable income by $2,975 ($11,900 x 25%).