South-Western Federal Taxation Comprehensive, Chapter 3 Review Questions with Verified Solutions Already Passed
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South-Western Federal Taxation Comprehensive
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South-Western Federal Taxation Comprehensive
South-Western Federal Taxation Comprehensive, Chapter 3 Review Questions with Verified Solutions Already Passed
Abandoned spouse - Answers The abandoned spouse provision enables a married taxpayer with a dependent child whose spouse did not live in the taxpayer's home during the last six months o...
South-Western Federal Taxation Comprehensive, Chapter 3 Review Questions with Verified Solutions
Already Passed
Abandoned spouse - Answers The abandoned spouse provision enables a married taxpayer with a
dependent child whose spouse did not live in the taxpayer's home during the last six months of the tax
year to file as a head of household rather than as married filing separately.
Child tax credit - Answers A tax credit based solely on the number of qualifying children under age 17.
The maximum credit available is $1,000 per child through 2017. A qualifying child must be claimed as a
dependent on a parent's tax return to qualify for the credit. Taxpayers who qualify for the child tax
credit may also qualify for a supplemental credit. The supplemental credit is treated as a component of
the earned income credit and is therefore refundable. The credit is phased out for higher-income
taxpayers. § 24.
Collectibles - Answers A special type of capital asset, the gain from which is taxed at a maximum rate of
28 percent if the holding period is more than one year. Examples include art, rugs, antiques, gems,
metals, stamps, some coins and bullion, and alcoholic beverages held for investment.
Dependency exemption - Answers The tax law provides an exemption for each individual taxpayer and
an additional exemption for the taxpayer's spouse if a joint return is filed. An individual may also claim a
dependency exemption for each dependent, provided certain tests are met. The amount of the personal
and dependency exemptions is $3,900 in 2013 ($3,800 in 2012). The exemption is subject to phaseout
once adjusted gross income exceeds certain statutory threshold amounts. This phaseout provision is
subject to partial phaseout beginning in 2006. Beginning in 2010, the phaseout provision no longer
applies. Under the sunset provision, the phaseout of personal and dependency exemptions was
scheduled to be reinstated in 2011. The Tax Relief Act (TRA) of 2010 put off the reinstatement for two
years (i.e., 2011 and 2012). For 2013, the American Taxpayer Relief Act of 2012 restored the phaseout of
personal and dependency exemptions.
E-file - Answers The electronic filing of a tax return. The filing is either direct or indirect. As to direct, the
taxpayer goes online using a computer and tax return preparation software. Indirect filing occurs when a
taxpayer utilizes an authorized IRS e-file provider. The provider often is the tax return preparer.
Head of household - Answers An unmarried individual who maintains a household for another and
satisfies certain conditions set forth in § 2(b). This status enables the taxpayer to use a set of income tax
rates that are lower than those applicable to other unmarried individuals but higher than those
applicable to surviving spouses and married persons filing a joint return.
Itemized deductions - Answers Personal and employee expenditures allowed by the Code as deductions
from adjusted gross income. Examples include certain medical expenses, interest on home mortgages,
state income taxes, and charitable contributions. Itemized deductions are reported on Schedule A of
Form 1040. Certain miscellaneous itemized deductions are reduced by 2 percent of the taxpayer's
adjusted gross income. In addition, a taxpayer whose adjusted gross income exceeds a certain level
(indexed annually) must reduce the itemized deductions by 3 percent of the excess of adjusted gross
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