Reference no: EM13857993

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 ex- husband deduct the annual payments and, if so, is the deduction For AGI for 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 2014, 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 2014. For the situations below, determine whether the individuals qualify as dependency exemptions for Jerry and Jenny on their 2014 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 $4,000.

(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   2014,  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  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 2012. Joan and her son Marley, age 21, continued to live at home in years 2012 - 2015. 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  2012,   2013, 2014, and 2015? 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  2014  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 daughter and completely maintained the household. What is  Mary's  filing  status?

11) Jake and Janice are a married couple with two dependent children. In 2014, their salaries totaled $130,000, and they suffered a capital loss of $8,000. They also received $1,000 of tax- exempt 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 2014 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 2014. 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  2014  (a)  adjusted  gross  income;;  (b)  taxable  income;;  and (c) tax liability?

13) 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 12/29/13, Geraldo received  a  deposit  of  $4,000  in  addition  to  the  first  and  last  months'  rent.    Brian  commenced   occupancy of the building on 1/02/14. On 7/15/14, 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 5/10/14, 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 2013 and 2014?

16) Humphrey and Lauren filed a 2014 joint return. Humphrey earned $31,000 during the year before losing his job. Lauren received Social Security benefits of $5,000. What was the taxable portion of the Social Security benefits? What would have been the taxable portion of the Social Security benefits if Humphrey had earned $46,000 in 2014? Explain.

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	Age	Key Employee	Coverage	Premiums
Sandy	62	Yes	$200,000	$4,000
Randy	52	Yes	40,000	700
Mandy	33	No	80,000	600
Candy	33	No	40,000	300

(a) How much may Lamar deduct for group term life insurance premiums?

(b) How much income must be reported by each employee?