Problem 5 (4 Points Each; 50 minutes) 1. The Samsons are trying to determine whe

Question

Problem 5 (4 Points Each; 50 minutes)

1.     The Samsons are trying to determine whether they can claim their 22-year-old adopted son, Jason, as a dependent. Jason is currently a full-time student at an out-of-state university. Jason lived in his parents’ home for three months of the year and he was away at school for the rest of the year. He received $9,500 in scholarships this year for his outstanding academic performance and earned $4,800 of income working a part-time job during the year. The Samsons paid a total of $5,000 to support Jason while he was away at college. Jason used the scholarship, the earnings from the part-time job, and the money from the Samsons as his only sources of support. Can the Samsons claim Jason as their dependent?

a. True                                               b.   false

.        Jasper and Crewella Dahvill were married in year 0. They filed joint tax returns in years 1 and 2. In year 3, their relationship was strained and Jasper insisted on filing a separate tax return. In year 4, the couple divorced. Both Jasper and Crewella filed single tax returns in year 4. In year 5, the IRS audited the couple’s joint year 2 tax return and each spouse’s separate year 3 tax returns. The IRS determined that the year 2 joint return and Crewella’s separate year 3 tax return understated Crewella’s self-employment income, causing the joint return year 2 tax liability to be understated by $5,700 and Crewella’s year 3 separate return tax liability to be understated by $6,450. The IRS also assessed penalties and interest on both of these tax returns. Try as it might, the IRS has not been able to locate Crewella, but they have been able to find Jasper. What amount of tax can the IRS require Jasper to pay for the Dahvill’s year 2 joint return and year 3 return, respectively?

a. $5,700; $-0-                              b. $0; $0-0                                 c. $2,850; $3,225                 d. $2,850; $-0-

Problem 3 (6 Points; 5 minutes)

Denny is a 16-year old full time student who is claimed by his parents as a qualifying child. Denny’s income consists of interest income of $4,000 and earnings from a summer job of $3,700. How much is Denny’s taxable income and income tax for 2016? His parents’ marginal tax rate is 28%.

Explanation / Answer

Problem 5 1 answer

True (Jason still relied on Samson's money to support him. Since he is full-time student it is acceptable not to live at home).

Problem 5 2 answer

Option A 5700, 0

(Jasper is jointly and severally liable, he is responsible for entire amount in year 2. In year 3, he filed seperately he is not liable for any amount)

Problem 3 7700, 2156

Total taxable income = 4000+3700 = 7700

Income tax = 7700*28%= 2156

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