Question 1

Amy and Chris have three children and are unclear whether they can claim their children as dependents. Assume Amy and Chris provide all the support not provided by the children. Information on the children is as follows:

Ruth, age 18, graduated from high school in May, and moved into an apartment immediately after graduation. She earned $5,500 from a job and provided 30% of her own support for the year.

a. Ruth is a dependent child because she meets all of the tests
b. Ruth is a dependent relative because she meets all of the tests
c. Ruth is not a dependent child because she fails the age test
d. Ruth is not a dependent because she fails the residency and gross income tes

Question 2

Sam owns and manages a rental business where he spends 4 out of his 5 days working behind a desk at location "A". On the other day of the week, Sam stops off at office "A" to make sure everything is OK, and drives to a second store ("B") that he owns to oversee the activities at that location. From the "B" location, Sam drives home. A friend tells him that if he puts the name of the business on the side of his car, he can deduct his car expense. What portion of his auto expenses is deductible?

a. Since Sam has put the name on the door of his car, all of his auto expenses are deductible as an advertising expense.
b. Sam cannot deduct the trip from his home to the "A" office, but can deduct the costs of driving between "A" and "B" offices, and the additional mileage from location "B" to his home when this mileage is compared to the mileage between his home and the "A" location.
c. Only the mileage between the two offices is deductible.
d. If Sam uses the standard mileage rate, rather than the actual costs, it will relieve him of all record keeping.