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:

Peter, age 25, who served in the military immediately after high school, is a full-time college senior. He worked part-time earning $2,200 and provided 20% of his support.

a. Peter is a qualifying child dependent because he is in college full-time
b. Peter is not a dependent because he fails the age test
c. Peter is a qualifying relative dependent because he meets the qualifying tests
d. Peter is not a qualifying relative because he fails the gross income test

Question 2

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:
Mark, age 22, graduated from college in May (he was a full-time student for five months of the year), and accepted a job in June. He lived with his parents for the entire year, earned $28,000, and provided 70% of his support.
a. Mark is a dependent child because he was a full-time student, meets the age test and meets the residency test
b. Mark is a dependent relative because he meets the residency test
c. Mark is not a dependent relative because he fails the age test
d. Mark is not a dependent because he fails both the gross income and support tests.

Question 3

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 4

In December 2016, Buddy rents an apartment to Gary. Buddy receives the first and last months' rent of $1,200 plus a security deposit of $500. How much income does Buddy, a cash basis taxpayer, report in 2016?
a. $0
b. $1,100
c. $1,200
d. $1,700

Question 5
Sherlock retired last year due to a lay-off. During the current year, he receives $10,000 in Social Security benefits. In addition, he receives $6,000 in cash dividends on stocks that he owned, $8,000 in interest on tax-exempt bonds and $11,000 in unemployment compensation. Assuming that Sherlock is single, how much of his social security benefits are taxable?
a. $0
b. $2,500
c. $5,000
d. $8,500

Question 6
Cooper was physically injured in a sailboat accident and received $100,000 in punitive damages. The entire $100,000 is taxable.