Question

3) Sam and Tracy have been married for 25 years. They have filed a joint return every year of their marriage. They have two sons Christopher and Zachary. Christopher is 19 years old and Zachary is 14 years old. Christopher lived in his parents' home from January through August and he lived in his own apartment from September through December. During the year, Christopher attended college for one month before dropping out. Christopher's living expenses totaled $12,000 for the year. Of that, Christopher paid $5,000 from income he received while working a part time job. Sam and Tracy provided the remaining $7,000 of Christopher's support. Zachary lived at home the entire year and did not earn any income. Who are Sam and Tracy allowed to claim as dependents? Learning Objective: 04-03 Determine a taxpayer's filing status.

4) J.Z. (single taxpayer) is retired and received $10,000 of Social Security benefits this year. How much of the $10,000 Social Security benefits is taxable if his only other income was $28,000 of pension income?

Learning Objective: 05-02 Discuss the distinctions between the various sources of income, including income from services and property.

5) This year Ann has the following stock transactions. What amount is included in her gross income if Ann paid a $200 selling commission for each sale?

Shares	Firm	Total Purchase price		Sales price			Value at year end
100	IBM	$	5,000					$7,000
200	ATT		7,500		$	9,500
500	Dell		12,500			13,000

Learning Objective: 05-01 Apply the concept of realization.

SHOW HOW YOU GOT ANSWERS!!!

Answer 1

3)

Christopher is not a full time student to be qualified child. His gross income crosses required threshold to be depedent relative. Thus, he is not a dependent.

Zachary qualifies as dependent.

Total number of dependents are one.

4. J.Z.'s modified AGI plus 50% of his social security benefits is equal to $28,000 + $5,000 = $33,000. So his taxable social security benefits are the lesser of (1) $5,000 (50% of his social security benefits) or (2) $4,000 (being 50% of ($28,000 modified AGI + $5,000 (50% social security benefits) - $25,000).

Answer is therefore $4,000.

5. For ATT: ($9,500 - $200) - $7,500 = $1,800

For Dell: ($13,000 - $200) - $12,500 = $300

For IBM: The increase in value in IBM stocks is not realized yet (as it is still not sold).

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