Unit 2 Questions and Answers

Unit 2 Questions and Answers

I: 2-40

Dependency Exemptions and Child Credit

How many dependency exemptions are the following taxpayers entitled to, assuming the people involved are U.S. citizens? Which dependents qualify for the child credit?

a. Andrew supports his cousin Mary, who does not live with him. Mary has no income and is single.

ANSWER: As long as Mary does not have any income and Andrew supports her fully than I believe yes he can claim her as a dependent.

b. Bob and Ann are filing a joint return. Bob provided over one-half of his father’s support.

The father received Social Security benefits of $6,000 and taxable interest income of $800. The father is single and does not live with them.

ANSWER: Bob and Ann can claim Bob’s father as a dependent because Bob provides one-half of his father’s income. Bob did not earn a child credit.

c. Clay provides 60% of his single daughter’s support. She earned $3,000 while attending school during the year as a full-time student. She is 22 years old.

ANSWER: Clay may claim 1 dependent as long as his daughter does not claim a dependent. Since his daughter is a full-time student than he can still claim her and earn the child credit.

d. Dave provided 30% of his mother’s support and she provided 55% of her own support.

Dave’s brother provided the remainder. The brother agreed to sign a multiple support agreement.

ANSWER: David must file a form 2120 to claim his mother as a dependent. He does not meet the requirements for the earn child credit.