ACT405 Dependency Tax Credits and Personal Exemption Writing Paper

Dependency and Personal Exemptions

Read the following tax problem and answer items a-d.

Bob and Donna have been married for 35 years and have filed joint returns since their marriage. The couple has three children: Jack (age 11), Bonnie (age 16), and Margie (age 22). All three children live with Bob and Donna. In addition, none of the children provide more than half of their own support. Margie is a full-time student at a local university and does not have any gross income.

Based on the situation above, answer the following questions:

a. How many personal exemptions can Bob and Donna claim?

b. Assume the original facts, except that Margie is married. She and her husband live with Bob and Donna and they file a joint return. They have a $2,000 tax liability for the year. Can Bob and Donna claim Margie as a dependent on their tax return? Why or why not?

c. Assume the same facts in (b), except that Margie and her husband report no tax liability on their joint return. Also, if the couple had filed separately, Margie would not have had a tax liability on her return, but her husband would have had a $550 tax liability on his separate return. Can Bob and Donna claim Margie as a dependent on their tax return? Why or why not?

d. Assume the original facts except that Margie is married. Margie files a separate tax return. Margie’s husband files a separate tax return and reports a $550 tax liability on the return. Can Bob and Donna claim Margie as a dependent? Why or why not?

Requirements

Clearly identify the requirements being addressed. Explain each of your conclusions and cite appropriate authority to support your position.

Your paper must meet the following requirements: