| Scenario 1: Darcy and Chris Tabor |
Interview Notes
- Darcy is 45 years old, single, and a U.S. citizen with a valid Social Security number. She had $45,000 in wages.
- During the interview with Darcy, you determine the following facts:
- Darcy’s son Chris, age 21, is unmarried and was a full-time student working on a degree in accounting during 2017.
- Chris’ income was $8,500 in wages, which he used to pay his tuition. He did not provide more than half his own support.
- Chris lived on campus during the school year, but came home on breaks and for the summer.
- Chris is in his third year of college.
- Chris has never had a felony drug conviction.
- Chris is a U.S. citizen with a valid Social Security number.
1. Who can claim Chris' personal or dependency exemption? | D. Chris must file a tax return and claim zero personal exemptions because Darcy canclaim him as a dependent on her tax return. |
Interview Notes
- Darcy is 45 years old, single, and a U.S. citizen with a valid Social Security number. She had $45,000 in wages.
- During the interview with Darcy, you determine the following facts:
- Darcy’s son Chris, age 21, is unmarried and was a full-time student working on a degree in accounting during 2017.
- Chris’ income was $8,500 in wages, which he used to pay his tuition. He did not provide more than half his own support.
- Chris lived on campus during the school year, but came home on breaks and for the summer.
- Chris is in his third year of college.
- Chris has never had a felony drug conviction.
- Chris is a U.S. citizen with a valid Social Security number.
2. Darcy can claim the expenses Chris paid as qualifying expenses for the American opportunity credit if Darcy claims Chris as a dependent on her return. | True |
| Scenario 2: Mike Hastings |
Interview Notes
- Mike is 50 and made $36,000 in wages in 2017. He is single and pays all the cost of keeping up his home.
- Mike's daughter, Brittany, lived with Mike all year.
- Brittany's son, Hayden, was born in November 2017. Hayden lived in Mike's home since birth.
- Brittany is 25, single, and had $1,500 in wages in 2017. She is not disabled.
- Mike provides more than half of the support for both Brittany and Hayden.
- Mike, Brittany, and Hayden are all U.S. citizens with valid Social Security numbers.
3. Who can claim Hayden as a dependent? | D. Mike can claim Hayden; Brittany cannot claim Hayden because Brittany qualifies as Mike’s dependent. |
Interview Notes
- Mike is 50 and made $36,000 in wages in 2017. He is single and pays all the cost of keeping up his home.
- Mike's daughter, Brittany, lived with Mike all year.
- Brittany's son, Hayden, was born in November 2017. Hayden lived in Mike's home since birth.
- Brittany is 25, single, and had $1,500 in wages in 2017. She is not disabled.
- Mike provides more than half of the support for both Brittany and Hayden.
- Mike, Brittany, and Hayden are all U.S. citizens with valid Social Security numbers.
4. Who can Mike claim as a qualifying child(ren) for the earned income credit? | (Incorrect)
D. Mike can claim both Brittany and Hayden. |
Interview Notes
- Mike is 50 and made $36,000 in wages in 2017. He is single and pays all the cost of keeping up his home.
- Mike's daughter, Brittany, lived with Mike all year.
- Brittany's son, Hayden, was born in November 2017. Hayden lived in Mike's home since birth.
- Brittany is 25, single, and had $1,500 in wages in 2017. She is not disabled.
- Mike provides more than half of the support for both Brittany and Hayden.
- Mike, Brittany, and Hayden are all U.S. citizens with valid Social Security numbers.
5. Mike's most advantageous filing status is Single. | False |
| Scenario 3: Henry and Claudia Oberlin |
Interview Notes
- Henry and Claudia are married and want to file a joint return.
- They have one child, Alyssa, who is 5 years old and lived with them all year.
- Henry, Claudia, and Alyssa lived in the U.S. all year and all have Individual Taxpayer Identification Numbers (ITINs).
- Henry earned $37,000 in wages. Claudia had $5,000 in wage income. They had no other income.
- Henry and Claudia provided all the support for Alyssa.
6. Are Henry and Claudia eligible to claim the earned income credit? | B. No, because they all have ITINs. |
Interview Notes
- Henry and Claudia are married and want to file a joint return.
- They have one child, Alyssa, who is 5 years old and lived with them all year.
- Henry, Claudia, and Alyssa lived in the U.S. all year and all have Individual Taxpayer Identification Numbers (ITINs).
- Henry earned $37,000 in wages. Claudia had $5,000 in wage income. They had no other income.
- Henry and Claudia provided all the support for Alyssa.
7. Henry and Claudia can claim Alyssa for which tax benefit(s)? | A. Dependency exemption and the child tax credit |
| Scenario 4: Martin Huron |
Interview Notes
- Martin is married, but did not live with or have contact with his spouse in 2017. He does not know where she is. He indicated on the intake sheet that he is not legally separated.
- Martin does not have children or any other dependents.
- Martin worked as a clerk and earned $36,000 in wages. He had no other income.
- In 2017, he took a computer class at the local university to improve his job skills.
- Martin has a receipt showing he paid $1,200 for tuition. He paid for all his educational expenses and did not receive any assistance or reimbursement.
- He paid $400 for course books from an online bookseller.
- Martin paid $150 for a parking permit. It was not a requirement of enrollment.
- Martin does not have enough deductions to itemize.
- He is a U.S. citizen with a valid Social Security number.
8. What is Martin's most advantageous allowable filing status? | A. Married Filing Separately |
Interview Notes
- Martin is married, but did not live with or have contact with his spouse in 2017. He does not know where she is. He indicated on the intake sheet that he is not legally separated.
- Martin does not have children or any other dependents.
- Martin worked as a clerk and earned $36,000 in wages. He had no other income.
- In 2017, he took a computer class at the local university to improve his job skills.
- Martin has a receipt showing he paid $1,200 for tuition. He paid for all his educational expenses and did not receive any assistance or reimbursement.
- He paid $400 for course books from an online bookseller.
- Martin paid $150 for a parking permit. It was not a requirement of enrollment.
- Martin does not have enough deductions to itemize.
- He is a U.S. citizen with a valid Social Security number.
9. Considering Martin's filing status and using Publication 4012, Tab J, Education Benefits, which education benefit is Martin eligible to claim? | B. He does not qualify for any education benefit |
| Scenario 5: Samantha Rollins |
| 10. Which allowable filing status is most advantageous to Samantha? | (Incorrect)
D. Head of Household |
| 11. Howard is Samantha’s qualifying person for which of the following benefits? | C. Earned income credit |
| 12. What is the credit for child and dependent care expenses shown in the tax and credits section of Samantha's tax return? | D. $600 |
13. What is the total amount of qualified educational expenses used in the calculation of Samantha’s American opportunity credit? $________.
(Do not enter dollar signs, commas, periods, or decimal points in your answer.) |
(Incorrect)
4240
|
| 14. What is the amount of self-employment tax in the Other Taxes section of Samantha’s Form 1040, page 2? | C. $148 |
| 15. Samantha's unemployment income does not need to be reported on her tax return. | False |
| 16. Where is the cancelled debt from Form 1099-C reported on Samantha's tax return? | C. On Form 1040, line 21 as other income |
| 17. Samantha qualifies for an exception to the 10% additional tax on the early distribution from her IRA. | True |
| Scenario 6: Quincy and Marian Pike |
| 18. What is the total taxable interest income shown on Line 8a of Form 1040? | B. $110 |
| 19. How does the code Q on Quincy's Form 1099-R from Essex Bank affect the return? | A. The entire distribution is not taxable. |
Note: The printed Publication 6744 was missing the following worksheet required to answer this question:
Schedule D – Worksheet for Capital Loss Carryovers or Sale of Your Home, 2016
Capital Loss Carryovers from This Year to Next Year
1. Amount from Form 1040, line 41: $34,372
2. Loss shown on Schedule D, line 21 as a positive amount: $3,000
3. Combine lines 1 and 2: $37,372
4. Smaller of line 2 or line 3: $3,000
5. Loss shown on Schedule D, line 7: blank
6. Gain, if any, shown on Schedule D, line 15: blank
7. Add lines 4 and 6: $3,000
8. Short-term capital loss carryover. Subtract line 7 from line 5: $0
9. Loss shown on Schedule D, line 15 as a positive amount: $3,450
10. Gain, if any, shown on Schedule D, line 7: $0
11. Subtract line 5 from line 4: $3,000
12. Add lines 10 and 11: $3,000
13. Long-term capital loss carryover. Subtract line 12 from line 9: $450
The Short Term and Long Term Loss Carryover is not currently carrying to the appropriate line on Form 1040 in the Practice Lab. See https://vitablog.taxslayerpro.com/ for details and updates.
20. What is the amount shown on Form 1040, Line 13 – Capital gain or loss? | (Incorrect)
C. $2,366 |
21. How much of the $17,500 gross distribution reported on Form 1099-R is taxable in 2017? $________.
(Do not enter dollar signs, commas, periods, or decimal points in your answer.) |
(Incorrect)
16797
|
| 22. Is Quincy's Social Security income taxable? | A. Yes, a portion of the Social Security income is taxable. |
| 23. Are the Pikes entitled to claim an earned income credit for 2017? | (Incorrect)
B. No, Quincy is over the age of 65. |
24. What is the total income tax withholding on the tax return? $________.
(Do not enter dollar signs, commas, periods, or decimal points in your answer.) |
3760
|
| Scenario 7: Austin Drake |
| 25. What income must Austin report for his business on Schedule C-EZ or C? | D. Both his income reported on the Form 1099-MISC and the cash income from his clients. |
| 26. What is Austin's mileage expense deduction (at the standard mileage rate) for his business as a personal trainer? | A. $1,525 |
| 27. Which item cannot be deducted by Austin as a business expense? | D. Nutritional supplements |
| 28. How does Austin's self-employment tax affect his tax return? | D. The self-employment tax is shown on Form 1040, Other Taxes section, and the deductible part is an adjustment on Form 1040, page 1. |
29. What is the amount Austin can take as a student loan interest deduction? $________.
(Do not enter dollar signs, commas, periods, or decimal points in your answer.) |
2500
|
| 30. What are Austin’s total itemized deductions on Schedule A, line 29? | (Incorrect)
A. $6,856 |
| 31. The amount of Austin's retirement savings contributions credit in the Tax and Credits section of Form 1040 is $120. | True |
| 32. Austin is not able to pay the entire balance due by the due date of the return (without extensions). What are his options? | D. Any of the above. |
| Scenario 8: Robert Wharton |
Interview Notes
- Robert, age 33, lived and worked in the U.S. all year. He is single and has no dependents.
- Robert is not lawfully present in the U.S. and has an Individual Taxpayer Identification Number (ITIN).
- Robert had wages of $19,000. He had no other income.
- He did not have any health insurance for all of 2017.
- If he gets a refund, Robert would like to split it between two separate bank accounts.
33. What form must be used to split Robert's refund? | A. Form 8888 |
Interview Notes
- Robert, age 33, lived and worked in the U.S. all year. He is single and has no dependents.
- Robert is not lawfully present in the U.S. and has an Individual Taxpayer Identification Number (ITIN).
- Robert had wages of $19,000. He had no other income.
- He did not have any health insurance for all of 2017.
- If he gets a refund, Robert would like to split it between two separate bank accounts.
34. Which health coverage exemption does Robert quality for? | C. Not lawfully present in the U.S. and not a U.S. citizen |
Interview Notes
- Robert, age 33, lived and worked in the U.S. all year. He is single and has no dependents.
- Robert is not lawfully present in the U.S. and has an Individual Taxpayer Identification Number (ITIN).
- Robert had wages of $19,000. He had no other income.
- He did not have any health insurance for all of 2017.
- If he gets a refund, Robert would like to split it between two separate bank accounts.
35. Refer to Publication 4012, Tab H. Which of the following qualify as minimum essential coverage? | D. All of the above |
