1) Indicate for each of the following the most favorable filing status for the 2011 tax year.
a. Kenny died on March 2, 2011. Marge, his wife, and Bart, their son, survive. Marge filed a joint return in 2011. Bart, age 18 in 2012, is a part-time college student and continues to live at home with his mother. He works part-time, earning $5,900. What is Marge's filing status in 2012?
b. Alan Spaulding is single and provides over 50% support of his niece Alicia who lives with him all year long. Alan maintains the household and claims Alicia as a dependent. Alicia makes $3,600 at a part-time job. She is a full-time student, age 18. What is Alan's filing status?
c. Lily, who was divorced on July 27, 2011, provides 100% of the support for her parents who live in a nursing home in Kansas and have no income. What is Lily's filing status?
d. Holly was abandoned by her husband Fletcher in September of the current year. She has not seen or communicated with him since then. What is Holly's filing status?
e. Rick, whose wife died in December 2011, filed a joint tax return for 2011. He did not remarry, but has continued to maintain his home in which his two dependent children live. What is Rick's filing status for 2012?
2) For each of the following independent cases, indicate the total number of exemptions that may be claimed by the taxpayer in 2012.
a. Cassie is a single mother providing the sole support of her three children, who all live with her. Her 16 year-old daughter, Tammy, earned $15,200 modeling during the year and her two sons, R.J. and Will, ages 10 and 8, have no income.
b. Olivia, 35 years old, provided eighty percent of the support of her grandmother who lived in another state. Her grandmother's only income was from non-taxable social security of $6,500.
c. Vanessa and Matt Reardon are married and under 65 years of age. During 2012, they furnish more than half of the support of their 25 year-old son, Bill, who lives with them. Bill earns $2,000 from a part-time job, most of which he sets aside for future college expenses. Bill is not currently a student. Vanessa's father, Henry, who died on January 3, 2012, at age 80, had for many years qualified as their dependent.
d. Douglas and Marjorie are husband and wife and file a joint return. Both are under 65 years of age. They provide more than half of the support of their daughter, Ellen (age 23), who is a full-time medical student. Ellen receives a $3,400 taxable scholarship covering her room and board at college. They furnish all of the support of Henry (Douglas's grandfather), who is age 70 and lives in a nursing home. They also support Meg (age 69), who is a friend of the family and lives with them.
e. Blair, who is divorced, maintains a home in which she, her twin sons, and her baby daughter live all year. The children's father, Ross, provides over half their support. No special arrangements exist between Blair and Ross.
3) David, a lawyer (age 65), is married and files a joint return. His spouse, Susan, is also 65 years of age. During the current year he engages in the following activities and transactions:
a. eing an avid fisherman, David develops an expertise in tying flies. At times during the year, he is asked to conduct fly-tying demonstrations, for which he is paid a small fee. He also periodically sells flies that he makes. Income generated from these activities during the year is $2,500. The expenses for the year associated with David's fly-tying activity include $125 personal property taxes on a small trailer that he uses exclusively for this purpose, $2,900 in supplies, $270 in repairs on the trailer, and $200 in gasoline for traveling to demonstrations. (Do not consider David's fly tying activities as a hobby).
b. David sells a small building lot to his brother for $40,000. David purchased the lot four years ago for $47,000, hoping to make a profit.
c. Susan enters into the following stock transactions: (None of the stock qualifies as small business stock).
DATE TRANSACTION
March 22 Purchases 100 shares of Silver Corporation common stock for $2,800.
April 5 Sells 200 shares of Gold Corporation common stock for $8,000. The stock was originally purchased two years ago for $5,000
April 15 Sells 200 shares of Silver Corporation common stock for $5,400. The stock was originally purchased three years ago for $9,400.
May 20 Sells 100 shares of United Corporation common stock for $12,000. The stock was originally purchased five years ago for $10,000.
d. David's salary for the year is $370,695. It is decided that the standard deduction will be used.
Answer the following questions regarding David's activities for the year.
1. Compute their taxable income for the year.
2. What is Susan's basis in the Silver stock she continues to own?