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Unformatted text preview: H Chapter Four H PERSONAL AND DEPENDENCY EXEMPTIONS; FILING STATUS; DETERMINATION OF TAX FOR AN INDIVIDUAL; FILING REQUIREMENTS SOLUTIONS TO PROBLEM MATERIALS DISCUSSION QUESTIONS 4-1 The personal exemption is a deduction allowed each taxpayer. On a joint return, each of the two taxpayers (husband and wife) is entitled to a personal exemption deduction. Dependency exemptions are allowed for each qualifying dependent, whether a qualifying child or other dependent, of the taxpayer. See Question 2 for the definition of a dependent. The exemption amount for both the personal and dependency exemptions is $3,500 for 2008. However, a taxpayer who qualifies to be claimed as a dependent on any other taxpayer’s return may not claim a personal exemption (technically the exemption deduction is zero) on his or her own return. (See pp. 4-2 and 4-3 and §§ 151 and 152.) 4-2 Six requirements must be met. 1. Relationship test—must be the taxpayer’s child, step-child, or foster child, or a sibling or step-sibling, or a descendant of any of these. See question 4-3. 2. Residence test—the qualifying child must have the same place of abode as the taxpayer. 3. The qualifying child must be under age-19, or under age-24 and a full-time student, or totally and permanently disabled. 4. The child may not have filed a joint return if he or she is married at the end of the year, unless there is no tax shown on the return. 5. The child must be a U. S. citizen, resident, or national, or a resident of Canada or Mexico. 6. The child cannot be self-supporting (i.e., provides more than one-half of his or her own support). (See pp. 4-3 and 4-4) 4-3 The relationship test stipulates that a qualifying child must be the taxpayer’s— c. S is entitled to the exemption for D. F is not a qualifying child of S, but she may be claimed under the rules for other dependents. Since F can be claimed by S, F cannot claim an exemption for D. Since D is a qualifying child of S, S can claim the exemption for D. (See pp. 4-3 to 4-12.) 4-5 All five of the tests below must be met in order for a taxpayer to be entitled to an exemption for a dependent. Support test. The taxpayer must provide more than 50 percent of the qualifying individual’s total support. Gross income test. The dependent’s gross income must be less than the exemption amount, which is $3,650 in 2010. (See Question 4 above for exceptions.) Relationship test. The taxpayer must be related to the dependent. Qualifying relationships are listed in Code § 152(a). Joint return test. The dependent may not have filed a joint return with his or her spouse. An exception is provided if the joint return is filed solely for a refund. Citizenship test. The dependent must be a citizen or resident of the United States or its contiguous countries....
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This note was uploaded on 03/01/2011 for the course ACCT 4331 taught by Professor X during the Spring '08 term at University of Houston.

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