24211_ch04_final_p001-012

B lived in the same abode as her mother for more than

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Unformatted text preview: r for more than half of the year, but she also lived with her grandparents. B is a qualifying child of both her mother, P, and her grandparents, M and D. Under the tie-breaker rules, the exemption goes to P. But, if P's gross income was less than $3,700 and she meets the other requirements, her parents can claim her and B, since P cannot claim the exemption if she herself is claimed by M and/or D. (See p. 4-4.) 4-13 Currently there are ten community property states: Alaska, California, Washington, Idaho, Nevada, Texas, Louisiana, New Mexico, Arizona, and Wisconsin. Alaska allows its residents to elect community property treatment. Income generated through the personal efforts of either spouse in these states is owned equally by each spouse and is included in his or her estate. In the so-called "common law"states, the income from earnings is generally owned by the spouse providing the services. The operation of State law as to the ownership of property is respected for Federal income tax purposes. (See pp. 4-14 and 4-15.) The list of filing status classifications and tax schedule designations is as follows: Status Schedule Code Section 4-14 Married filing jointly Surviving spouse Married filing separately Head of household Single Y-1 Y-1 Y-2 Z X 1 (a) 2 (a) 1 (d) 1 (b) 1 (c) Taxpayers with taxable incomes not exceeding $100,000 must use the Tax Tables. (See pp. 4-15, 4-25 and inside-front cover of the textbook.) 4-15 Marital status is determined on the last day of an individual's taxable year. State law generally controls in the determination. A person, unless legally separated under a court ordered decree of separate maintenance or a final decree of divorce, is married for tax purposes if he or she is married under state law. (See p. 4-16.) An abandoned spouse is a married person who may use the rates for unmarried persons. To qualify as an abandoned spouse, a married individual must provide more than one-half the cost of the home that is his or her home and that of a child or stepchild for whom a dependency exemption is claimed. The child or stepchild must live in the home for more than one-half of the taxable year, and the taxpayer's spouse may not have lived in the home at any time during the last half of the taxable year. [See Example 20, p. 4-19, and 143(b).] A surviving spouse is an example of a single individual who may use the rates for married persons filing jointly. A taxpayer is a surviving spouse if his or her spouse died in either of the two taxable years preceding the current taxable year. To qualify, the taxpayer must provide over one-half the cost of maintaining a home that is his or her home and the principal place of abode of a child or stepchild for whom a dependency exemption deduction is claimed. (See Example 16 and p. 4-16.) 4-16 4-4 Chapter 4 Personal and Dependency Exemptions; Filing Status; etc. 4-17 In order to be eligible to use the head-of-household rates, a taxpayer must be unmarried, not be a surviving spouse, and provide over one-half the cost of maintaining the home in which a qualifying child or qualifying familial relative lives for more than one-half of the year. The specific requirements related to the home are as follows: 1. 2. 3. The taxpayer and his or her unmarried son, stepson, daughter, stepdaughter, or descendant of a son or daughter live in the home; The taxpayer and any other dependent of the taxpayer for whom a dependency exemption is claimed live in the home (including siblings, certain in-laws, and others); or The father or mother of the taxpayer for whom a dependency exemption deduction is claimed lives in the home. It is not necessary that it also be the...
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