Question

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.

Answer 1

Answer : (A)

As per IRS 2018 No Personal Exemption is available.  

But items like Child Credits are still available.

Child Tax Credit-$2,000 per qualifying child

2000 * 3Qualifying Child = 6,000

Jack Is a qualifying Child as under 19 and meet conditions**

Bonnie Is a qualifying Child as under 19 and meet conditions

Margie even above 19 But Below 24 and a Student with no income.

**To meet the qualifying child test the child must be younger than19 years old

or

A student younger than 24 years old as of the end of the calendar year

Answer : (B)

No, Bonb and Donna cannot claim Margie as a dependent on their tax return, as she is married and filling a joint return and have a tax liability for an amount of $2000 for the year.

As per the rules for claiming an exemption for a dependent:

You cannot claim a married person as a dependent who files joint return unless that joint return is just a claim for refund and there would be no tax liability for either spouse on separate tax returns.

In this case, they have a tax liability for $2000, thus cannot be claimed as dependent

Answer : (C)

In order to claim dependent exemption for Married Daughter, you need to make sure that she satisifies the Following Conditions which says whether she is dependent or not !

1. She must be younger than 24 and a Full Time Student - She is 22 and Full Time Student of a Local University.

2. She must have lived with her parents for more than half of the Year - It is assumed in the given case that she had satisfied this condition due to lack of information.

3. She doesnt Contribute more more than half of her support - Yes Satisfied, and can be seen in the Question that none of the Children provide more than half their own support.

4.. Daughter and her Husband where not filing a joint return unless they are filing only to claim refund of taxes which has been withheld from their paycheks. - Here there are two cases:

a. They where not filing Jointly - In this case, Bob and Donna can claim Margie on their return because all the above conditions were satisfied.

b. If in case they have filed seperately - Margie have no tax liability on her return but her husband have tax liability of $ 550 - In this Case, Bob and Donna cannot claim Margie on their return because all the above conditions were satisfied but not the 4th Conditon.

Answer : (D)

Yes, Bob and Donna can claim Margie as dependent.

Because, Margie satisfies all the conditions applicable to become a dependent accordibg to chapter 26 section 152 of US CODE.

According to the above mentioned section, dependent means qualified child or qualified relative.

To become a qualified child following conditions shall be satisfied.

1) she should have relationship with the taxpayer

2)she should have same principal place with the tax payer more than one half of the taxpayable year

3) satisfies age requirements - for students upto 24 years can claim as dependent ( paragragh 3)

4) who not provide one half of individual own support.

5) who has not filed a joint return with his spouse.

Above all conditions are satisfied in the case of Margie. She has a relationship with tax payer, she is in same principal place, she is a student of 22 years old, give in the question she not provide onehalf of the individual own support and at tge same time she is not filling joint return with his spouse.

So, Bob and Donna can claim Margie as dependent