Question

1. Sam and Tracy have been married for 25 years. They have filed a joint return every year of their marriage. They have two sons, Christopher and Zachary. Christopher is 19 years old and Zachary is 14 years old. Christopher lived in his parents' home from January through August and he lived in his own apartment from September through December. During the year, Christopher attended college for one month before dropping out. Christopher's living expenses totaled $12,000 for the year. Of that, Christopher paid $5,000 from income he received while working a part-time job. Sam and Tracy provided the remaining $7,000 of Christopher's support. Zachary lived at home the entire year and did not earn any income. Whom are Sam and Tracy allowed to claim as dependents? Make sure you explain why or why not -- hint you should show the tests for dependents.

2. This year Ann has the following stock transactions. What amount is included in her gross income if Ann paid a $200 selling commission for each sale?

Shares Firm Total Purchase Price Sales Price Value at year-end   

100 IBM $5000 $7,000

200 ATT 7,500 $9,500

500 Dell 12,500 13,000

Answer 1

1. Tests for dependents is as follows:

a. Relationship- Must be child or stepchild

b. Residence- Must have resided with parents for more than half of the year

c. Age- Must be under the age of 19

d. Support- Did not provide for more than half of his support for the year

In given case Zachary will be allowed to be claimed as dependent. As for Christopher he fulfills all the conditions of dependency as he is under 19, has resided with his parents for 8 months and has provided less than half ($5,000) of his support ($12,000).

Thus both Christopher and Zachary can be claimed as dependents.

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