This paper will analyse the simulation about "Analyzing Income Tax Implications" Cycle I and II. Although some parts of the simulation were very fundamental in essence it still provided many examples that enforced the decision-making process. Within this paper, I will be describing the two cycle and the outcome results.
The first cycle of analyzing income tax computations deals with the Lawrence family, Spencer and Patricia, who file jointly, and want to know if they have dependency exemptions for their son, Kenneth, and Patricia's mother, Gillian, in the current year. After analyzing all the data provided, I had to determine if the dependency test for Kenneth and Gillian were met.
The dependency exemption consists of five tests, all which must be met. I used the textbook and the information tabs provided to help me in my dependency decision-making process. First was the citizenship test. Both Kenneth and Gillian are U.
S. citizens. Next was the relationship test. To meet the relationship test the person must be related according to the criteria listed or the person must have been a member of the household for the entire year. Both passed this test. Neither Kenneth nor Gillian will be filing a joint tax return so the joint return test is not an issue. Gross income was next. Although Kenneth's income is over the 3,100 limit, Kenneth qualifies because he is a student under the age of 24 years old, and his parents provide over half of the child support in the tax year. Gillian qualifies as well because her gross income of $12,000, even though it is over the limit, is from Social Security which is tax exempt. The final test was the support test. Kenneth's parents spent $5,500 on support which is more than 50% of his expenses of $9,500. Therefore,