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Kyle and Liza are married and under 65 years of age. During 2018, they furnish more than half of the support of their 19-year old daughter, Kendra, who lives with them. She graduated from high school in May 2017. Kendra earns $15,000 from a part-time job, most of which she sets aside for future college expenses. Kyle and Liza also provide more than half of the support of Kyle’s cousin who lives with them. Liza’s father, who died on January 3, 2018, at age 90, has for many years qualified as their dependent. How many dependents can Kyle and Liza claim?

Question
  1. Kyle and Liza are married and under 65 years of age. During 2018, they furnish more than half of the support of their 19-year old daughter, Kendra, who lives with them. She graduated from high school in May 2017. Kendra earns $15,000 from a part-time job, most of which she sets aside for future college expenses. Kyle and Liza also provide more than half of the support of Kyle’s cousin who lives with them. Liza’s father, who died on January 3, 2018, at age 90, has for many years qualified as their dependent. How many dependents can Kyle and Liza claim?

 

check_circleAnswer
Step 1

Dependency exemption: The deduction allowed for the care and maintenance of qualifying dependent is referred to as dependency exemption.

Step 2

Qualifying dependent: An individual is qualified as a dependent if he or she fulfills the following criteria as ‘qualifying child’ or ‘qualifying relative’.

Qualifying child:

According to §152 (c) of Internal Revenue Code a person is said to be a ‘qualifying child’ if he or she passes the following tests:

  • Relationship test: ‘The person can be biological child, adopted child, stepchild, eligible foster child, brother, sister, brother, half-brother, half-sister, stepsister, stepbrother, or the descendants of grandchild, nephew, and niece of the taxpayer.’
  • Age test: ‘The person should be under the age of 19 years or under the age of 24 years as a student. The person should be younger than the taxpayer.’
  • Residency test: ‘The person claiming to be the dependent should have lived with the taxpayer for more than 6 months in the assessment year.’
  • Support test: ‘The person claiming to be the dependent should not be able to provide for more than half of her or his support.’
  • Joint return test: ‘The married individual should file return separately to claim refund and they should not file joint returns with his or her spouse.’
  • Citizenship test: ‘The individual should be a citizen of Country U, or a resident of Country U, or Country C, or Country M.’

 Qualifying relative:

According to §152 (d) of Internal Revenue Code a person is said to be a ‘qualifying relative’ if he or she passes the following tests:

  • Relationship test: ‘The person can be an ancestor like grandfather, lineal descendant, collateral ascendant, and in-laws.’
  • Support test: ‘The taxpayer or group of taxpayers claiming the dependency exemption for the relative should provide for more than 50% support of the expenses of the dependent.’
  • Gross income test: ‘The gross income of the person claiming to be dependent should be less than the dependency exemption amount ($4,000).’
  • Joint return test: ‘The married individual should file return separately to claim refund and they should not file joint returns with his or her spouse.’
  • Citizenship test: ‘The individual should be a citizen of Country U, or a resident of Country U, or Country C, or Country M.’
Step 3

KY and LI could claim 2 dependency exemptions.

  • Their daughter, KE, aged 19 in the filing year 2018, does not meet the requirements of a qualifying child as she does not pass the age test (she is not under 19 years), support test (able to provide for her future expenses), and gross income test (earning a gross income of $15,000).
  • KY’s cous...

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