Question

Evan and Eileen Carter are husband and wife and file a joint return for 2016. Both are under 65 years of age. They provide more than half of the support of their daughter, Pamela (age 25), who is a full-time medical student. Pamela receives a $5,000 scholarship covering her tuition at college. They furnish all of the support of Belinda (Evan's grandmother), who is age 80 and lives in a nursing home. They also support Peggy (age 66), who is a friend of the family and lives with them. How many exemptions may the Carters claim?

A.
Two

B.Four
C.Three
D.Five
E.Five

Answer 1

Evan and Eileen Carter can potentially claim five exemptions on their joint tax return, which includes themselves, their dependent daughter, Evan's grandmother, and a family friend if all qualifying conditions are met.

Step-by-step explanation:

The question regarding Evan and Eileen Carter pertains to the number of exemptions they can claim on their joint tax return. They have three dependents: their daughter Pamela, Evan's grandmother Belinda, and a friend of the family, Peggy. According to the IRS guidelines for the year 2016, each dependent who qualifies for an exemption allows the taxpayer to reduce their taxable income. A dependent can be a qualifying child or a qualifying relative.

For the Carters, they can claim an exemption for each of them and potentially for each of these dependents. Pamela qualifies if she does not provide more than half of her own support and is a full-time student under the age of 24. Belinda qualifies as a dependent relative since they provide all of her support. Peggy potentially qualifies as a dependent under the qualifying relative rules if she meets the gross income requirement and lived with the Carters all year as a member of the household. Thus, the Carters may claim five exemptions: one for each of them, one for Pamela (as long as she meets the criteria for a qualifying child), one for Belinda, and one for Peggy if she meets the qualifying relative requirements.