IRS Instructions for Form 1040

This assignment is designed to develop your skills in using IRS instructions and not in general legal research. All the information you need to complete this assignment is contained in the IRS instructions for the completion of Form 1040. There is no need to research or cite other sources. You may access the IRS Instructions for Form 1040 here:

Please answer the following five questions as completely as you can. However, please focus only on what is being asked. There is no need to go off on tangents or discuss contingencies not referenced in the question. You should cite appropriate language from the instructions to support your answers.

1) Timothy is 21 years old. He lives with his father and mother, Sam and Diane. Timothy is a full time student at Utopia University. However, he also works some night and weekend hours at the local library. In all, he earns about $200 per week. He saves some of this money and uses the rest on nights out and other entertainment. His basic needs are seen to mainly by his parents. All 3 people are U.S. citizens. May Sam and Diane claim Timothy as a dependent?

2) Jenny buys 1,000 shares of Microsoft (a public company) on February 1. She holds the stock for the rest of the year. During the year, Jenny received $2,000 in dividends from the Microsoft stock. Are these dividends “qualified” dividends (for purpose of qualifying for the lower dividend tax rate) or not?

3) Assume that Joe has an individual retirement account (IRA) at Fidelity Investments and that he receives a distribution from that IRA. What is the name of the form that he should receive from Fidelity that will tell him how much of his distribution must be reported on his income tax return?

4) Barbara works at a local hospital. She lives 20 miles away from the hospital. However, one day, her supervisor tells her that she must move closer to the hospital so as to be able to make it to work faster in the event of an emergency. Therefore, she packs up and moves to within one mile of the hospital. May Barbara deduct the cost of the moving expenses on her income tax return?

5) Assume that in State X, only someone earning under $12,000 per year is eligible for Medicaid. One year, John earned $11,500 and so was eligible for, and received, Medicaid assistance. However, because of the “earned income tax credit,” he received an extra $1,000 from the IRS and thus, in effect, earned $12,500. Is he now no longer eligible for Medicaid because he earns too much?


Last Updated on