ACCT M50 PRINCIPLES OF INCOME TAXATION PRACTICE EXAM | FREE SOLVED ANSWERS
Which of the following Items would not be considered support for a dependency exemption?
Which of the following Items would not be considered support for a dependency exemption?
Multiple Choice
a. medical Insurance premiums
b. food
c. clothing
d. life insurance premiums
The correct answer is (d) life insurance premiums.
Explanation:
For tax purposes, “support” for a dependency exemption generally includes expenses directly related to the dependent’s well-being and basic needs. This typically covers items like food, lodging, education, medical care, and clothing.
- Medical insurance premiums are considered a form of medical care and thus qualify as support.
- Food is a fundamental necessity and is always considered support.
- Clothing is also a basic need and is included in the definition of support.
- Life insurance premiums, however, are considered an investment or a form of savings for the future, rather than a direct expense for the dependent’s immediate needs and well-being. Therefore, they are generally not considered support for the purpose of claiming a dependency exemption.