Research Problem 2 a. The Bakers are limited to two dependency exemptions; Florence and Darin. With regard to Janet’s parents, the following table summarizes the components involved. Support Provided Calvin Florence
Funds spent on clothing, transportation, and recreation(1/2 of $8,000) $4,000 $4,000
Fair rental value of lodging (1/7 X $14,000) 2,000 2,000
Share of food (1/7 X $10,500) 1,500 1,500
Dental bills — 1,000
Life insurance premium — —
Parents’ total support $7,500 $8,500

Of Calvin’s total support of $7,500, the Bakers provide only $3,500 ($2,000 + $1,500), which is not more than 50%. Unfortunately, life insurance premiums are not considered to be an item of support. In Florence’s case, however, the Bakers furnish $4,500 ($2,000 + $1,500 + $1,000) which is more than $4,250 (50% of $8,500). As a qualifying child (under age 19), Darin’s income is immaterial (as long as he is not self-supporting). Since he satisfies the age requirement, his student status does not matter. Andrea is not a qualifying child as she meets neither the age or student tests. She is not a qualifying relative because the support test is not met. The facts do not state what other types of support (e.g., clothing, recreation, medical) the Bakers pay for, but it would have to be significant for the total (including room and board) to exceed $21,000. Morgan could be a qualifying child except that she appears to be self-supporting. Furthermore, she cannot be a qualifying relative due to the support test. As was the case of Andrea, however, the facts do not reflect what other types of support (besides room and board) her parents might provide. It is unlikely that the total would exceed the $20,000 Morgan furnishes herself.

b. A dependency exemption for Calvin could have been salvaged if Janet had not paid the life insurance premium. Instead, she should have applied the funds on Calvin’s behalf toward a support item (e.g., help pay for the vacation). Thus, Calvin could pay the premium from his own funds without jeopardizing the support percentage.
In the case of Andrea, her parents would have had a better chance of meeting the support test if the cost of the car had not been so high. In this regard, could leasing, rather than purchasing, the Camaro have accomplished this result? Perhaps the Bakers could have contributed whatever portion of the cost is needed to satisfy the more than 50% requirement for the dependency exemption.