• Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off
Reading...
Front

Card Range To Study

through

image

Play button

image

Play button

image

Progress

1/35

Click to flip

Use LEFT and RIGHT arrow keys to navigate between flashcards;

Use UP and DOWN arrow keys to flip the card;

H to show hint;

A reads text to speech;

35 Cards in this Set

  • Front
  • Back

Barkley owns a vacation cabin that was rented to unrelated parties for 10 days during the year for $2,500. The cabin was used personally by Barkley for three months and left vacant for the rest of the year. Expenses for the cabin were as follows.


Real estate taxes $1,000
Maintenance and utilities 2,000


How much rental income(loss) is included in Barkley's adjusted gross income?


A. $0


B. $500


C. $(500)


D. $(1,500)

A . $0

An individual taxpayer reports the following items for the current year:


Ordinary income from partnership A, operating a movie theater in which the taxpayer materially participates$70,000


Net loss from partnership B, operating an equipment rental business in which the taxpayer does not materially participate(9,000)


Rental income from building rented to a third party7,000


Short-term capital gain from sale of stock4,000




What is the taxpayer's adjusted gross income for the year?


A. $70,000


B. $72,000


C. $74,000


D. $77,000

C. $74,000

Which of the following statements regarding an individual’s suspended passive activity losses is correct?


A. $3,000 of suspended losses can be utilized each year against portfolio income.


B. Suspended losses can be carried forward, but not back, until utilized.


C. Suspended losses must be carried back three years and forward seven years.


D. A maximum of 50% of the suspended losses can be used each year when an election is made to forgo the carry-back period.

B. Suspended losses can be carried forward, but not back, until utilized.

Smith has an adjusted gross income (AGI) of $120,000 without taking into consideration $40,000 of losses from rental real estate activities. Smith actively participates in the rental real estate activities. What amount of the rental losses may Smith deduct in determining taxable income?


A. $0


B. $15,000


C. $20,000


D. $40,000

B. $15,000

In the current year, an unmarried individual with modified adjusted gross income of $25,000 paid $1,000 interest on a qualified education loan entered into on July 1. How may the individual treat the interest for income tax purposes?


A. As a $500 deduction to arrive at AGI for the year


B. As a $1,000 deduction to arrive at AGI for the year


C. As a $1,000 itemized deduction


D. As a nondeductible item of personal interest

B. As a $1,000 deduction to arrive at AGI for the year

Cole earned $3,000 in wages, incurred $1,000 in unreimbursed employee business expenses, paid $400 as interest on a student loan, and contributed $100 to a charity. What is Cole's adjusted gross income?


A. $3,000


B. $2,600


C. $2,500


D. $1,600

B. $2,600

Mike and Julia Crane are married and both age 35 in 2013. Mike earned a salary of $150,000 from his job at Troy Corp., where Mike is covered by his employer's pension plan. In addition, Mike and Julia earned interest of $3,000 on their joint savings account. Julia is not employed, and the couple had no other income. On January 15, 2014, Mike contributed $5,500 to an IRA for himself, and $5,500 to an IRA for Julia. The allowable IRA deduction in the Cranes' 2013 joint return is


A. $0


B. $3,000


C. $5,500


D. $11,000

C. $5,500

A calendar-year individual is eligible to contribute to a deductible IRA. The taxpayer obtained a four-month extension to file until August 15 but did not file the return until November 1. What is the latest date that an IRA contribution can be made in order to qualify as a deduction on the prior year's return?


A. October 15


B. April 15


C. August 15


D. November 1

B. April 15

Grey, a calendar year taxpayer, was employed and resided in New York. On February 2, Grey was permanently transferred to Florida by his employer. Grey worked full-time for the entire year. Grey incurred and paid the following unreimbursed expenses in relocating.


Lodging and travel expenses while moving$1,000


Pre-move house hunting costs1,200


Costs of moving household furnishings and
personal effects
1,800



What amount was deductible as moving expense on Grey's tax return?



A. $4,000


B. $2,800


C. $1,800


D. $1,000

B. $2,800

Poole, a carpenter, is 45 years old and unmarried. He has adjusted gross income of $40,000. The following information applies to Poole for the current year:


Medical expenses$10,600


Standard deduction6,100


Personal exemption3,900



Poole wishes to minimize his income tax. What is Poole's taxable income?



A. $36,100


B. $30,000


C. $29,500


D. $25,500

C. $29,500

Which one of the following expenditures qualifies as a deductible medical expense for tax purposes?


A. Vitamins for general health not prescribed by a physician


B. Health club dues


C. Transportation to physician's office for required medical care


D. Mandatory employment taxes for basic coverage under Medicare A

C. Transportation to physician's office for required medical care

Gail and Jeff Payne are married and filed a joint return for Year 1. In Year 1, they paid the following doctors' bills:

* $700 for Gail's mother, who received over half of her support from Gail and Jeff, but who does not live in the Payne household, and who earned $3,600 during the year for baby-sitting.
* $500 for their unmarried 26-year-old son, who earned $4,000 during the year, but was fully supported by his parents. He is not a full-time student.

Disregarding the adjusted gross income percentage test, how much of these doctors' bills may be included on the Paynes' joint return in Year 1 as qualifying medical expenses?



A. $0


B. $500


C. $700


D. $1,200


D. $1,200

n Year 1, Wells paid the following expenses:


Premiums on an insurance policy against loss of
earnings due to sickness or accident
$3,000


Physical therapy after spinal surgery2,000


Premium on an insurance policy that covers
reimbursement for the cost of prescription drugs
500



In Year 1, Wells recovered $1,500 of the $2,000 that she paid for physical therapy through insurance reimbursement from a group medical policy paid for by her employer. Disregarding the adjusted gross income percentage threshold, what amount could be claimed on Wells' Year 1 income tax return for medical expenses?



A. $4,000


B. $3,500


C. $1,000


D. $ 500

C. $1,000

In the current year, Drake, a disabled taxpayer, made the following home improvements:


* Pool installation for $100,000, which qualified as a medical expense and increased the value of the home by $25,000
* Widening doorways to accommodate Drake's wheelchair for $10,000. The improvement did not increase the value of his home


For regular income tax purposes and without regard to the adjusted gross income percentage threshold limitation, what maximum amount would be allowable as a medical expense deduction in the current year?


A. $110,000


B. $85,000


C. $75,000


D. $10,000

B. $85,000

Which of the following statements is correct regarding the deductibility of an individual’s medical expenses?


A. A medical expense paid by credit card is deductible in the year the credit card bill is paid.


B. A medical expense deduction is allowed for payments made in the current year for medical services received in earlier years.


C. Medical expenses, net of insurance reimbursements, are disregarded in the alternative minimum tax calculation.


D. A medical expense deduction is not allowed for Medicare insurance premiums.

B. A medical expense deduction is allowed for payments made in the current year for medical services received in earlier years.

In Year 2, Smith paid $6,000 to the tax collector of Wek City for realty taxes on a two-family house owned by Smith's mother. Of this amount, $2,800 covered back taxes for Year 1, and $3,200 covered Year 2 taxes. Smith resides on the second floor of the house, and his mother resides on the first floor. In Smith's itemized deductions on his Year 2 return, what amount was Smith entitled to claim for realty taxes?


A. $6,000


B. $3,200


C. $3,000


D. $0

D. $0

William did not itemize his deductions on his Year 7 and Year 8 federal income tax returns. However, William plans to itemize his deductions for Year 9. The following information relating to his state income taxes is available:


Taxes withheld in Year 9 $2,000


Refund received in Year 9 of Year 8 tax 300


Assessment paid in Year 9 of Year 7 tax 200


What amount should William utilize as state and local income taxes in calculating itemized deductions for his Year 9 federal income tax return?


A. $1,700


B. $1,900


C. $2,000


D. $2,200

D. $2,200

How may taxes paid by an individual to a foreign country be treated?


A. As an itemized deduction subject to the 2% floor


B. As a credit against federal income taxes due


C. As an adjustment to gross income


D. As nondeductible

B. As a credit against federal income taxes due

The Year 3 deduction by an individual taxpayer for interest on investment indebtedness is


A. Limited to the investment interest paid in Year 3


B. Limited to the taxpayer's interest income earned in Year 3


C. Limited to the taxpayer's net investment income earned in Year 3


D. Not limited

C. Limited to the taxpayer's net investment income earned in Year 3

The Browns borrowed $20,000, secured by their home, to pay their son's college tuition. At the time of the loan, the fair market value of their home was $400,000, and it was unencumbered by other debt. The interest on the loan qualifies as


A. Deductible educational interest


B. Deductible qualified residence interest


C. Nondeductible interest


D. Investment interest expense

B. Deductible qualified residence interest

In Year 1, the Philips paid $50,000 cash and obtained a $200,000 mortgage to purchase a home. That same year they took out a $10,000 auto loan. In Year 4, they borrowed $15,000 secured by their home, and used the cash to add a new room to their residence. The following information pertains to interest paid in Year 5:


Mortgage interest$17,000


Interest on room construction loan1,500


Auto loan interest500



For Year 5, how much interest is deductible, prior to any itemized deduction limitations?



A. $17,000


B. $17,500


C. $18,500


D. $19,000

C. $18,500

Moore, a single taxpayer, had $50,000 in adjusted gross income for the current year. During the current year, she contributed $18,000 to her church. She had a $10,000 charitable contribution carryover from her prior year church contribution. What was the maximum amount of properly substantiated charitable contributions that Moore could claim as an itemized deduction for the current year?


A. $10,000


B. $18,000


C. $25,000


D. $28,000

C. $25,000

Jimet, an unmarried taxpayer, qualifies to itemize deductions. Jimet's adjusted gross income was $30,000 and he made a $2,000 cash donation directly to a needy family. In the same year, Jimet also donated stock, valued at $3,000, to his church. Jimet had purchased the stock four months earlier for $1,500. What was the maximum amount of the charitable contribution allowable as an itemized deduction on Jimet's income tax return?


A. $0


B. $1,500


C. $2,000


D. $5,000

B. $1,500

Deet, an unmarried taxpayer, qualified to itemize Year 1 deductions. Deet's Year 1 adjusted gross income was $40,000 and he made a $1,500 substantiated cash donation directly to a needy family. Deet also donated art, valued at $11,000, to a local art museum. Deet had purchased the art work two years earlier for $2,000. What was the maximum amount of the charitable contribution allowable as an itemized deduction on Deet's Year 1 income tax return?


A. $12,500


B. $11,000


C. $ 3,500


D. $ 2,000

B. $11,000

An individual's losses on transactions entered into for personal purposes are deductible only if


A. The losses qualify as casualty or theft losses.


B. The losses can be characterized as hobby losses.


C. The losses do not exceed $3,000 ($6,000 on a joint return).


D. No part of the transactions was entered into for profit.

A. The losses qualify as casualty or theft losses.

Which of the following is not a miscellaneous itemized deduction?


A. An individual's tax return preparation fee


B. Funeral expenses of a deceased spouse


C. Custodial fees for a brokerage account


D. An individual's subscription to professional journals

B. Funeral expenses of a deceased spouse

Which expense, both incurred and paid in the current year, can be claimed as an itemized deduction subject to the two-percent-of-adjusted-gross-income floor?


A. Self-employed health insurance


B. Half of the self-employment tax


C. Employee's unreimbursed moving expense


D. Employee's unreimbursed business car expense

D. Employee's unreimbursed business car expense

Which of the following is a miscellaneous itemized deduction subject to the 2% of adjusted gross income floor?


A. Gambling losses up to the amount of gambling winnings


B. Medical expenses


C. Real estate tax


D. Employee business expenses

D. Employee business expenses

On January 1, Fast, Inc. entered into a covenant not to compete with Swift, Inc. for a period of five years, with an option by Swift to extend it to seven years. What is the amortization period of the covenant for tax purposes?


A. 5 years


B. 7 years


C. 15 years


D. 17 years

C. 15 years

Roe Corp. purchased and placed in service a machine to be used in its manufacturing operations. This machine cost $2,001,000. In this year, there is an allowable Section 179 ceiling of $500,000 and a cap of $2,000,000 of total assets. What portion of the cost may Roe elect to treat as an Section 179 expense in the year of purchase rather than as a capital expenditure?


A. $1,000


B. $499,000


C. $500,000


D. $2,000,000

B. $499,000

On August 1, Graham purchased and placed into service an office building costing $264,000 including $30,000 for the land. In this year, there is an allowable Section 179 limit of $500,000 for up to a threshold of $2,000,000. Graham opted out of any allowable bonus depreciation. What was Graham's approximate MACRS deduction for the office building for that year?


A. $9,600


B. $6,000


C. $3,600


D. $2,250

D. $2,250

Data Corp., a calendar year corporation, purchased and placed into service office equipment during November. No other equipment was placed into service during the calendar tax year. Data qualifies to use the general MACRS depreciation system. Data wants to take the largest deduction possible, but elected out of Section 179 for these assets. What convention will Data use?


A. Full-year


B. Half-year


C. Mid-quarter


D. Mid-month

C. Mid-quarter

Green Valley, Inc., purchased and placed in service a $1,030,000 piece of used equipment in a year with 50% bonus depreciation as well as a maximum allowable Section 179 amount of $500,000 and a ceiling of $2,000,000 of qualifying property. No other equipment was placed in service during the year. The equipment is 7-year property. The first-year depreciation for 7-year property is 14.29%. Before considering the depreciation deduction, Green Valley had $3,000,000 of taxable income. Green Valley did not elect out of bonus depreciation. Rounding to the nearest dollar, what amount is the maximum allowable depreciation deduction?


A. $1,030,000


B. $1,017,144


C. $588,594


D. $575,737

D. $575,737

In July, Roberts purchased computers for his business with a cost of $910,000. Roberts' net income from the business was $3,675,000. There is an allowable Section 179 limit of $500,000 with a phase-out starting at $2,000,000. Roberts did not elect out of the 50% bonus depreciation and made the appropriate elections to deduct the maximum amount. What is Roberts' basis for MACRS deduction on the computers?


A. $0


B. $135,500


C. $205,000


D. $274,500

C. $205,000

A taxpayer purchased five acres of land for $600,000 and placed in service other tangible business assets that cost $100,000. Disregarding business income limitations and assuming that the annualSection 179 (Election to Expense Certain Depreciable Business Assets) limit is $500,000, what maximum amount of cost recovery can the taxpayer claim this year?


A. $700,000


B. $600,000


C. $500,000


D. $100,000

D. $100,000