Exam 4: Business Income and Expenses, Part II

If a residence is rented for 15 days or more and is used for personal purposes for not more than 14 days or 10 percent of the days rented,whichever is greater,no allocation of expenses is required and the taxpayer may claim a deduction for the full amount of the expenses.

Ralph has a $120,000 IRA with the Red Association.For personal reasons,he decides to move his funds to the Blue Association.He requests that his funds be distributed to him on August 20,20xx. a.What amount will Ralph receive from the Red Association? b.What is the last day Ralph can deposit the funds from the Red Association and avoid taxation in the current year? c.If the funds were distributed from a qualified retirement plan not an IRA),how much would Ralph receive? d.Assuming the funds were distributed from a qualified retirement plan,not an IRA,how much will Ralph have to contribute to the Blue Association to avoid taxable income and any penalties?

Bill is the owner of a house with two identical apartments.He resides in one apartment and rents the other apartment to a tenant.The tenant made timely monthly rental payments of $500 per month for the months of January through December,2013.The following expenses were incurred on the entire building: Utilities \ 3,600 Maintenance and repairs \ 800 Insurance on building \ 600 In addition,depreciation allocable to the rented apartment is $1,500.What amount should Bill report as net rental income for 2013?

Jeremy,age 38,has $25,000 in a traditional IRA account and is considering taking the money out to buy himself a new car.What will be the tax consequences to Jeremy if he withdraws the $25,000 from his IRA in 2013 for this purpose? Explain.

Which of the following is not a test which must be met to qualify for the moving expense deduction?

What is the maximum amount a 30-year-old taxpayer and a 35-year-old spouse can put into a Traditional or Roth IRA for 2013,assuming they earn $50,000 in total and are not covered by pension plans?

Clay changes jobs in 2013 and decides to roll his $50,000 retirement plan balance from his old employer's plan into an IRA.He instructs the trustee of the retirement plan to transfer the money directly to the IRA he has chosen. What are the tax consequences of the transfer to Clay? Explain.

Contributions by a self-employed individual to a Keogh plan for 2013 are limited to the lesser of 20 percent of net earned income or:

Under the Keogh plan provisions,deductible contributions to a qualified retirement plan on behalf of a self-employed individual whose net earned income is $20,000 are limited to:

In order for a pension plan to be considered a "qualified" retirement plan,the plan must satisfy certain minimum vesting requirements.

Miki,who is single and 57 years old,has a quaifying high-deductible insurance plan.She had the following transactions with her HSA during the year: Contributions to her HSA \ 3,250 Interest income earned on her HSA \ 9 Medical expenses paid from her HSA \ 5,739 HSA distribution to pay for her daughter's wedding \ 7,650 a.How much may Miki claim as a deduction for adjusted gross income? b.What is the amount that Miki must report on her tax return as income from her HSA? c.How much is subject to a penalty? What is the penalty percentage?

Jody is a physician not covered by a retirement plan)with a salary of $40,000 from the hospital where she is employed.She supports her husband,Andre,who sells art work and has no earned income.Both are in their twenties.What is the maximum total amount that Jody and Andre may contribute to their IRAs and deduct for the 2013 tax year?

Mike owns a house that he rents out for $1,000 per month.His expenses for the 2013 tax year are as follows: Real estate taxes \ 1,500 Mortgage interest \ 4,200 Insurance \ 600 General repairs \ 620 Mike bought the property in September of 1995,and his basis for depreciation on the house is $137,500.He uses straight-line depreciation with a 27 ½-year life,so the depreciation on the house is $5,000.Mike does not use a property manager and handles all aspects of the rental activity himself. a.Calculate Mike's net income or loss from renting the house if his gross rental income is $12,000 $1,000 * 12 months). b.Is the income or loss on Mike's rental considered to be active,passive,or portfolio income?

Carey,a single taxpayer,purchased a rental house in 2013,which he actively manages.During 2013,Carey had a loss of $14,000 from the rental house.If Carey's adjusted gross income for 2013 is $140,000 before the rental loss,what is the amount of Carey's allowable deduction for the rental activity for 2013?

Dividend income is considered "passive income."

In most cases,a taxpayer reports rental income and the related expenses on Schedule E.

Patrick owns a home on the beach in Daytona.He lives in the house for most of the year but leaves town during the big motor sports race that comes through every year.During that time,he rents his home out for 3 weeks to race fans for $5,000.Which of the following is true?

Ursula,an employee of Ficus Corporation,is 35 years old and plans to retire in 20 years.The corporation has a qualified retirement plan and contributes $2,000 during 2013 for Ursula.How should Ursula treat the $2,000 contribution made on her behalf by the corporation?

Walt and Jackie rent out their residence in San Diego to friends for 10 days while they vacation in Europe.They collect $1,000 of rental income.How is the rental income treated on their tax return? Explain.

Choose the correct statement.Passive losses