Exam 4: Business Income and Expenses, Part II

Carmen owns a house that she rents out for $500 per month.Her expenses for the 2013 tax year are as follows: Real estate taxes \ 900 Mortgage interest \ 4,000 Insurance \ 300 General repairs \ 320 Carmen bought the property in March of 1990,and her basis for depreciation on the house is $110,000.She uses straight-line depreciation with a 27 ½ -year life,so the depreciation on the house is $4,000. Calculate Carmen's net income or loss from renting the house if her gross rental income is $6,000 $500 x 12 months).

Donald owns a two-family home.He rents out the first floor and resides on the second floor.The following expenses attributable to the total building were incurred by Donald for the year ended December 31,2013: Real estate taxes \ 1,800 Mortgage interest \ 1,200 Utilities \ 1,000 Repairs (first floor) \ 300 Painting (second floor) \ 400 In addition,the depreciation attributable to the entire building would be $2,000.What is the total amount of the expenses that Donald can deduct on Schedule E of Form 1040 before any limitations)?

If a Section 401k)plan allows an employee to choose between a direct payment of compensation in cash or a contribution to the retirement plan,the plan is not a "qualified" plan.

To qualify for the moving expense deduction,an employee must change job sites,move a required distance,and change employers.

Christian,a single taxpayer,acquired a rental house in 2000.The rental house,which Christian actively manages,generated a $15,000 loss in 2013.In addition,Christian owns a limited partnership interest which he acquired in 2005.His share of the partnership loss for 2013 is $10,000.Christian has modified adjusted gross income,before the rental loss and partnership loss,of $130,000. What is the amount of these losses that Christian may deduct in 2013?

Arnold purchased interests in two limited partnerships 6 years ago.During 2013,Arnold had income of $22,000 from one of the partnerships.He had a loss from the other partnership of $32,000,salary income of $35,000,and dividend income of $2,000.What is the amount of net passive losses that Arnold may deduct for 2013?

Wages are considered "active income."

Lester rents his vacation home for 6 months and lives in the home during the other 6 months of 2013.The gross rental income from the home is $4,500.For the entire year,real estate taxes are $800,interest is $3,000,utilities and maintenance expenses are $2,200,and depreciation expense on the entire home would be $4,000.What is Lester's allowable net loss from renting his vacation home?

Which of the following is not deductible as a moving expense?

What percentage of medical insurance payments can self-employed taxpayers deduct for adjusted gross income on their 2013 tax returns,assuming their self-employment income exceeds their medical insurance payments?

XYZ Corporation has assigned Allison to inspect their zipper manufacturing plant in China for the next 4 months.Allison has incurred the following expenses: Transportation for her p oodle \ 1,000 Cost of shipping her CD collection \ 300 Airport meals \5 0 Lodging for a week layover in France \1 ,500 How much may Allison deduct as moving expenses?

Which of the following statements is true of a distribution rollover not a trustee-to-trustee transfer)from a retirement plan?

Ned has active modified adjusted gross income before passive losses of $170,000.He has a loss of $15,000 on rental property he actively manages.How much of the loss is he allowed to deduct against his other income?

Unreimbursed qualifying moving expenses are an itemized deduction for 2013.

For the current year,Robert,a single taxpayer,earned wages of $235,000 from Big Shot Corporation.He also received interest income of $1,000 from Little Credit Union.Robert had a $9,000 loss from his rental property which he actively manages.$2,000 of income was also reported on his Schedule K-1 from ABC Limited Partnership.Neither the rental property nor the partnership investment has passive losses carried over from prior years.Since Robert is not an active participant in a retirement plan,he decides to contribute $5,500 to his IRA. a.Calculate Robert's adjusted gross income using the above information. b.How much is Robert's unallowed loss from his passive investments? c.What happens to the unallowed passive loss? d.Calculate Robert's adjusted gross income assuming his wages were only $35,000.

What is the maximum amount a 55-year-old taxpayer and a 48-year-old spouse can put into a Traditional or Roth IRA for 2013,assuming they earn $85,000 in total and are not participants in pension plans?

Which of the following statements is true about health savings accounts HSAs)?

Chorisia Corporation has a Section 401k)plan for its employees.The plan provides for maximum contributions equal to 15 percent of the employee's salary.Donna,a 55-year-old employee of Chorisia Corporation,elects to contribute the maximum amount possible to the Section 401k)plan.During 2013,Donna has $110,000 in wages.For 2013,what is the maximum amount that Donna may contribute to the plan on a tax-deferred basis?

Moe has a law practice and earns $322,000 which he reports on his Schedule C.His wife,Mindy,works part-time at Wal-Mart and earns $8,300.Mindy does not receive any medical benefits through Wal- Mart.Their 29-year-old daughter,Michelle,who is not a dependent,is working towards earning her Master's degree. Moe and Mindy pay the following amounts: Health insurance \ 6,100 Dental insurance \ 525 Vision care insurance \4 25 Health insurance for their daughter \1 ,620 Long-term care insurance for Moe who is 54 years old \1 ,380 How much may Moe and Mindy claim on their tax return as a self-employed health insurance deduction?

Passive losses are fully deductible as long as they do not exceed $50,000 during the year.