Exam 4: Business Income and Expenses, Part II

If an employer makes a contribution to a qualified retirement plan on behalf of an employee,the amount is currently deductible by the employer,and the employee must include the amount in gross income at the time the contribution is made.

In a distribution rollover from an IRA,the recipient must contribute 80 percent of the distributed amount to the new trustee in order for the rollover to be tax free.

Donald,a 40-year-old married taxpayer,has a salary of $55,000 and interest income of $6,000.What is the maximum amount Donald can contribute to a Roth IRA?

Net losses on the rental of vacation homes are limited to 15 percent of total gross income.

Donald rents out his vacation home for 9 months and lives in his vacation home for the remainder of the year.His gross rental income for 2013 is $7,200.The expenses attributable to the vacation home for the entire year are as follows: Real estate taxes \ 2,000 Interest on mortgage loan \ 4,000 Utilities \ 1,200 Repairs/maintenance \ 600 Depreciation \ 3,500 What amount would Donald report as net income or loss from the rental of the vacation home?

Which of the following is true about the self-employed health insurance deduction?

Mort is the owner of an apartment building containing ten identical apartments.Mort resides in one apartment and rents out the remaining units.For 2013,the following information is available: Gross rents \ 21,600 Utilities for total building \ 2,500 Maintenance and repairs (rental apartments only) \ 1,200 Advertising for vacant apartments \ 300 Depreciation of building (all ten units) \ 5,000 What amount should Mort report as net rental income for 2013?

Under a defined contribution plan,the contribution made on behalf of the employee is determined using a formula dependent on the employee's current compensation.

Wilson and Joan,both in their 30s,file a joint income tax return for 2013.Wilson's wages are $15,000 and Joan's wages are $23,000 for the year.Their total adjusted gross income is $38,000,and Joan is covered by a qualified pension plan at work but Wilson is not. a.What is the maximum amount that Wilson and Joan may each deduct for contributions to their individual retirement accounts? b.If Joan's wages are $82,000 for 2013,instead of $23,000,and their adjusted gross income is $97,000,what is the maximum amount that Wilson and Joan may each deduct for contributions to their individual retirement accounts?

Penny,age 52,takes a distribution of $30,000 from her Traditional IRA account.She plans to deposit it in an IRA with a different bank.Shortly after the distribution she drives her car through the front window of her credit union in a freak accident,and uses the funds to pay for the damages.What income and/or penalties related to the failed rollover must she show on her tax return ?

Thelma works at a liquor store in 2013 and makes $45,000.She also has dividend income of $12,000 and interest income of $1,000.She owns a beach house that gives her $11,000 in rental income and she owns a stake in a limited partnership that generates a $15,000 loss.What is her adjusted gross income in 2013?

Which of the following taxpayers qualifies for the maximum individual retirement account deduction for 2013?

Choose the incorrect answer.Money removed from a traditional IRA is taxable as ordinary income and subject to a 10 percent penalty except for taxpayers who are:

What is the difference between the tax treatment of contributions and distributions from a traditional IRA and a Roth IRA?

A 42-year-old single taxpayer earning a salary of $130,000 a year can make which of the following IRA contributions if he is not covered by a plan at work?

Norm is a real estate professional with a real estate trade or business as defined in the tax law.He has $150,000 of business income and $50,000 of losses from actively managed real estate rentals.How much of the $50,000 in losses is he allowed to claim on his tax return?

Johnice's employer contributes $3,000 to a qualified retirement plan in 2013 for Johnice's retirement. a.Is the $3,000 deductible by Johnice's employer in 2013? Explain. b.Is the $3,000 income to Johnice in 2013? Explain. c.Is either the interest or dividend earnings on the $3,000 contribution taxable to Johnice in 2013? Explain.

Debbie is 63 years old and retired in 2011.She receives Social Security payments of $12,000 a year and interest income of $30,000.She wishes to put the maximum allowed into an IRA.How much can she contribute to her IRA?

Paul earns $55,000 during the current year.His employer contributes $3,000 during the year to a qualified retirement plan on behalf of Paul.The amount of the contribution for the year is based on Paul's desire to have a monthly retirement benefit of $3,500.What type of retirement plan is this?

Ellen supports her family as a self-employed attorney.She reports $90,000 of income on her Schedule C and pays $8,000 for health insurance for her family,$2,500 for dental insurance,$4,000 for health insurance for her 23-year-old daughter who is no longer a dependent,and $3,000 for disability insurance for herself.What is Ellen's self-employed health insurance deduction?