Exam 4: Additional Income and the Qualified Business Income Deduction

Martha has a net capital loss of $17,000 and other ordinary taxable income of $45,000 for the current year. What is the amount of Martha's capital loss carryforward?

An asset's adjusted basis is computed as:

In 2019, Kelly has qualified business income from her Schedule C small business of $178,000. She files jointly with her spouse and their taxable income is $214,000. They have no capital gains or qualified dividends in 2019. If Kelly's business is a service business (e.g., accounting), what is Kelly's 2019 QBI deduction?

In December 2019, Ben and Jeri (married filing jointly) have a long-term capital gain of $55,000 on the sale of stock held for 4 years. They have no other capital gains and losses for the year. After the standard deduction, their ordinary income for the year, before the capital gain, is $70,000, making their total income for the year $125,000. In 2019, married taxpayers who file jointly pay tax of $8,012 on the first $70,000 of ordinary taxable income and 15% on long-term capital gains above $78,750. What is their total tax liability?

Choose the correct statement. Passive losses

Gary has qualified business income of $40,000 in 2019. His taxable income without net capital gains is $28,000. Gary's QBI deduction for 2019 is?

In the current year, Marc, a single taxpayer, has ordinary income of $35,000. In addition, he has $3,000 in short-term capital gains, short-term capital losses of $6,000, and long-term capital gains of $4,000. What is Marc's adjusted gross income (AGI) for the current year?

An artist's painting is not a capital asset when held by the artist.

If not entirely used in one sale, the unused portion of the $250,000 exclusion on the sale of a taxpayer's principal residence may be used to reduce the recognized gain on the sale of the taxpayer's next residence.

Robert and Becca file jointly. They have taxable income of $60,000 in 2018 (before considering any capital gains or losses). They have a long-term capital gain of $28,000 and a long-term capital loss of $17,000 on sales of stock in the current year. What will their capital gains tax be in the current year?

Patrick has a business net operating loss of $70,000 in 2019. Patrick's business generated significant taxable profits in 2017 and in 2018. Which of the following is true?

The basis of property received as an inheritance is generally equal to the fair market value at the date of death.

Karen was ill for most of the current year. She received tax-free disability income that covered most of her expenses. She paid the deductible expense of owning her home, interest on the mortgage, and property taxes out of this income. Her tax return shows negative taxable income of $25,000. Can this loss be carried forward to future years? Why or why not?

Under the passive loss rules, real estate rental activities are specifically defined as passive, even if the taxpayer actively manages the property.

Carey, a single taxpayer, purchased a rental house in 2019, which he actively manages. During 2019, Carey had a loss of $14,000 from the rental house. If Carey's adjusted gross income for 2019 is $138,000 before the rental loss, what is the amount of Carey's allowable deduction for the rental activity for 2019?

Stewart, age 44, sells his personal residence of 4 years on June 14, 2019, for $190,000. The expenses of sale are $15,000 and he has paid for capital improvements of $3,000. Stewart purchased the residence for $100,000. On February 2, 2020, Stewart purchases and occupies a new residence at a cost of $200,000. a.Calculate the gain realized on the sale of Stewart's residence. b.How much gain must be recognized on the sale of Stewart's residence? c.Calculate Stewart's basis in the new residence.

The qualified business income deduction is limited to 20% of taxable income not including long-term capital gains and qualified dividends.

If a taxpayer is relieved of a liability on the disposition of property, the amount of the liability should be included in the amount realized on the sale or other disposition.

An asset has an original basis of $25,000 and depreciation has been claimed for the asset in the amount of $20,000. If the asset's adjusted basis is $15,000, what is the amount of capital improvements that have been made to the asset?

Bennett purchased a tract of land for $20,000 in 2013 when he heard that a new highway was going to be constructed through the property and the land would soon be worth $200,000. The highway project was abandoned in 2019 and the value of the land fell to $15,000. Bennett can claim a loss in 2019 of: