Exam 17: Tax Consequences of Personal Activities

A taxpayer must have owned and lived in a personal residence at least two of the last five years in order to qualify for the maximum exclusion of gain on the sale of that residence.

James Dean received the following this year. Scholarship for college tuition and fees \2 0,000 Scholarship for college room and board \1 3,100 chamber of Commerce citizenship award \1 ,500 Inheritance from great uncle \3 8,000 Compute James' gross income.

For federal income tax purposes, a taxpayer may elect to deduct state and local sales taxes ($10,000 maximum) as itemized deductions.

Which of the following government transfer payments is included in the recipient's gross income?

Taxpayers include a maximum of 85% of Social Security benefits in gross income.

Ms. Ruang, a single taxpayer, purchased her principal residence on August 19, 2018 and financed the purchase with a mortgage secured by the residence. In 2018, the average balance of the mortgage was $817,000, and Ms Ruang paid $35,000 of mortgage interest. How much of this interest is an itemized deduction?

Carl had $2,000 gambling winnings and $8,400 gambling losses this year. Carl must include $2,000 in gross income and can deduct $8,400 as an itemized deduction.

A charitable contribution in excess of the AGI limitation may be carried forward five years.

Ben received a $5,000 tuition scholarship from his local community college. He can exclude the $5,000 from gross income.

A taxpayer must purchase a new personal residence in order to exclude any gain from the sale of the old residence.

Mr. and Mrs. McGraw received $50,160 Social Security benefits this year. They also received $108,000 taxable pension payments and earned $47,300 interest and dividends from their investment portfolio. How much of the McGraws' Social Security is included in gross income?

Mr. and Mrs. Frazier recognized a $723,000 gain on sale of a home that had been their principal residence for 29 years. They moved into a rented condominium in Naples, Florida. What are the tax consequences of the sale to the Fraziers?

Mr. and Mrs. Trent divorced last year. Pursuant to the divorce, Mr. Trent transferred marketable securities (FMV $100,000; basis $67,000) to Mrs. Trent. This year, Mrs. Trent sold the securities for $112,000. Which of the following statements is true?

Mr. and Mrs. Alvarez paid $130,000 for their home 30 years ago. They recently sold this home and moved into a rented apartment. Describe the tax consequences of the sale assuming that the amount realized was:$125,000$450,000$850,000

If alimony is paid under a 2015 divorce decree, the annual payments are included in the recipient's gross income.

Mr. Lightfoot owns three mortgaged residences that he occupies at different times of the year. He can treat the interest paid on only one mortgage as qualified residence interest.

Gains realized on the sale of personal use assets aregenerally taxable.

Mr. and Mrs. Allen made the following interest payments. Determine their deduction for each payment.$28,000 on a $400,000 acquisition mortgage secured by their personal residence.$5,000 on a $60,000 second mortgage secured by their personal residence. The Allens used the proceeds to pay off credit card debt and take a second honeymoon.$2,400 on credit card debt.$1,500 on a bank loan incurred to purchase a new family car.$1,890 on an unsecured bank loan incurred to pay for a new roof on their personal residence.

Mr. and Mrs. Darwin sold their principal residence on September 12, 2019, and purchased and moved into a new residence three weeks later. They excluded their $353,000 gain realized on this sale from gross income. On October 2, 2020, the Darwins realized a gain on sale of the new residence. Which of the following statements about this second gain is true?

Six years ago, Milo Lenz, an amateur artist, sculpted a garden gnome as a gift for his mother. This year, his mother sold the gnome on eBay for $1,200. What is the amount and character of the mother's gain?