Question 1

Which of the following entity(ies)is(are)considered flow-through?

Accepted Answer

A) C corporation 
B) Sole proprietorship 
C) Publicly traded corporation 
D) S corporation 
A) C corporation 
B) Sole proprietorship 
C) Publicly traded corporation 
D) S corporation D

Question 2

What are the rules concerning the deductibility of travel as it relates to rental properties? How are travel expenses to and from rental properties calculated?

Accepted Answer

Travel costs from the taxpayer's home to a rental property are deductible if the travel is for business purposes.For example,expenses to conduct repairs or attend a condo association meeting are deductible.Typically,the standard mileage rate for business is used in calculating any travel concerning rental property (the rate is adjusted each year for inflation).The amount calculated is deducted on Schedule E as part of rental expense.

Question 3

When reporting the income and expenses of a rental property,what determines the use of the Schedule C versus the Schedule E?

Accepted Answer

Generally,if a taxpayer materially participates in the operations and decisions of a property and is considered a real estate professional,then the rental activity should be reported on Schedule C as a trade or business.Otherwise,the rental activity should be reported on Schedule E.

Question 4

Which of the following entity(ies)is(are)considered flow-through entity(ies)?

Accepted Answer

A) C corporation. 
B) Sole proprietorship. 
C) Non-profit corporations. 
D) Estates. 
A) C corporation. 
B) Sole proprietorship. 
C) Non-profit corporations. 
D) Estates.

Question 5

A taxpayer with a rental activity may be allowed up to $25,000 of rental losses against other (active or portfolio)income.

Accepted Answer

A) True 
 B)False

Question 6

Roger,Ellen,Drew and Cindy are equal partners in a local pub.The pub reports the following items for the current year: $\begin{array}{lr}
\text { Business revenue } & \$ 1,770,000 \
\text { Business expenses } & 1,000,000 \
\text { Investment expenses } & 160,000
\end{array}$ Each partner receives a Schedule K-1 with one-fourth of the preceding items reported to him/her.How must each individual report these results on his/her Form 1040?

Accepted Answer

A) $192,500 on Schedule E;$40,000 on Schedule A. 
B) $257,667 on Schedule E;$40,000 on Schedule A. 
C) $385,000 on Schedule E;$40,000 on Schedule A. 
D) $770,000 on Schedule E;$160,000 on Schedule A. 
A) $192,500 on Schedule E;$40,000 on Schedule A. 
B) $257,667 on Schedule E;$40,000 on Schedule A. 
C) $385,000 on Schedule E;$40,000 on Schedule A. 
D) $770,000 on Schedule E;$160,000 on Schedule A.

Question 7

Which of the following statements is true concerning vacation home properties?

Accepted Answer

A) A property rented for 15 days or more and used for personal use for no more than 14 days is categorized as primarily rental. 
B) A property rented for 15 days or more and used for personal use for more than 14 days is categorized as primarily personal. 
C) A property categorized as primarily personal is one rented for zero days. 
D) Report all income and expenses for a personal/rental property and the net amount reported may be either net income or net loss. 
A) A property rented for 15 days or more and used for personal use for no more than 14 days is categorized as primarily rental. 
B) A property rented for 15 days or more and used for personal use for more than 14 days is categorized as primarily personal. 
C) A property categorized as primarily personal is one rented for zero days. 
D) Report all income and expenses for a personal/rental property and the net amount reported may be either net income or net loss.

Question 8

Brad and Kate received $9,500 for rent from Mike and Janet,who are renting their home in Santa Ana,California.Brad and Kate did not use this property for personal use.The rent covers eight months from August 1 of the current year to March 31 of the following year.The amount also includes a security deposit of $1,500.How much should Brad and Kate report as rental income in the current tax year?

Accepted Answer

A) $1,500 
B) $5,000 
C) $8,000 
D) $9,500 
A) $1,500 
B) $5,000 
C) $8,000 
D) $9,500

Question 9

If a taxpayer materially participates in his/her rental activity as a real estate professional,the activity is considered a trade or business and not a passive activity.

Accepted Answer

A) True 
 B)False

Question 10

Jeremiah is a full-time professor of psychology at the University of Washington and an author of a psychology textbook.The royalty income he receives from the publisher should be reported on:

Accepted Answer

A) Schedule C. 
B) Schedule K-1. 
C) Form 1099-MISC. 
D) Schedule E. 
A) Schedule C. 
B) Schedule K-1. 
C) Form 1099-MISC. 
D) Schedule E.

Question 11

Lori and Donald own a condominium in Colorado Springs,Colorado,that they rent out part of the time and use during the summer.The rental property is classified as personal/rental property and their personal use is determined to be 75% (based on the IRS method).They had the following income and expenses for the year (before any allocation): $\begin{array}{lll}
\text { Gross rental income}&\$2,000\
\text {Interest and taxes }&3,200\
\text { Utilities and maintenance}&2,200\
\text {Depreciation }&4,000\\end{array}$
 How much net loss should Lori and Donald report for their condominium on their tax return this year?

Accepted Answer

A) $0. 
B) $3,350 loss. 
C) $7,400 loss. 
D) $9,000 loss. 
A) $0. 
B) $3,350 loss. 
C) $7,400 loss. 
D) $9,000 loss.

Question 12

When royalties are paid,the amount paid is reported to the recipient by the payer on a Form 1099-MISC.

Accepted Answer

A) True 
 B)False

Question 13

If a tenant pays an expense normally paid by the taxpayer (landlord)in lieu of rent (or the full rent),that expense is not considered part of rental income to the taxpayer.

Accepted Answer

A) True 
 B)False

Question 14

Royalties can be earned from allowing others the right to use:

Accepted Answer

A) Building. 
B) Equipment. 
C) Furniture. 
D) Copyrighted material. 
A) Building. 
B) Equipment. 
C) Furniture. 
D) Copyrighted material.

Question 15

Nathan owns a tri-plex in Santa Maria,California.He lives in one and rents the other two remaining units.All three units are identical.He incurred the following expenses for the entire building: $\begin{array}{lr}
\text { Mortgage interest } & \$ 20,000 \
\text { Maintenance } & 6,200 \
\text { Property taxes } & 9,000 \
\text { Utilities } & 5,000 \
\text { Depreciation } & 4,000
\end{array}$ How much in rental expenses can Nathan deduct against the rental income on a Schedule E in the current year (without considering any passive loss limitations)? (Round your answers to the nearest whole dollar)

Accepted Answer

A) $14,733 
B) $20,000 
C) $29,467 
D) $44,200 
A) $14,733 
B) $20,000 
C) $29,467 
D) $44,200

Question 16

On June 1 of the current year,Jack and Angie purchased a rental beach house for $900,000 and rented it right away.Of that amount,$600,000 was for the land value.How much depreciation deduction can Jack and Angie take in the current year? (You may need to refer to the depreciation tables. )

Accepted Answer

A) $11,820 
B) $10,909 
C) $5,910 
D) $17,730 
A) $11,820 
B) $10,909 
C) $5,910 
D) $17,730

Question 17

Explain what is considered personal use of a rental property.

Accepted Answer

Personal use of a dwelling is any use by

Question 18

On June 1st of the current year,Kayla and Ralph purchased a rental beach house for $700,000.Of that amount,$400,000 was for the land value.How much depreciation deduction can they take in the current year? (You may need to refer to the depreciation tables. )

Accepted Answer

A) $0. 
B) $5,910. 
C) $7,880. 
D) $13,790. 
A) $0. 
B) $5,910. 
C) $7,880. 
D) $13,790.

Question 19

Which of the following is not considered a capital improvement for a rental activity?

Accepted Answer

A) Addition of a bathroom 
B) Replacement of the roof 
C) Repair of a leaky water pipe 
D) New landscaping 
A) Addition of a bathroom 
B) Replacement of the roof 
C) Repair of a leaky water pipe 
D) New landscaping

Question 20

A property rented for less than 15 days and used for personal use the remainder of the year,should have the rental income reported on Schedule E.

Accepted Answer

A) True 
 B)False

Which of the following entity(ies)is(are)considered flow-through?

What are the rules concerning the deductibility of travel as it relates to rental properties? How are travel expenses to and from rental properties calculated?

When reporting the income and expenses of a rental property,what determines the use of the Schedule C versus the Schedule E?

Which of the following entity(ies)is(are)considered flow-through entity(ies)?

A taxpayer with a rental activity may be allowed up to $25,000 of rental losses against other (active or portfolio)income.

Which of the following statements is true concerning vacation home properties?

If a taxpayer materially participates in his/her rental activity as a real estate professional,the activity is considered a trade or business and not a passive activity.

Jeremiah is a full-time professor of psychology at the University of Washington and an author of a psychology textbook.The royalty income he receives from the publisher should be reported on:

When royalties are paid,the amount paid is reported to the recipient by the payer on a Form 1099-MISC.

If a tenant pays an expense normally paid by the taxpayer (landlord)in lieu of rent (or the full rent),that expense is not considered part of rental income to the taxpayer.

Royalties can be earned from allowing others the right to use:

On June 1 of the current year,Jack and Angie purchased a rental beach house for $900,000 and rented it right away.Of that amount,$600,000 was for the land value.How much depreciation deduction can Jack and Angie take in the current year? (You may need to refer to the depreciation tables. )

Explain what is considered personal use of a rental property.

On June 1^st of the current year,Kayla and Ralph purchased a rental beach house for $700,000.Of that amount,$400,000 was for the land value.How much depreciation deduction can they take in the current year? (You may need to refer to the depreciation tables. )

Which of the following is not considered a capital improvement for a rental activity?

A property rented for less than 15 days and used for personal use the remainder of the year,should have the rental income reported on Schedule E.

Introduction to Taxation, the Income Tax Formula, and Form 1040EZ

Expanded Tax Formula, forms 1040A and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income Line 12 of Form 1040 and Schedule C

Capital Gains and Other Sales of Property Schedule D and Form 4797

Tax Credits Form 1040,lines 48 Through 54 and Lines 66A Through 73

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities

Special Property Transactions

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Corporate Taxation

Filters

Exam 8: Rental Property, Royalties, and Income From Flow- Through Entities Line 17, form 1040, and Schedule E

Which of the following entity(ies)is(are)considered flow-through?

What are the rules concerning the deductibility of travel as it relates to rental properties? How are travel expenses to and from rental properties calculated?

When reporting the income and expenses of a rental property,what determines the use of the Schedule C versus the Schedule E?

Which of the following entity(ies)is(are)considered flow-through entity(ies)?

A taxpayer with a rental activity may be allowed up to $25,000 of rental losses against other (active or portfolio)income.

Which of the following statements is true concerning vacation home properties?

If a taxpayer materially participates in his/her rental activity as a real estate professional,the activity is considered a trade or business and not a passive activity.

Jeremiah is a full-time professor of psychology at the University of Washington and an author of a psychology textbook.The royalty income he receives from the publisher should be reported on:

When royalties are paid,the amount paid is reported to the recipient by the payer on a Form 1099-MISC.

If a tenant pays an expense normally paid by the taxpayer (landlord)in lieu of rent (or the full rent),that expense is not considered part of rental income to the taxpayer.

Royalties can be earned from allowing others the right to use:

On June 1 of the current year,Jack and Angie purchased a rental beach house for $900,000 and rented it right away.Of that amount,$600,000 was for the land value.How much depreciation deduction can Jack and Angie take in the current year? (You may need to refer to the depreciation tables. )

Explain what is considered personal use of a rental property.

On June 1st of the current year,Kayla and Ralph purchased a rental beach house for $700,000.Of that amount,$400,000 was for the land value.How much depreciation deduction can they take in the current year? (You may need to refer to the depreciation tables. )

Which of the following is not considered a capital improvement for a rental activity?

A property rented for less than 15 days and used for personal use the remainder of the year,should have the rental income reported on Schedule E.

Introduction to Taxation, the Income Tax Formula, and Form 1040EZ

Expanded Tax Formula, forms 1040A and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income Line 12 of Form 1040 and Schedule C

Capital Gains and Other Sales of Property Schedule D and Form 4797

Tax Credits Form 1040,lines 48 Through 54 and Lines 66A Through 73

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities

Special Property Transactions

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Corporate Taxation

Filters

On June 1^st of the current year,Kayla and Ralph purchased a rental beach house for $700,000.Of that amount,$400,000 was for the land value.How much depreciation deduction can they take in the current year? (You may need to refer to the depreciation tables. )