Question 1

Generally,a taxpayer uses Schedule C to report royalty income.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) Books 
B) Plays 
C) Trademarks 
D) All of these 
A) Books 
B) Plays 
C) Trademarks 
D) All of these

Question 3

Rental properties that are also used as vacation homes fall under one of two categories: (1)primarily rental;or (2)primarily personal.

Accepted Answer

A) True 
 B)False

Question 4

Flow-through entities include,but are not limited to,LLCs,S Corporations,trusts and estates.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) Copyrights 
B) Formulas 
C) Coal mines 
D) All of these 
A) Copyrights 
B) Formulas 
C) Coal mines 
D) All of these

Question 6

What are the criteria that determine an amount as capital improvement rather than repair and maintenance expense? What is the proper tax treatment of a capital improvement for rental properties?

Accepted Answer

Allowable repairs are expenditures that

Question 7

Define royalty income.What criteria determine which form is used and where the royalties are reported?

Accepted Answer

Royalty is a payment for the right to us

Question 8

Royalty income is income received from the use of books,stories,plays,copyrights,trademarks,etc.owned by the taxpayer.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements is incorrect concerning rental properties?

Accepted Answer

A) Generally,rental activities are reported on Schedule E. 
B) All ordinary expenses related to the rental activity are deductible. 
C) Capital improvements may be deducted as expense in the year the improvements are made. 
D) Travel expenses related to the rental activity are calculated using the standard mileage rate. 
A) Generally,rental activities are reported on Schedule E. 
B) All ordinary expenses related to the rental activity are deductible. 
C) Capital improvements may be deducted as expense in the year the improvements are made. 
D) Travel expenses related to the rental activity are calculated using the standard mileage rate.

Question 10

A property that has been rented for 120 days and used for personal use for 13 days should be categorized as:

Accepted Answer

A) Primarily rental 
B) Primarily personal 
C) Personal/rental 
D) None of these 
A) Primarily rental 
B) Primarily personal 
C) Personal/rental 
D) None of these

Question 11

Darlene is a full-time author and recently published her third romance novel.The royalty income she receives from the publisher this year should be reported on what schedule?

Accepted Answer

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

Question 12

Jeremy and Gladys own a cabin in Sun Valley,Idaho,which they rented for 30 days.They also used the cabin with their family and friends for the ski season for 45 days.Their income and expenses were as follows: rental income $4,000,mortgage interest $3,000,property taxes $2,200,utilities $400,maintenance $400,and depreciation $4,800.How much depreciation expense can they deduct on Schedule E for the cabin? Use the IRS method for allocation of expenses.

Accepted Answer

A) $0 
B) $1,600 
C) $2,400 
D) $4,800 
A) $0 
B) $1,600 
C) $2,400 
D) $4,800

Question 13

Elizabeth rented her personal residence for 12 days to summer vacationers for $4,800.Rest of the year,she and her family used the home as their personal residence.She has AGI of $105,000,excluding the rental income.Related expenses for Elizabeth's personal residence for the year include the following: $\begin{array}{lr}
\text { Real property taxes } & \$, 500 \
\text { Utilities } & 5,000 \
\text { Insurance } & 900 \
\text { Mortgage interest } & 7,000 \
\text { Repairs } & 800 \
\text { Depreciation } & 15,000
\end{array}$ What is Elizabeth's AGI after taking into consideration the rental income and related expenses for her home?

Accepted Answer

A) $4,800. 
B) $100,200. 
C) $105,000. 
D) $109,800. 
A) $4,800. 
B) $100,200. 
C) $105,000. 
D) $109,800.

Question 14

Hugh and Mary own a cabin in Big Bear that they rented for 45 days at $4,500.They used the cabin for personal use for 30 days during the year.The allocated expenses related to the cabin of $6,000 resulted in a net loss of $1,500 for this rental activity.What is the proper tax treatment of these amounts by Hugh and Mary?

Accepted Answer

A) Report net income of $4,500 
B) Report rental net loss of $1,500 
C) None of the amounts should be reported 
D) Report income and expenses on Schedule E but expenses cannot exceed income 
A) Report net income of $4,500 
B) Report rental net loss of $1,500 
C) None of the amounts should be reported 
D) Report income and expenses on Schedule E but expenses cannot exceed income

Question 15

Flow-through entities supply each owner at the end of the year with a Schedule E,indicating his/her income and expenses to report.

Accepted Answer

A) True 
 B)False

Question 16

Explain the difference between the two methods available;the Tax Court's method and the IRS method,to allocate expenses between personal and rental use of property.

Accepted Answer

If using the IRS method,expenses are all

Question 17

Eddie and Camilla received $11,600 for the rental of their rental house in Irvine,California.Eddie and Camilla do not use this property for personal use.The rent covers six months from October 1 of the current year to March 31 of next year.The amount also includes a security deposit of $2,000.How much should Eddie and Camilla report as rental income in the current tax year?

Accepted Answer

A) $2,000. 
B) $9,600. 
C) $11,600. 
D) $13,600. 
A) $2,000. 
B) $9,600. 
C) $11,600. 
D) $13,600.

Question 18

Richard owns a cabin in Utah that he rented for $4,000 for 21 days.He lived there for a total of 120 days.The expenses for the home included $8,000 in mortgage interest,$1,200 in property taxes,$1,300 in maintenance and utilities,and $3,500 in depreciation.How much net income or loss from the Utah home would Richard report for the current year (use the IRS method)? (Round your answer to the nearest whole number)

Accepted Answer

A) $0. 
B) $1,915 net income. 
C) $4,000 net income. 
D) $10,000 net loss. 
A) $0. 
B) $1,915 net income. 
C) $4,000 net income. 
D) $10,000 net loss.

Question 19

Residential rental properties are depreciated using the straight-line method over 27½ years.

Accepted Answer

A) True 
 B)False

Generally,a taxpayer uses Schedule C to report royalty income.

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

Rental properties that are also used as vacation homes fall under one of two categories: (1)primarily rental;or (2)primarily personal.

Flow-through entities include,but are not limited to,LLCs,S Corporations,trusts and estates.

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

What are the criteria that determine an amount as capital improvement rather than repair and maintenance expense? What is the proper tax treatment of a capital improvement for rental properties?

Define royalty income.What criteria determine which form is used and where the royalties are reported?

Royalty income is income received from the use of books,stories,plays,copyrights,trademarks,etc.owned by the taxpayer.

Which of the following statements is incorrect concerning rental properties?

A property that has been rented for 120 days and used for personal use for 13 days should be categorized as:

Darlene is a full-time author and recently published her third romance novel.The royalty income she receives from the publisher this year should be reported on what schedule?

Flow-through entities supply each owner at the end of the year with a Schedule E,indicating his/her income and expenses to report.

Explain the difference between the two methods available;the Tax Court's method and the IRS method,to allocate expenses between personal and rental use of property.

Residential rental properties are depreciated using the straight-line method over 27½ years.

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

Generally,a taxpayer uses Schedule C to report royalty income.

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

Rental properties that are also used as vacation homes fall under one of two categories: (1)primarily rental;or (2)primarily personal.

Flow-through entities include,but are not limited to,LLCs,S Corporations,trusts and estates.

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

What are the criteria that determine an amount as capital improvement rather than repair and maintenance expense? What is the proper tax treatment of a capital improvement for rental properties?

Define royalty income.What criteria determine which form is used and where the royalties are reported?

Royalty income is income received from the use of books,stories,plays,copyrights,trademarks,etc.owned by the taxpayer.

Which of the following statements is incorrect concerning rental properties?

A property that has been rented for 120 days and used for personal use for 13 days should be categorized as:

Darlene is a full-time author and recently published her third romance novel.The royalty income she receives from the publisher this year should be reported on what schedule?

Flow-through entities supply each owner at the end of the year with a Schedule E,indicating his/her income and expenses to report.

Explain the difference between the two methods available;the Tax Court's method and the IRS method,to allocate expenses between personal and rental use of property.

Residential rental properties are depreciated using the straight-line method over 27½ years.

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