Question 1

Which of the following tax payments is allowed as an itemized income tax deduction?

Accepted Answer

A) Federal gift tax 
B) Payroll tax on wages paid to a housekeeper 
C) Social Security tax withheld from salary 
D) Local property tax on personal automobile 
A) Federal gift tax 
B) Payroll tax on wages paid to a housekeeper 
C) Social Security tax withheld from salary 
D) Local property tax on personal automobile

Question 2

Unemployment benefits are excluded from gross income.

Accepted Answer

A) True 
 B)False

Question 3

Mr.and Mrs.Oliva,ages 44 and 40,incurred the following unreimbursed medical expenses this year.     If the Olivas' AGI is $23,200,compute their medical expense deduction.

Accepted Answer

A) $0 
B) $6,040 
C) $6,560 
D) $8360 
A) $0 
B) $6,040 
C) $6,560 
D) $8360

Question 4

For federal income tax purposes,property transfers pursuant to a divorce are nontaxable events.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following expenditures is not a medical expense for federal tax purposes?

Accepted Answer

A) Payment for eyeglasses 
B) Health insurance premiums 
C) Payment for prescription antibiotics 
D) All of the above are deductible medical expenses 
A) Payment for eyeglasses 
B) Health insurance premiums 
C) Payment for prescription antibiotics 
D) All of the above are deductible medical expenses

Question 6

Dotty,age 45,incurred the following medical expenses this year.     Dotty's insurance company reimbursed her for $8,800 of these expenses.If Dotty's AGI is $35,400,compute her medical expense deduction.

Accepted Answer

A) $0 
B) $1,320 
C) $10,120 
D) $13,660 
A) $0 
B) $1,320 
C) $10,120 
D) $13,660

Question 7

Which of the following deductions is disallowed in the computation of alternative minimum taxable income (AMTI)?

Accepted Answer

A) Alimony. 
B) Charitable contributions. 
C) Interest paid on a home equity debt. 
D) None of the above deductions is disallowed. 
A) Alimony. 
B) Charitable contributions. 
C) Interest paid on a home equity debt. 
D) None of the above deductions is disallowed.

Question 8

Jenna Leigh is employed as a receptionist for a CPA firm,but on evenings and weekends,she bakes wedding cakes.In each of the past four years,Jenna's baking activity resulted in a net profit.This year,the activity generated a $720 net loss.Which of the following statements is true?

Accepted Answer

A) The legal presumption is that Jenna's $720 loss is a business loss. 
B) The legal presumption is that Jenna's $720 loss is a nondeductible hobby loss. 
C) Jenna must include the revenues from her baking activity in gross income but can't deduct any of her related expenses. 
D) Jenna is allowed to report her $720 loss as a miscellaneous itemized deduction. 
A) The legal presumption is that Jenna's $720 loss is a business loss. 
B) The legal presumption is that Jenna's $720 loss is a nondeductible hobby loss. 
C) Jenna must include the revenues from her baking activity in gross income but can't deduct any of her related expenses. 
D) Jenna is allowed to report her $720 loss as a miscellaneous itemized deduction.

Question 9

On February 1,Alan,a single individual,purchased his first personal residence for $400,000.On July 1,Alan sold this residence for $460,000 because he wanted to rent a newly constructed condominium.Consequently,Alan occupied the home for only 150 days.How much gain must Alan recognize?

Accepted Answer

A) $0 
B) $8,630 
C) $51,370 
D) $60,000 
A) $0 
B) $8,630 
C) $51,370 
D) $60,000

Question 10

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.

Accepted Answer

A) True 
 B)False

Question 11

Mr.and Mrs.Allen made the following interest payments.Determine their deduction for each payment.
a.$28,000 on a $400,000 acquisition mortgage secured by their personal residence.
b.$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.
c.$2,400 on credit card debt.
d.$1,500 on a bank loan incurred to purchase a new family car.
e.$1,890 on an unsecured bank loan incurred to pay for a new roof on their personal residence.

Accepted Answer

a.$28,000.b.$5,000.c

Question 12

Gary is a successful architect who also sings at weddings.This year,he received $5,400 fees from his singing and spent $6,250 on singing lessons,sheet music,and travel to the weddings.If Gary reports this activity as a hobby for federal tax purposes,which of the following statements is true?

Accepted Answer

A) Gary is not required to include the $5,400 in gross income. 
B) Gary is not allowed to deduct any of his hobby expenses. 
C) Gary is allowed to deduct $5,400 as an above-the-line deduction. 
D) None of the above is true. 
A) Gary is not required to include the $5,400 in gross income. 
B) Gary is not allowed to deduct any of his hobby expenses. 
C) Gary is allowed to deduct $5,400 as an above-the-line deduction. 
D) None of the above is true.

Question 13

Gary is a successful architect who also sings at weddings.This year,he received $5,400 of fees for his singing and spent $6,250 on voice lessons,sheet music,and travel to the weddings.Which of the following statements is true?

Accepted Answer

A) Because the singing activity resulted in a loss,Gary can't treat it as a business. 
B) If facts and circumstances support Gary's claim that his singing activity is a business,he can deduct an $850 above-the-line loss. 
C) Because Gary's primary source of income is his architecture practice,he can't treat the singing activity as a business. 
D) None of the above is true. 
A) Because the singing activity resulted in a loss,Gary can't treat it as a business. 
B) If facts and circumstances support Gary's claim that his singing activity is a business,he can deduct an $850 above-the-line loss. 
C) Because Gary's primary source of income is his architecture practice,he can't treat the singing activity as a business. 
D) None of the above is true.

Question 14

Which of the following statements about divorce settlements is false?

Accepted Answer

A) Alimony is excluded from the recipient's gross income. 
B) Child support is excluded from the recipient's gross income. 
C) Alimony is an above-the-line deduction for the payer. 
D) None of the above is false. 
A) Alimony is excluded from the recipient's gross income. 
B) Child support is excluded from the recipient's gross income. 
C) Alimony is an above-the-line deduction for the payer. 
D) None of the above is false.

Question 15

Interest paid on debt incurred to acquire,build,or improve a personal residence is a preference item for computing the alternative minimum tax (AMT).

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is excluded from gross income?

Accepted Answer

A) $50,000 slot machine winnings 
B) $13,900 value of Hawaiian vacation won on a game show 
C) $85,000 Pulitzer prize for journalism 
D) None of the above is excluded. 
A) $50,000 slot machine winnings 
B) $13,900 value of Hawaiian vacation won on a game show 
C) $85,000 Pulitzer prize for journalism 
D) None of the above is excluded.

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Mr.Rex had his car stolen this year.The car had $35,600 basis and a $22,000 FMV.Rex received a $16,500 reimbursement from his insurance company.Compute Rex's casualty loss resulting from the theft,subject to an aggregate 10% AGI floor.

Accepted Answer

A) $5,400 
B) $5,500 
C) $19,000 
D) $22,000 
A) $5,400 
B) $5,500 
C) $19,000 
D) $22,000

Question 19

Josh donated a painting to the local art museum.He purchased the painting twenty years ago for $34,000,and its appraised FMV at date of gift was $115,000.Which of the following statements about this donation is true?

Accepted Answer

A) Josh must recognize an $81,000 long-term capital gain and is allowed a $115,000 charitable contribution deduction. 
B) Josh recognizes no gain and is allowed a $115,000 charitable contribution deduction. 
C) Josh recognizes no gain and is allowed a $34,000 charitable contribution deduction. 
D) None of the above is true. 
A) Josh must recognize an $81,000 long-term capital gain and is allowed a $115,000 charitable contribution deduction. 
B) Josh recognizes no gain and is allowed a $115,000 charitable contribution deduction. 
C) Josh recognizes no gain and is allowed a $34,000 charitable contribution deduction. 
D) None of the above is true.

Question 20

A nondeductible charitable contribution may be carried forward five years.

Accepted Answer

A) True 
 B)False

Which of the following tax payments is allowed as an itemized income tax deduction?

Unemployment benefits are excluded from gross income.

Mr.and Mrs.Oliva,ages 44 and 40,incurred the following unreimbursed medical expenses this year. If the Olivas' AGI is $23,200,compute their medical expense deduction.

For federal income tax purposes,property transfers pursuant to a divorce are nontaxable events.

Which of the following expenditures is not a medical expense for federal tax purposes?

Dotty,age 45,incurred the following medical expenses this year. Dotty's insurance company reimbursed her for $8,800 of these expenses.If Dotty's AGI is $35,400,compute her medical expense deduction.

Which of the following deductions is disallowed in the computation of alternative minimum taxable income (AMTI)?

Jenna Leigh is employed as a receptionist for a CPA firm,but on evenings and weekends,she bakes wedding cakes.In each of the past four years,Jenna's baking activity resulted in a net profit.This year,the activity generated a $720 net loss.Which of the following statements is true?

On February 1,Alan,a single individual,purchased his first personal residence for $400,000.On July 1,Alan sold this residence for $460,000 because he wanted to rent a newly constructed condominium.Consequently,Alan occupied the home for only 150 days.How much gain must Alan recognize?

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.

Gary is a successful architect who also sings at weddings.This year,he received $5,400 fees from his singing and spent $6,250 on singing lessons,sheet music,and travel to the weddings.If Gary reports this activity as a hobby for federal tax purposes,which of the following statements is true?

Gary is a successful architect who also sings at weddings.This year,he received $5,400 of fees for his singing and spent $6,250 on voice lessons,sheet music,and travel to the weddings.Which of the following statements is true?

Which of the following statements about divorce settlements is false?

Interest paid on debt incurred to acquire,build,or improve a personal residence is a preference item for computing the alternative minimum tax (AMT).

Which of the following is excluded from gross income?

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

Mr.Rex had his car stolen this year.The car had $35,600 basis and a $22,000 FMV.Rex received a $16,500 reimbursement from his insurance company.Compute Rex's casualty loss resulting from the theft,subject to an aggregate 10% AGI floor.

Josh donated a painting to the local art museum.He purchased the painting twenty years ago for $34,000,and its appraised FMV at date of gift was $115,000.Which of the following statements about this donation is true?

A nondeductible charitable contribution may be carried forward five years.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

The Tax Compliance Process

Filters

Exam 17: Tax Consequences of Personal Activities

Which of the following tax payments is allowed as an itemized income tax deduction?

Unemployment benefits are excluded from gross income.

Mr.and Mrs.Oliva,ages 44 and 40,incurred the following unreimbursed medical expenses this year. If the Olivas' AGI is $23,200,compute their medical expense deduction.

For federal income tax purposes,property transfers pursuant to a divorce are nontaxable events.

Which of the following expenditures is not a medical expense for federal tax purposes?

Dotty,age 45,incurred the following medical expenses this year. Dotty's insurance company reimbursed her for $8,800 of these expenses.If Dotty's AGI is $35,400,compute her medical expense deduction.

Which of the following deductions is disallowed in the computation of alternative minimum taxable income (AMTI)?

Jenna Leigh is employed as a receptionist for a CPA firm,but on evenings and weekends,she bakes wedding cakes.In each of the past four years,Jenna's baking activity resulted in a net profit.This year,the activity generated a $720 net loss.Which of the following statements is true?

On February 1,Alan,a single individual,purchased his first personal residence for $400,000.On July 1,Alan sold this residence for $460,000 because he wanted to rent a newly constructed condominium.Consequently,Alan occupied the home for only 150 days.How much gain must Alan recognize?

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.

Gary is a successful architect who also sings at weddings.This year,he received $5,400 fees from his singing and spent $6,250 on singing lessons,sheet music,and travel to the weddings.If Gary reports this activity as a hobby for federal tax purposes,which of the following statements is true?

Gary is a successful architect who also sings at weddings.This year,he received $5,400 of fees for his singing and spent $6,250 on voice lessons,sheet music,and travel to the weddings.Which of the following statements is true?

Which of the following statements about divorce settlements is false?

Interest paid on debt incurred to acquire,build,or improve a personal residence is a preference item for computing the alternative minimum tax (AMT).

Which of the following is excluded from gross income?

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

Mr.Rex had his car stolen this year.The car had $35,600 basis and a $22,000 FMV.Rex received a $16,500 reimbursement from his insurance company.Compute Rex's casualty loss resulting from the theft,subject to an aggregate 10% AGI floor.

Josh donated a painting to the local art museum.He purchased the painting twenty years ago for $34,000,and its appraised FMV at date of gift was $115,000.Which of the following statements about this donation is true?

A nondeductible charitable contribution may be carried forward five years.

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Taxable Income From Business Operations

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

The Tax Compliance Process

Filters