Question 1

An activity will be classified as a hobby if the taxpayer fails to make a profit from the activity.

Accepted Answer

A) True 
 B)False

Question 2

Mr.and Mrs.King had only one casualty loss this year.A tornado severely damaged their home,decreasing its value by $70,000.The couple received a $48,000 reimbursement from their insurance company.Compute the Kings' itemized deduction for casualty losses if their AGI was $98,200.

Accepted Answer

A) $22,000 
B) $21,900 
C) $12,080 
D) $60,080 
A) $22,000 
B) $21,900 
C) $12,080 
D) $60,080

Question 3

Three years ago,Suzanne bought a new personal automobile for $26,900.This year,she sold it for $19,000.What is the amount and character of Suzanne's recognized loss?

Accepted Answer

A) No loss recognized on the sale of a personal asset. 
B) $26,900 long-term capital loss. 
C) $7,900 ordinary loss. 
D) $7,900 long-term capital loss. 
A) No loss recognized on the sale of a personal asset. 
B) $26,900 long-term capital loss. 
C) $7,900 ordinary loss. 
D) $7,900 long-term capital loss.

Question 4

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?

Accepted Answer

A) No gain recognized on the sale of a personal asset. 
B) $1,200 ordinary gain. 
C) $1,200 long-term capital gain. 
D) None of the above. 
A) No gain recognized on the sale of a personal asset. 
B) $1,200 ordinary gain. 
C) $1,200 long-term capital gain. 
D) None of the above.

Question 5

Polly received the following items this year.     Compute Polly's gross income.

Accepted Answer

A) $59,600 
B) $58,000 
C) $53,000 
D) $50,000 
A) $59,600 
B) $58,000 
C) $53,000 
D) $50,000

Question 6

Mia inherited $1 million from her deceased grandfather.Mia must include the inheritance in gross income.

Accepted Answer

A) True 
 B)False

Question 7

Personal exemptions are allowed in computing alternative minimum taxable income (AMTI).

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) State and local income tax 
B) Casualty loss 
C) Charitable contribution 
D) Gambling loss 
A) State and local income tax 
B) Casualty loss 
C) Charitable contribution 
D) Gambling loss

Question 9

Mrs.Hanson's financial support this year consisted of: $14,650 Social Security benefits; $9,600 pension from her former employer's qualified retirement plan,and $15,000 cash gifts from her children.Compute Mrs.Hanson's AGI.

Accepted Answer

AGI = $9,6

Question 10

Gifts are not included in the recipient's gross income.

Accepted Answer

A) True 
 B)False

Question 11

Mrs.Kronin received $16,200 child support payments from her former husband.These payments are excluded from Mrs.Kronin's gross income.

Accepted Answer

A) True 
 B)False

Question 12

Ted and Alice divorced this year.Pursuant to the divorce agreement,Ted pays $5,000 alimony and $7,500 child support to Alice every month.Alice is the custodial parent.Which of the following statements is true?

Accepted Answer

A) Alice includes the monthly alimony and child support payments in gross income. 
B) Ted is allowed to deduct the monthly alimony and child support payments. 
C) Ted is entitled to the exemptions for the couples' two minor children because he is paying child support. 
D) None of the above is true. 
A) Alice includes the monthly alimony and child support payments in gross income. 
B) Ted is allowed to deduct the monthly alimony and child support payments. 
C) Ted is entitled to the exemptions for the couples' two minor children because he is paying child support. 
D) None of the above is true.

Question 13

Tax return preparation fees are miscellaneous itemized deductions subject to the 2% AGI floor.

Accepted Answer

A) True 
 B)False

Question 14

Mr.and Mrs.Perry own three personal residences,all of which are subject to an acquisition mortgage.The mortgage on the first residence is $290,000,the mortgage on the second residence is $400,000,and the mortgage on the third residence is $357,000.Which of the following statements is true?

Accepted Answer

A) Mr.and Mrs.Perry can report an itemized deduction for the interest paid on all three mortgages. 
B) The Perrys' itemized deduction is limited to the interest on $1 million of their acquisition debt. 
C) The Perrys' itemized deduction is limited to the interest on the $400,000 mortgage. 
D) None of the statements is true. 
A) Mr.and Mrs.Perry can report an itemized deduction for the interest paid on all three mortgages. 
B) The Perrys' itemized deduction is limited to the interest on $1 million of their acquisition debt. 
C) The Perrys' itemized deduction is limited to the interest on the $400,000 mortgage. 
D) None of the statements is true.

Question 15

Mary Stone,a single individual,sold a personal residence on June 3,2016,and excluded her $93,600 gain from gross income.If she sells another personal residence before June 4,2018,she can exclude a maximum of $156,400 of any gain.

Accepted Answer

A) True 
 B)False

Question 16

Any gain recognized on the sale of a personal residence is excluded from the seller's gross income.

Accepted Answer

A) True 
 B)False

Question 17

Spencer paid the following taxes this year.     Compute Spencer's itemized deduction for taxes.

Accepted Answer

A) $5,725 
B) $13,615 
C) $9,025 
D) $12,023 
A) $5,725 
B) $13,615 
C) $9,025 
D) $12,023

Question 18

Ms.Bjorn's only contribution this year was a donation of marketable securities (FMV $600,000; tax basis $273,000)to a public charity.Her AGI was $814,000.Which of the following statements is true?

Accepted Answer

A) Ms.Bjorn's charitable contribution deduction is limited to $407,000,and she has a $193,000 contribution carryover to future years. 
B) Ms.Bjorn's charitable contribution deduction is $273,000. 
C) Ms.Bjorn's charitable contribution deduction is limited to $407,000.The $193,000 nondeductible amount will never result in a tax benefit. 
D) Ms.Bjorn's charitable contribution deduction is $600,000. 
A) Ms.Bjorn's charitable contribution deduction is limited to $407,000,and she has a $193,000 contribution carryover to future years. 
B) Ms.Bjorn's charitable contribution deduction is $273,000. 
C) Ms.Bjorn's charitable contribution deduction is limited to $407,000.The $193,000 nondeductible amount will never result in a tax benefit. 
D) Ms.Bjorn's charitable contribution deduction is $600,000.

Question 19

Mr.Haugh owns a sporting goods store as a sole proprietorship.This year,he donated baseball equipment (bats,gloves,balls)to the local YMCA to use in their community sports programs.His cost basis in the inventory items was $45,700,and their retail value was $68,200.Which of the following statements about this donation is true?

Accepted Answer

A) Mr.Haugh must recognize $22,500 ordinary business income and is allowed a $68,200 business deduction. 
B) Mr.Haugh must recognize $22,500 ordinary business income and is allowed a $68,200 charitable contribution deduction. 
C) Mr.Haugh is allowed a $45,700 charitable contribution deduction. 
D) Mr.Haugh is allowed a $68,200 charitable contribution deduction. 
A) Mr.Haugh must recognize $22,500 ordinary business income and is allowed a $68,200 business deduction. 
B) Mr.Haugh must recognize $22,500 ordinary business income and is allowed a $68,200 charitable contribution deduction. 
C) Mr.Haugh is allowed a $45,700 charitable contribution deduction. 
D) Mr.Haugh is allowed a $68,200 charitable contribution deduction.

Question 20

Mr.and Mrs.Blake suffered two casualty losses this year.Mr.Blake's wallet containing $1,300 cash was stolen,and their uninsured sailboat (basis $67,000; FMV $50,000)sank after colliding with a reef.Compute the Blakes' itemized deduction for casualty losses if their AGI was $112,200.

Accepted Answer

A) $40,080 
B) $56,080 
C) $39,980 
D) None of the above. 
A) $40,080 
B) $56,080 
C) $39,980 
D) None of the above.

An activity will be classified as a hobby if the taxpayer fails to make a profit from the activity.

Mr.and Mrs.King had only one casualty loss this year.A tornado severely damaged their home,decreasing its value by $70,000.The couple received a $48,000 reimbursement from their insurance company.Compute the Kings' itemized deduction for casualty losses if their AGI was $98,200.

Three years ago,Suzanne bought a new personal automobile for $26,900.This year,she sold it for $19,000.What is the amount and character of Suzanne's recognized loss?

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?

Polly received the following items this year. Compute Polly's gross income.

Mia inherited $1 million from her deceased grandfather.Mia must include the inheritance in gross income.

Personal exemptions are allowed in computing alternative minimum taxable income (AMTI).

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

Mrs.Hanson's financial support this year consisted of: $14,650 Social Security benefits; $9,600 pension from her former employer's qualified retirement plan,and $15,000 cash gifts from her children.Compute Mrs.Hanson's AGI.

Gifts are not included in the recipient's gross income.

Mrs.Kronin received $16,200 child support payments from her former husband.These payments are excluded from Mrs.Kronin's gross income.

Ted and Alice divorced this year.Pursuant to the divorce agreement,Ted pays $5,000 alimony and $7,500 child support to Alice every month.Alice is the custodial parent.Which of the following statements is true?

Tax return preparation fees are miscellaneous itemized deductions subject to the 2% AGI floor.

Mr.and Mrs.Perry own three personal residences,all of which are subject to an acquisition mortgage.The mortgage on the first residence is $290,000,the mortgage on the second residence is $400,000,and the mortgage on the third residence is $357,000.Which of the following statements is true?

Mary Stone,a single individual,sold a personal residence on June 3,2016,and excluded her $93,600 gain from gross income.If she sells another personal residence before June 4,2018,she can exclude a maximum of $156,400 of any gain.

Any gain recognized on the sale of a personal residence is excluded from the seller's gross income.

Spencer paid the following taxes this year. Compute Spencer's itemized deduction for taxes.

Ms.Bjorn's only contribution this year was a donation of marketable securities (FMV $600,000; tax basis $273,000)to a public charity.Her AGI was $814,000.Which of the following statements is true?

Mr.and Mrs.Blake suffered two casualty losses this year.Mr.Blake's wallet containing $1,300 cash was stolen,and their uninsured sailboat (basis $67,000; FMV $50,000)sank after colliding with a reef.Compute the Blakes' itemized deduction for casualty losses if their AGI was $112,200.

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

An activity will be classified as a hobby if the taxpayer fails to make a profit from the activity.

Mr.and Mrs.King had only one casualty loss this year.A tornado severely damaged their home,decreasing its value by $70,000.The couple received a $48,000 reimbursement from their insurance company.Compute the Kings' itemized deduction for casualty losses if their AGI was $98,200.

Three years ago,Suzanne bought a new personal automobile for $26,900.This year,she sold it for $19,000.What is the amount and character of Suzanne's recognized loss?

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?

Polly received the following items this year. Compute Polly's gross income.

Mia inherited $1 million from her deceased grandfather.Mia must include the inheritance in gross income.

Personal exemptions are allowed in computing alternative minimum taxable income (AMTI).

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

Mrs.Hanson's financial support this year consisted of: $14,650 Social Security benefits; $9,600 pension from her former employer's qualified retirement plan,and $15,000 cash gifts from her children.Compute Mrs.Hanson's AGI.

Gifts are not included in the recipient's gross income.

Mrs.Kronin received $16,200 child support payments from her former husband.These payments are excluded from Mrs.Kronin's gross income.

Ted and Alice divorced this year.Pursuant to the divorce agreement,Ted pays $5,000 alimony and $7,500 child support to Alice every month.Alice is the custodial parent.Which of the following statements is true?

Tax return preparation fees are miscellaneous itemized deductions subject to the 2% AGI floor.

Mr.and Mrs.Perry own three personal residences,all of which are subject to an acquisition mortgage.The mortgage on the first residence is $290,000,the mortgage on the second residence is $400,000,and the mortgage on the third residence is $357,000.Which of the following statements is true?

Mary Stone,a single individual,sold a personal residence on June 3,2016,and excluded her $93,600 gain from gross income.If she sells another personal residence before June 4,2018,she can exclude a maximum of $156,400 of any gain.

Any gain recognized on the sale of a personal residence is excluded from the seller's gross income.

Spencer paid the following taxes this year. Compute Spencer's itemized deduction for taxes.

Ms.Bjorn's only contribution this year was a donation of marketable securities (FMV $600,000; tax basis $273,000)to a public charity.Her AGI was $814,000.Which of the following statements is true?

Mr.and Mrs.Blake suffered two casualty losses this year.Mr.Blake's wallet containing $1,300 cash was stolen,and their uninsured sailboat (basis $67,000; FMV $50,000)sank after colliding with a reef.Compute the Blakes' itemized deduction for casualty losses if their AGI was $112,200.

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