Question 1

Rental income is generally reported on Schedule C.

Accepted Answer

A) True 
 B)False

Question 2

A royalty is a payment for the right to use intangible property.

Accepted Answer

A) True 
 B)False

Question 3

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 4

If a taxpayer materially participates in a real estate activity as a real estate professional,the income and expenses of the activity should be reported on:

Accepted Answer

A)  Schedule A 
B)  Schedule C 
C)  Schedule E 
D)  None of these 
A)  Schedule A 
B)  Schedule C 
C)  Schedule E 
D)  None of these

Question 5

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 6

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 7

What is meant by a passive activity? Why is a rental activity classified as a passive activity? Can a rental activity be classified as active? Explain.

Accepted Answer

A passive activity is an activity in whi

Question 8

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 9

The income from a partnership to its partner is considered self-employment income.

Accepted Answer

A) True 
 B)False

Question 10

Stephen and Joy own a duplex in Newport Beach,CA.They live in one unit and rent the other to another couple.Their rental income for the year was $24,000.They incurred the following expenses for the entire duplex:   What amount of net income from the duplex should Stephen and Joy report for the current year?

Accepted Answer

A)  $7,300 
B)  $9,400 
C)  $16,700 
D)  $24,000 
A)  $7,300 
B)  $9,400 
C)  $16,700 
D)  $24,000

Question 11

What must the owner of rental property do with respect to the rental activity to have it be considered:
1)material participation?
2)A trade or business?

Accepted Answer

1)Generally,if the taxpayer works on a r

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Lupe rented her personal residence for 13 days to summer vacationers for $3,800.She lived in the home for the rest of the year.She has AGI of $95,000 excluding the rental income.Related expenses for Lupe's personal residence for the year include these:   What is Lupe's AGI after taking into consideration the rental income and related expenses?

Accepted Answer

A)  $95,000 
B)  $98,098 
C)  $98,800 
D)  $115,000 
A)  $95,000 
B)  $98,098 
C)  $98,800 
D)  $115,000

Question 14

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 15

A security deposit for a rental property is not reported as income.

Accepted Answer

A) True 
 B)False

Question 16

Katie and Mike own a home in Newport Beach,California.During the year,they rented the house for 80 days for $24,000 and used it for personal use for 30 days.The expenses for the house included $20,000 in mortgage interest,$8,500 in property taxes,$6,000 in utilities,$2,000 in maintenance,and $12,000 in depreciation.What is the deductible loss for the rental of their home (without considering the passive loss limitation)? Use the IRS method for allocation of expenses.

Accepted Answer

A)  $0. 
B)  $5,000 net income. 
C)  $17,414 net loss. 
D)  $27,500 net loss. 
A)  $0. 
B)  $5,000 net income. 
C)  $17,414 net loss. 
D)  $27,500 net loss.

Question 17

Kirk and Amy live in Augusta,Georgia.Every year during the Masters Golf Tournament,they rent their primary personal residence for 10 days for $10,000 to a large corporation that uses it to entertain clients.The rest of year,they reside full-time in their home.How should Kirk and Amy treat the rental income? Explain.

Accepted Answer

If a residence is rented for less than 1

Question 18

In the case of a primarily personal property,a taxpayer may report a net loss as long as the correct allocation method was used.

Accepted Answer

A) True 
 B)False

Question 19

When royalties are paid,the amount paid is reported to the recipient by the payer at the end of the year on a Schedule K-1.

Accepted Answer

A) True 
 B)False

Question 20

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

Rental income is generally reported on Schedule C.

A royalty is a payment for the right to use intangible property.

If a taxpayer materially participates in a real estate activity as a real estate professional,the income and expenses of the activity should be reported on:

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.)

What is meant by a passive activity? Why is a rental activity classified as a passive activity? Can a rental activity be classified as active? Explain.

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.

The income from a partnership to its partner is considered self-employment income.

What must the owner of rental property do with respect to the rental activity to have it be considered: 1)material participation? 2)A trade or business?

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

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.

A security deposit for a rental property is not reported as income.

In the case of a primarily personal property,a taxpayer may report a net loss as long as the correct allocation method was used.

When royalties are paid,the amount paid is reported to the recipient by the payer at the end of the year on a Schedule K-1.

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

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

Capital Gains and Other Sales of Property

Tax Credits

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

Rental income is generally reported on Schedule C.

A royalty is a payment for the right to use intangible property.

If a taxpayer materially participates in a real estate activity as a real estate professional,the income and expenses of the activity should be reported on:

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.)

What is meant by a passive activity? Why is a rental activity classified as a passive activity? Can a rental activity be classified as active? Explain.

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.

The income from a partnership to its partner is considered self-employment income.

What must the owner of rental property do with respect to the rental activity to have it be considered: 1)material participation? 2)A trade or business?

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

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.

A security deposit for a rental property is not reported as income.

In the case of a primarily personal property,a taxpayer may report a net loss as long as the correct allocation method was used.

When royalties are paid,the amount paid is reported to the recipient by the payer at the end of the year on a Schedule K-1.

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

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

Capital Gains and Other Sales of Property

Tax Credits

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.)