Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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 3

Chad won a car valued at $25,000 from a game show. Because he immediately donated the car to the Red Cross, Chad can exclude $25,000 from gross income.

Accepted Answer

A) True 
 B)False

Question 4

Helen makes quilts and sells them at the regional county fairs. This year, she earned $950 from quilt sales and spent $3,300 on supplies and travel relating to her quilting activity. If the IRS determines that this activity is a hobby instead of a business, Helen can't deduct her $2,350 net loss.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following donations does not qualify as a charitable contribution for federal tax purposes?

Accepted Answer

A)  $50 cash given to a homeless panhandler 
B)  Used furniture valued at $300 given to the Salvation Army 
C)  $3,000 cash given to the University of Georgia 
D)  $600 cash given to the Boy Scouts of America 
A)  $50 cash given to a homeless panhandler 
B)  Used furniture valued at $300 given to the Salvation Army 
C)  $3,000 cash given to the University of Georgia 
D)  $600 cash given to the Boy Scouts of America

Question 6

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 7

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

Accepted Answer

A) True 
 B)False

Question 8

A drunk driver seriously injured Leah. The court awarded her $200,000 for her physical injuries and $300,000 as punitive damages. Leah must include $300,000 in gross income.

Accepted Answer

A) True 
 B)False

Question 9

Over the course of the year, Mr. Soo won $8,200 and lost $5,900 gambling in the local casino. Mr. Soo does not itemize deductions on his federal tax return. What is the net effect of his gambling on Mr. Soo's taxable income?

Accepted Answer

A)  No effect on taxable income. 
B)  $8,200 increase in taxable income. 
C)  $2,300 increase in taxable income. 
D)  None of the above. 
A)  No effect on taxable income. 
B)  $8,200 increase in taxable income. 
C)  $2,300 increase in taxable income. 
D)  None of the above.

Question 10

Sue, a single taxpayer, purchased a principal residence in 2001 for $415,000. In 2005, she paid $18,000 to add a sunroom. This year, Sue sold the residence for $686,000. Her selling expenses were $5,000. How much gain must Sue recognize on the sale?

Accepted Answer

A)  $0 
B)  $3,000 
C)  $16,000 
D)  $25,000 
A)  $0 
B)  $3,000 
C)  $16,000 
D)  $25,000

Question 11

William took out a $740,000 mortgage to purchase his personal residence. The residence is worth over $1.4 million, and William wants to take out a $200,000 second mortgage and use the proceeds to consolidate his credit card debt. William can deduct 50% of the interest he will pay on the second mortgage.

Accepted Answer

A) True 
 B)False

Question 12

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 13

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 accepted a new job in another state. Consequently, Alan occupied the home for only 150 days. How much gain must Alan recognize?

Accepted Answer

A)  $0 
B)  $8,630 
C)  $30,000 
D)  $51,370 
A)  $0 
B)  $8,630 
C)  $30,000 
D)  $51,370

Question 14

A taxpayer must have owned and lived in a personal residence at least two of the last five years in order to qualify for the maximum exclusion of gain on sale of that residence.

Accepted Answer

A) True 
 B)False

Question 15

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.

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 16

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 17

Twelve years ago, Mr. Drake incurred a $790,000 mortgage to purchase his principal residence. Last year, he took out a $32,000 loan secured by his considerable equity in the residence and used the proceeds to send his daughter to Stanford University. Which of the following statements is true?

Accepted Answer

A)  Mr. Drake can report the interest paid on both his first and second mortgages as an itemized deduction. 
B)  Mr. Drake can deduct the interest paid on both his first and second mortgages as an above-the-line deduction. 
C)  Mr. Drake can report the interest paid on only his first mortgage as an itemized deduction. 
D)  Mr. Drake can report the interest paid on his first mortgage as an above-the-line deduction and the interest paid on his second mortgage as an itemized deduction. 
A)  Mr. Drake can report the interest paid on both his first and second mortgages as an itemized deduction. 
B)  Mr. Drake can deduct the interest paid on both his first and second mortgages as an above-the-line deduction. 
C)  Mr. Drake can report the interest paid on only his first mortgage as an itemized deduction. 
D)  Mr. Drake can report the interest paid on his first mortgage as an above-the-line deduction and the interest paid on his second mortgage as an itemized deduction.

Question 18

Which of the following is not a tax incentive for individuals to purchase a home instead of renting?

Accepted Answer

A)  Real property taxes on the home are deductible. 
B)  Premiums paid on homeowner's insurance are deductible. 
C)  Interest paid on a home mortgage is deductible. 
D)  All of the above are tax incentives. 
A)  Real property taxes on the home are deductible. 
B)  Premiums paid on homeowner's insurance are deductible. 
C)  Interest paid on a home mortgage is deductible. 
D)  All of the above are tax incentives.

Question 19

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 20

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.

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

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

Chad won a car valued at $25,000 from a game show. Because he immediately donated the car to the Red Cross, Chad can exclude $25,000 from gross income.

Helen makes quilts and sells them at the regional county fairs. This year, she earned $950 from quilt sales and spent $3,300 on supplies and travel relating to her quilting activity. If the IRS determines that this activity is a hobby instead of a business, Helen can't deduct her $2,350 net loss.

Which of the following donations does not qualify as a charitable contribution for federal tax purposes?

Which of the following statements about divorce settlements is false?

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

A drunk driver seriously injured Leah. The court awarded her $200,000 for her physical injuries and $300,000 as punitive damages. Leah must include $300,000 in gross income.

Over the course of the year, Mr. Soo won $8,200 and lost $5,900 gambling in the local casino. Mr. Soo does not itemize deductions on his federal tax return. What is the net effect of his gambling on Mr. Soo's taxable income?

Sue, a single taxpayer, purchased a principal residence in 2001 for $415,000. In 2005, she paid $18,000 to add a sunroom. This year, Sue sold the residence for $686,000. Her selling expenses were $5,000. How much gain must Sue recognize on the sale?

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?

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 accepted a new job in another state. Consequently, Alan occupied the home for only 150 days. How much gain must Alan recognize?

A taxpayer must have owned and lived in a personal residence at least two of the last five years in order to qualify for the maximum exclusion of gain on sale of that residence.

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.

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?

Twelve years ago, Mr. Drake incurred a $790,000 mortgage to purchase his principal residence. Last year, he took out a $32,000 loan secured by his considerable equity in the residence and used the proceeds to send his daughter to Stanford University. Which of the following statements is true?

Which of the following is not a tax incentive for individuals to purchase a home instead of renting?

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. 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?

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

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

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

Chad won a car valued at $25,000 from a game show. Because he immediately donated the car to the Red Cross, Chad can exclude $25,000 from gross income.

Helen makes quilts and sells them at the regional county fairs. This year, she earned $950 from quilt sales and spent $3,300 on supplies and travel relating to her quilting activity. If the IRS determines that this activity is a hobby instead of a business, Helen can't deduct her $2,350 net loss.

Which of the following donations does not qualify as a charitable contribution for federal tax purposes?

Which of the following statements about divorce settlements is false?

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

A drunk driver seriously injured Leah. The court awarded her $200,000 for her physical injuries and $300,000 as punitive damages. Leah must include $300,000 in gross income.

Over the course of the year, Mr. Soo won $8,200 and lost $5,900 gambling in the local casino. Mr. Soo does not itemize deductions on his federal tax return. What is the net effect of his gambling on Mr. Soo's taxable income?

Sue, a single taxpayer, purchased a principal residence in 2001 for $415,000. In 2005, she paid $18,000 to add a sunroom. This year, Sue sold the residence for $686,000. Her selling expenses were $5,000. How much gain must Sue recognize on the sale?

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?

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 accepted a new job in another state. Consequently, Alan occupied the home for only 150 days. How much gain must Alan recognize?

A taxpayer must have owned and lived in a personal residence at least two of the last five years in order to qualify for the maximum exclusion of gain on sale of that residence.

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.

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?

Twelve years ago, Mr. Drake incurred a $790,000 mortgage to purchase his principal residence. Last year, he took out a $32,000 loan secured by his considerable equity in the residence and used the proceeds to send his daughter to Stanford University. Which of the following statements is true?

Which of the following is not a tax incentive for individuals to purchase a home instead of renting?

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. 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?

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