Question 1

Excess business losses are carried back and then forward as net operating losses.

Accepted Answer

A) True 
 B)False  False

Question 2

Lisa,age 45,needed some cash so she received a $50,000 distribution from her Roth IRA.At the time of the distribution,the balance in the Roth IRA was $200,000.Lisa established the Roth IRA 8 years ago.Through a rollover and annual contributions,she has contributed $80,000 to her account.What amount of the distribution is taxable and subject to early distribution penalty?

Accepted Answer

A) $0 
B) $20,000 
C) $30,000 
D) $50,000 
A) $0 
B) $20,000 
C) $30,000 
D) $50,000 A

Question 3

Tatia,age 38,has made deductible contributions to her traditional IRA over the past few years.When her account balance was $30,000,she received a distribution of the entire $30,000 balance of her traditional IRA.She retained $5,000 of the distribution to help her pay the taxes due on the distribution and she immediately contributed the remaining $25,000 to a Roth IRA.What amount of tax and early distribution penalty is she required to pay on the $30,000 distribution from the traditional IRA if her marginal tax rate is 24 percent?

Accepted Answer

$7,200 income tax; $500 early distribution penalty. Tatia is taxed at 24 percent on the full $30,000 distribution ($30,000 × 24%).She also must pay a 10% penalty on the $5,000 distribution she received but did not contribute to the Roth IRA ($5,000 × 10%).

Question 4

Passive losses that exceed passive income are deferred until the taxpayer generates passive income to offset these passive losses.

Accepted Answer

A) True 
 B)False

Question 5

Harvey rents his second home.During 2018,Harvey reported a net loss of $35,000 from the rental.If Harvey is an active participant in the rental and his AGI is $80,000,how much of the loss can he deduct against ordinary income in 2018?

Accepted Answer

A) $35,000 
B) $25,000 
C) $5,000 
D) $0 
A) $35,000 
B) $25,000 
C) $5,000 
D) $0

Question 6

Han is a self-employed carpenter and his wife,Christine,works full-time as a grade school teacher.Han paid $525 for carpentry tools and supplies,and Christine paid $3,600 as her share of health insurance premiums (not with pre-tax dollars)for Han and herself in a qualified plan provided by the school district.Which of the following is a true statement?

Accepted Answer

A) The tools and supplies are deductible for AGI while the health insurance is an itemized deduction. 
B) Both expenditures are deductible for AGI. 
C) The tools and supplies are an itemized deduction but the health insurance is deductible for AGI. 
D) Both expenditures are itemized deductions. 
E) Neither of the expenditures is deductible. 
A) The tools and supplies are deductible for AGI while the health insurance is an itemized deduction. 
B) Both expenditures are deductible for AGI. 
C) The tools and supplies are an itemized deduction but the health insurance is deductible for AGI. 
D) Both expenditures are itemized deductions. 
E) Neither of the expenditures is deductible.

Question 7

A loss from a passive activity is fully deductible as long as the taxpayer has sufficient tax basis in the activity.

Accepted Answer

A) True 
 B)False

Question 8

A SEP IRA is an example of a self-employed retirement account.

Accepted Answer

A) True 
 B)False

Question 9

This year,in 2018,Tiffanie files as a single taxpayer.Tiffanie received $62,700 of salary and paid $3,200 of qualified educational interest.This year,she paid moving expenses of $2,200 and received $9,800 of alimony (she got divorced in 2015).What is Tiffanie's AGI?

Accepted Answer

$71,250 ($62,700 + $9,800 - $1,250 = $71

Question 10

The profit motive distinguishes "business" activities from "personal" activities.

Accepted Answer

A) True 
 B)False

Question 11

In certain circumstances,a taxpayer could rent her personal residence at a profit and not pay any tax on the income.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is a true statement?

Accepted Answer

A) For purposes of the deduction for educational interest,an educational loan must be used to pay tuition to any type of school. 
B) The maximum deduction for educational interest is $5,000 for married taxpayers filing jointly. 
C) Self-employed taxpayers are not allowed to deduct health care premiums if the taxpayer is eligible to participate in their spouse's employer-provided health plan. 
D) Self-employment taxes paid by self-employed taxpayers are deductible as business expenses. 
E) All of the choices are true. 
A) For purposes of the deduction for educational interest,an educational loan must be used to pay tuition to any type of school. 
B) The maximum deduction for educational interest is $5,000 for married taxpayers filing jointly. 
C) Self-employed taxpayers are not allowed to deduct health care premiums if the taxpayer is eligible to participate in their spouse's employer-provided health plan. 
D) Self-employment taxes paid by self-employed taxpayers are deductible as business expenses. 
E) All of the choices are true.

Question 13

Tyson (48 years old)owns a traditional IRA with a current balance of $50,000.The balance consists of $30,000 of deductible contributions and $20,000 of account earnings.Tyson's marginal tax rate is 25%.Convinced that his marginal tax rate will increase in the future,Tyson receives a distribution of the entire $50,000 balance of his traditional IRA.He retains $12,500 to pay tax on the distribution and he contributes $37,500 to a Roth IRA.What amount of income tax and penalty must Tyson pay on this series of transactions?

Accepted Answer

A) $0 income tax; $0 penalty. 
B) $12,500 income tax; $1,250 penalty. 
C) $12,500 income tax; $3,000 penalty. 
D) $12,500 income tax; $5,000 penalty. 
E) $0 income tax; $5,000 penalty. 
A) $0 income tax; $0 penalty. 
B) $12,500 income tax; $1,250 penalty. 
C) $12,500 income tax; $3,000 penalty. 
D) $12,500 income tax; $5,000 penalty. 
E) $0 income tax; $5,000 penalty.

Question 14

Taxpayers renting a home would generally report the rental income and expenses on Schedule E.

Accepted Answer

A) True 
 B)False

Question 15

Describe the three main loss limitations that taxpayers must overcome before deducting losses allocated to them from a specific activity.

Accepted Answer

Tax basis - limits the amount of deducti

Question 16

Taxpayers contributing to and receiving distributions from a Roth IRA generally earn a before-tax rate of return on their contributions equal to their after-tax rate of return.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements regarding traditional IRAs is true?

Accepted Answer

A) Once a taxpayer reaches age 55 years of age she is allowed to contribute an additional $1,000 a year. 
B) Taxpayers with high income are not allowed to contribute to traditional IRAs. 
C) Taxpayers who participate in an employer-sponsored retirement plan are allowed to deduct contributions to a traditional IRA regardless of their AGI. 
D) A single taxpayer with no earned income is not allowed to deduct contributions to traditional IRAs. 
A) Once a taxpayer reaches age 55 years of age she is allowed to contribute an additional $1,000 a year. 
B) Taxpayers with high income are not allowed to contribute to traditional IRAs. 
C) Taxpayers who participate in an employer-sponsored retirement plan are allowed to deduct contributions to a traditional IRA regardless of their AGI. 
D) A single taxpayer with no earned income is not allowed to deduct contributions to traditional IRAs.

Question 18

Ryan,age 48,received an $8,000 distribution from his traditional IRA to pay for medical expenses.Ryan has made only deductible contributions to the IRA and his marginal tax rate is 32 percent.What amount of taxes and early distribution penalties will Ryan be required to pay on the distribution?

Accepted Answer

$2,560 tax; $0 penalty. The full distrib

Question 19

Which of the following statements regarding the home office expense deduction is correct?

Accepted Answer

A) Taxpayers allocate expenses of the home to the home office based on the size of the office relative to the size of the home. 
B) A taxpayer is not allowed to deduct any home office expenses unless the taxpayer has no other place to do business. 
C) A taxpayer is not allowed to deduct any depreciation associated with a home as a home office expense. 
D) A taxpayer must own a home in order to claim home office expenses. 
A) Taxpayers allocate expenses of the home to the home office based on the size of the office relative to the size of the home. 
B) A taxpayer is not allowed to deduct any home office expenses unless the taxpayer has no other place to do business. 
C) A taxpayer is not allowed to deduct any depreciation associated with a home as a home office expense. 
D) A taxpayer must own a home in order to claim home office expenses.

Question 20

Qualifying distributions from traditional IRAs are nontaxable while qualifying distributions from Roth IRAs are fully taxable as ordinary income.

Accepted Answer

A) True 
 B)False

Excess business losses are carried back and then forward as net operating losses.

Passive losses that exceed passive income are deferred until the taxpayer generates passive income to offset these passive losses.

Harvey rents his second home.During 2018,Harvey reported a net loss of $35,000 from the rental.If Harvey is an active participant in the rental and his AGI is $80,000,how much of the loss can he deduct against ordinary income in 2018?

A loss from a passive activity is fully deductible as long as the taxpayer has sufficient tax basis in the activity.

A SEP IRA is an example of a self-employed retirement account.

This year,in 2018,Tiffanie files as a single taxpayer.Tiffanie received $62,700 of salary and paid $3,200 of qualified educational interest.This year,she paid moving expenses of $2,200 and received $9,800 of alimony (she got divorced in 2015).What is Tiffanie's AGI?

The profit motive distinguishes "business" activities from "personal" activities.

In certain circumstances,a taxpayer could rent her personal residence at a profit and not pay any tax on the income.

Which of the following is a true statement?

Taxpayers renting a home would generally report the rental income and expenses on Schedule E.

Describe the three main loss limitations that taxpayers must overcome before deducting losses allocated to them from a specific activity.

Taxpayers contributing to and receiving distributions from a Roth IRA generally earn a before-tax rate of return on their contributions equal to their after-tax rate of return.

Which of the following statements regarding traditional IRAs is true?

Ryan,age 48,received an $8,000 distribution from his traditional IRA to pay for medical expenses.Ryan has made only deductible contributions to the IRA and his marginal tax rate is 32 percent.What amount of taxes and early distribution penalties will Ryan be required to pay on the distribution?

Which of the following statements regarding the home office expense deduction is correct?

Qualifying distributions from traditional IRAs are nontaxable while qualifying distributions from Roth IRAs are fully taxable as ordinary income.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview dependents and Filing Status

Gross Income and Exclusions

Individual Income Tax Computation and Tax Credits

Business Income, deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Formations and Operations

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

Individual From Agi Deductions

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Exam 6: Individual for Agi Deductions

Excess business losses are carried back and then forward as net operating losses.

Passive losses that exceed passive income are deferred until the taxpayer generates passive income to offset these passive losses.

Harvey rents his second home.During 2018,Harvey reported a net loss of $35,000 from the rental.If Harvey is an active participant in the rental and his AGI is $80,000,how much of the loss can he deduct against ordinary income in 2018?

A loss from a passive activity is fully deductible as long as the taxpayer has sufficient tax basis in the activity.

A SEP IRA is an example of a self-employed retirement account.

This year,in 2018,Tiffanie files as a single taxpayer.Tiffanie received $62,700 of salary and paid $3,200 of qualified educational interest.This year,she paid moving expenses of $2,200 and received $9,800 of alimony (she got divorced in 2015).What is Tiffanie's AGI?

The profit motive distinguishes "business" activities from "personal" activities.

In certain circumstances,a taxpayer could rent her personal residence at a profit and not pay any tax on the income.

Which of the following is a true statement?

Taxpayers renting a home would generally report the rental income and expenses on Schedule E.

Describe the three main loss limitations that taxpayers must overcome before deducting losses allocated to them from a specific activity.

Taxpayers contributing to and receiving distributions from a Roth IRA generally earn a before-tax rate of return on their contributions equal to their after-tax rate of return.

Which of the following statements regarding traditional IRAs is true?

Ryan,age 48,received an $8,000 distribution from his traditional IRA to pay for medical expenses.Ryan has made only deductible contributions to the IRA and his marginal tax rate is 32 percent.What amount of taxes and early distribution penalties will Ryan be required to pay on the distribution?

Which of the following statements regarding the home office expense deduction is correct?

Qualifying distributions from traditional IRAs are nontaxable while qualifying distributions from Roth IRAs are fully taxable as ordinary income.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview dependents and Filing Status

Gross Income and Exclusions

Individual Income Tax Computation and Tax Credits

Business Income, deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Formations and Operations

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

Individual From Agi Deductions

Filters