Question 1

A passive activity is any activity that involves a trade or business or rental activity in which the taxpayer does not materially participate.

Accepted Answer

A) True 
 B)False

Question 2

Cassandra,age 33,has made deductible contributions to her traditional IRA over the years.When the balance in her IRA was $40,000,Cassandra received a distribution of $34,000 from her IRA in order to purchase a new car.How much of the $34,000 distribution will she have remaining after paying income taxes and early distribution penalties on the distribution? Her marginal tax rate is 24 percent.

Accepted Answer

$22,440 She must pay $8,160 income taxes

Question 3

Compared to the Tax Court method of allocating expenses between rental use and personal use,the IRS method tends to allocate more expenses to personal use than does the Tax Court method.

Accepted Answer

A) True 
 B)False

Question 4

Taxpayers who use a home for both personal and rental use generally must allocate expenses associated with the home to the personal use and the rental use.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements regarding Roth IRAs is false?

Accepted Answer

A) Contributions to Roth IRAs are not deductible. 
B) Qualifying distributions from Roth IRAs are not taxable. 
C) Whether or not they participate in an employer-sponsored retirement plan,taxpayers are allowed to contribute to Roth IRAs as long as their AGI does not exceed certain thresholds. 
D) Taxpayers who are married and file separately are not allowed to contribute to a Roth IRA. 
A) Contributions to Roth IRAs are not deductible. 
B) Qualifying distributions from Roth IRAs are not taxable. 
C) Whether or not they participate in an employer-sponsored retirement plan,taxpayers are allowed to contribute to Roth IRAs as long as their AGI does not exceed certain thresholds. 
D) Taxpayers who are married and file separately are not allowed to contribute to a Roth IRA.

Question 6

In 2018,Tyson (age 22)earned $3,500 from his part-time job and he reported $15,000 of interest income (unearned income).Assuming he does not participate in an employer-sponsored plan,what is the maximum deductible IRA contribution Tyson can make in 2018?

Accepted Answer

$3,500 Deductible co

Question 7

Which of the following is a true statement?

Accepted Answer

A) Congress allows self-employed taxpayers to deduct the employer portion of their self-employment tax. 
B) To deduct expenses associated with any profit motivated activity taxpayers must maintain a high level of involvement or effort in the activity throughout the year. 
C) Business activities never require a relatively high level of involvement or effort from the taxpayer. 
D) All business expenses are deducted for AGI. 
E) All of the choices are true. 
A) Congress allows self-employed taxpayers to deduct the employer portion of their self-employment tax. 
B) To deduct expenses associated with any profit motivated activity taxpayers must maintain a high level of involvement or effort in the activity throughout the year. 
C) Business activities never require a relatively high level of involvement or effort from the taxpayer. 
D) All business expenses are deducted for AGI. 
E) All of the choices are true.

Question 8

What is the correct order of the loss limitation rules?

Accepted Answer

A) Tax basis,at-risk amount,passive loss limits. 
B) At-risk amount,tax basis passive loss limits. 
C) Passive loss limits,at-risk amount,tax basis. 
D) Tax basis,passive loss limits,at-risk amount. 
E) Passive loss limits,tax basis,at-risk amount. 
A) Tax basis,at-risk amount,passive loss limits. 
B) At-risk amount,tax basis passive loss limits. 
C) Passive loss limits,at-risk amount,tax basis. 
D) Tax basis,passive loss limits,at-risk amount. 
E) Passive loss limits,tax basis,at-risk amount.

Question 9

Jennifer owns a home that she rents for 364 days and uses for personal purposes for one day.Jennifer is required to allocate expenses associated with the home between rental and personal use.

Accepted Answer

A) True 
 B)False

Question 10

A self-employed taxpayer reports home office expenses as for AGI deductions while home office expenses for employees are nondeductible.

Accepted Answer

A) True 
 B)False

Question 11

If a taxpayer's marginal tax rate is decreasing,a taxpayer contributing to a traditional IRA can earn an after-tax rate of return greater than her before-tax rate of return.

Accepted Answer

A) True 
 B)False

Question 12

Katy owns a second home.During 2018,she used the home for 20 personal use days and 50 rental days.Katy allocates expenses associated with the home between rental use and personal use.Katy did not incur any expenses to obtain tenants.Which of the following statements is correct regarding the tax treatment of Katy's income and expenses from the home?

Accepted Answer

A) Katy includes the rental receipts in gross income and deducts the expenses allocated to the rental use of the home for AGI. 
B) Katy deducts from AGI interest expense and property taxes associated with the home not allocated to the rental use of the home. 
C) Assuming Katy's rental receipts exceed the interest expense and property taxes allocated to the rental use,Katy's deductible expenses for 2018 may not exceed the amount of her rental receipts (she may not report a loss from the rental property). 
D) All of the choices are correct. 
A) Katy includes the rental receipts in gross income and deducts the expenses allocated to the rental use of the home for AGI. 
B) Katy deducts from AGI interest expense and property taxes associated with the home not allocated to the rental use of the home. 
C) Assuming Katy's rental receipts exceed the interest expense and property taxes allocated to the rental use,Katy's deductible expenses for 2018 may not exceed the amount of her rental receipts (she may not report a loss from the rental property). 
D) All of the choices are correct.

Question 13

In 2018,Tyson (age 52)earned $50,000 of salary.Assuming he does not participate in an employer-sponsored plan,what is the maximum deductible IRA contribution Tyson can make in 2018?

Accepted Answer

$6,500. The maximum deductible

Question 14

During 2018,Jacob,a 19-year-old full-time student,earned $4,500 during the year and was not eligible to participate in an employer-sponsored retirement plan.The general limit for deductible contributions during 2018 is $5,500.How much of a tax-deductible contribution can Jacob make to an IRA?

Accepted Answer

A) $0 (Full-time students are not allowed to participate in IRAs) 
B) $500 
C) $4,500 
D) $5,500 
A) $0 (Full-time students are not allowed to participate in IRAs) 
B) $500 
C) $4,500 
D) $5,500

Question 15

In 2018,Madison is a single taxpayer who is 25 years of age.During 2018,she contributed $3,000 to her employer sponsored 401(k)account.Her 2018 AGI was $67,500 (before considering IRA deductions).What is the maximum deductible contribution,if any,that Madison can make her to IRA?

Accepted Answer

$3,025 Because she participates in an em

Question 16

This fall Millie finally repaid her student loan.She originally borrowed the money to pay tuition several years ago when she attended at State University (a qualified educational institution).This year Millie paid a total of $2,400 of interest on the loan.If Millie files single and reports $70,000 of income and no other items of income or expense how much of the interest can she deduct?

Accepted Answer

A) Millie can deduct $2,400 for AGI. 
B) Millie can deduct $1,600 for AGI. 
C) Millie can deduct $2,400 as an itemized deduction. 
D) Millie can deduct $800 for AGI. 
E) None - the tuition is not deductible. 
A) Millie can deduct $2,400 for AGI. 
B) Millie can deduct $1,600 for AGI. 
C) Millie can deduct $2,400 as an itemized deduction. 
D) Millie can deduct $800 for AGI. 
E) None - the tuition is not deductible.

Question 17

Qualified education expenses for purposes of the deduction of interest on educational loans are expenses paid for the education of the taxpayer,the taxpayer's spouse,or a taxpayer's dependent to attend a post-secondary institution of higher education.

Accepted Answer

A) True 
 B)False

Question 18

Ashton owns a condominium near San Diego,California.This year,he incurs the following expenses in connection with his condo:
 $\begin{array}{l}
\begin{array}{lll}
\text { Insurance } \
\text { Mortgage interest } \
\text { Property taxes } \
\text { Repairs and maintenance } \
\text { Utilities } \
\text { Depreciation }
\end{array}
\begin{array}{lll}
\$ \quad 1,300 \
8,000 \
2,000 \
900 \
2,200 \
10,000
\end{array}
\end{array}$
 During the year,Ashton rented the condo for 120 days and he received $24,000 of rental receipts.He did not use the condo at all for personal purposes during the year.Ashton is considered to be an active participant in the property.Ashton's AGI from all sources other than the rental property is $120,000.Ashton does not have passive income from any other sources.What is Ashton's AGI?

Accepted Answer

$119,600 $

Question 19

Hector is a married self-employed taxpayer,and this year he paid $3,000 for his health insurance premiums.Under which of the following alternative conditions can Hector deduct the cost of the premiums for AGI?

Accepted Answer

A) Hector chose not to participate in the employer-sponsored plan of his spouse. 
B) Hector's spouse participates in an employer-sponsored plan but Hector is not eligible to participate in this plan. 
C) Neither Hector nor his spouse participates in an employer-sponsored plan although both are eligible to participate in a plan. 
D) Hector can deduct the health insurance premiums regardless of the insurance status of his spouse. 
E) None of the choices are correct - health insurance premiums can only be deducted as an itemized deduction. 
A) Hector chose not to participate in the employer-sponsored plan of his spouse. 
B) Hector's spouse participates in an employer-sponsored plan but Hector is not eligible to participate in this plan. 
C) Neither Hector nor his spouse participates in an employer-sponsored plan although both are eligible to participate in a plan. 
D) Hector can deduct the health insurance premiums regardless of the insurance status of his spouse. 
E) None of the choices are correct - health insurance premiums can only be deducted as an itemized deduction.

Question 20

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 10 years ago.Over the years,she has contributed $20,000 to her account.What amount of the distribution is taxable and subject to early distribution penalty?

Accepted Answer

A) $0 
B) $5,000 
C) $30,000 
D) $50,000 
A) $0 
B) $5,000 
C) $30,000 
D) $50,000

A passive activity is any activity that involves a trade or business or rental activity in which the taxpayer does not materially participate.

Compared to the Tax Court method of allocating expenses between rental use and personal use,the IRS method tends to allocate more expenses to personal use than does the Tax Court method.

Taxpayers who use a home for both personal and rental use generally must allocate expenses associated with the home to the personal use and the rental use.

Which of the following statements regarding Roth IRAs is false?

In 2018,Tyson (age 22)earned $3,500 from his part-time job and he reported $15,000 of interest income (unearned income).Assuming he does not participate in an employer-sponsored plan,what is the maximum deductible IRA contribution Tyson can make in 2018?

Which of the following is a true statement?

What is the correct order of the loss limitation rules?

Jennifer owns a home that she rents for 364 days and uses for personal purposes for one day.Jennifer is required to allocate expenses associated with the home between rental and personal use.

A self-employed taxpayer reports home office expenses as for AGI deductions while home office expenses for employees are nondeductible.

If a taxpayer's marginal tax rate is decreasing,a taxpayer contributing to a traditional IRA can earn an after-tax rate of return greater than her before-tax rate of return.

In 2018,Tyson (age 52)earned $50,000 of salary.Assuming he does not participate in an employer-sponsored plan,what is the maximum deductible IRA contribution Tyson can make in 2018?

During 2018,Jacob,a 19-year-old full-time student,earned $4,500 during the year and was not eligible to participate in an employer-sponsored retirement plan.The general limit for deductible contributions during 2018 is $5,500.How much of a tax-deductible contribution can Jacob make to an IRA?

In 2018,Madison is a single taxpayer who is 25 years of age.During 2018,she contributed $3,000 to her employer sponsored 401(k)account.Her 2018 AGI was $67,500 (before considering IRA deductions).What is the maximum deductible contribution,if any,that Madison can make her to IRA?

Qualified education expenses for purposes of the deduction of interest on educational loans are expenses paid for the education of the taxpayer,the taxpayer's spouse,or a taxpayer's dependent to attend a post-secondary institution of higher education.

Hector is a married self-employed taxpayer,and this year he paid $3,000 for his health insurance premiums.Under which of the following alternative conditions can Hector deduct the cost of the premiums for AGI?

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

Exam 6: Individual for Agi Deductions

A passive activity is any activity that involves a trade or business or rental activity in which the taxpayer does not materially participate.

Compared to the Tax Court method of allocating expenses between rental use and personal use,the IRS method tends to allocate more expenses to personal use than does the Tax Court method.

Taxpayers who use a home for both personal and rental use generally must allocate expenses associated with the home to the personal use and the rental use.

Which of the following statements regarding Roth IRAs is false?

In 2018,Tyson (age 22)earned $3,500 from his part-time job and he reported $15,000 of interest income (unearned income).Assuming he does not participate in an employer-sponsored plan,what is the maximum deductible IRA contribution Tyson can make in 2018?

Which of the following is a true statement?

What is the correct order of the loss limitation rules?

Jennifer owns a home that she rents for 364 days and uses for personal purposes for one day.Jennifer is required to allocate expenses associated with the home between rental and personal use.

A self-employed taxpayer reports home office expenses as for AGI deductions while home office expenses for employees are nondeductible.

If a taxpayer's marginal tax rate is decreasing,a taxpayer contributing to a traditional IRA can earn an after-tax rate of return greater than her before-tax rate of return.

In 2018,Tyson (age 52)earned $50,000 of salary.Assuming he does not participate in an employer-sponsored plan,what is the maximum deductible IRA contribution Tyson can make in 2018?

During 2018,Jacob,a 19-year-old full-time student,earned $4,500 during the year and was not eligible to participate in an employer-sponsored retirement plan.The general limit for deductible contributions during 2018 is $5,500.How much of a tax-deductible contribution can Jacob make to an IRA?

In 2018,Madison is a single taxpayer who is 25 years of age.During 2018,she contributed $3,000 to her employer sponsored 401(k)account.Her 2018 AGI was $67,500 (before considering IRA deductions).What is the maximum deductible contribution,if any,that Madison can make her to IRA?

Qualified education expenses for purposes of the deduction of interest on educational loans are expenses paid for the education of the taxpayer,the taxpayer's spouse,or a taxpayer's dependent to attend a post-secondary institution of higher education.

Hector is a married self-employed taxpayer,and this year he paid $3,000 for his health insurance premiums.Under which of the following alternative conditions can Hector deduct the cost of the premiums for AGI?

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