Question 1

Which of the following statements regarding Roth IRAs distributions is true?

Accepted Answer

A) A distribution is not a qualifying distribution unless the distribution is at least two years after the taxpayer has opened the Roth IRA. 
B) A taxpayer receiving a distribution from a Roth IRA before reaching the age of 55 is generally not subject to an early distribution penalty. 
C) A Roth IRA does not have minimum distribution requirements. 
D) The full amount of all nonqualifying distributions is subject to tax at the taxpayer's marginal tax rate. 
A) A distribution is not a qualifying distribution unless the distribution is at least two years after the taxpayer has opened the Roth IRA. 
B) A taxpayer receiving a distribution from a Roth IRA before reaching the age of 55 is generally not subject to an early distribution penalty. 
C) A Roth IRA does not have minimum distribution requirements. 
D) The full amount of all nonqualifying distributions is subject to tax at the taxpayer's marginal tax rate.

Question 2

Brady owns a second home that he rents to others.During the year,he used the second home for 50 days for personal use and for 100 days for rental use.Brady collected $20,000 of rental receipts during the year.Brady allocated $7,000 of interest expense and property taxes,$10,000 of other expenses,and $4,000 of depreciation expense to the rental use.What is Brady's net income from the property and what type and amount of expenses will he carry forward to next year,if any?

Accepted Answer

A) $0 net income.$1,000 depreciation expense carried forward to next year. 
B) ($1,000)net loss.$0 expenses carried over to next year. 
C) $0 net income.$1,000 of other expense carried over to next year. 
D) $0 net income.$1,000 of interest expense and property taxes carried over to next year. 
A) $0 net income.$1,000 depreciation expense carried forward to next year. 
B) ($1,000)net loss.$0 expenses carried over to next year. 
C) $0 net income.$1,000 of other expense carried over to next year. 
D) $0 net income.$1,000 of interest expense and property taxes carried over to next year.

Question 3

Scott is a self-employed plumber and his wife,Emily,is a full-time employee for the University.Emily has health insurance from a qualified plan provided by the University,but Scott has chosen to purchase his own health insurance rather than participate in Emily's plan.Besides paying $5,400 for his health insurance premiums,Scott also pays the following expenses associated with his plumbing business:
 
 $\begin{array}{l}
\begin{array}{lll}
\text {Plumbing tools and supplies}\
\text {Rent on Scott'splumbing shop}\
\text {Transportation between Scott's shop and various job sites}\
\text {Plumber's uniform}\
\text {Plumbing truck rental}\
\text {Self-employment tax ( 1 / 2 is employer share)}\
\end{array}
\begin{array}{lll}
\$ 1,300 \
6,250 \
500 \
50 \
7,200 \
400
\end{array}
\end{array}$

What is the amount of deductions for AGI that Scott can claim this year (2018)?

Accepted Answer

$15,500 $15,500 = $1,300 + $6,

Question 4

Which of the following is a true statement?

Accepted Answer

A) Individuals qualify for the moving expense deduction only if they change employers. 
B) Individuals qualify for the moving expense deduction if their employer does not pay for the moving expenses. 
C) Moving expenses are deductible from AGI. 
D) Moving expenses are generally not deductible. 
E) Moving expenses are deductible for AGI. 
A) Individuals qualify for the moving expense deduction only if they change employers. 
B) Individuals qualify for the moving expense deduction if their employer does not pay for the moving expenses. 
C) Moving expenses are deductible from AGI. 
D) Moving expenses are generally not deductible. 
E) Moving expenses are deductible for AGI.

Question 5

Sue invested $5,000 in the ABC Limited Partnership and received a 10 percent interest in the partnership.The partnership had $20,000 of debt she is not responsible to repay because she is a limited partner.Sue is allocated a 10 percent share of the debt resulting in a tax basis of $7,000 and an at-risk amount of $5,000.During the year,ABC LP generated a ($70,000)loss.How much of Sue's loss is disallowed due to her tax basis or at-risk amount?

Accepted Answer

A) Zero; all of her loss is allowed to be deducted. 
B) $2,000 disallowed because of her at-risk amount. 
C) $2,000 disallowed because of her tax basis. 
D) $4,000 disallowed because of her tax basis. 
E) $4,000 disallowed because of her at-risk amount. 
A) Zero; all of her loss is allowed to be deducted. 
B) $2,000 disallowed because of her at-risk amount. 
C) $2,000 disallowed because of her tax basis. 
D) $4,000 disallowed because of her tax basis. 
E) $4,000 disallowed because of her at-risk amount.

Question 6

Taxpayers who participate in an employer-sponsored retirement plan are not allowed to deduct contributions to individual retirement accounts (IRAs).

Accepted Answer

A) True 
 B)False

Question 7

The phrase "Ordinary and necessary" means that an expense must be appropriate in and helpful for generating a profit.

Accepted Answer

A) True 
 B)False

Question 8

Kristen rented out her home for 10 days during the year for $5,000.She used the home for personal purposes for the other 355 days.She allocated the following home expenses to the rental use of the home:
 
 $\begin{array}{lr}
\text {Insurance  }&\$50 \
\text {Mortgage interest  }&100 \
\text {Property taxes  }&30 \
\text { Repairs and maintenance }&150 \
\text {Utilities  }&40 \
\text { Depreciation }&600
\end{array}$ Kristen's AGI is $120,000 before considering the effect of the rental activity.What is Kristen's AGI after considering the tax effect of the rental use of her home?

Accepted Answer

$120,000 She ignores

Question 9

Braxton owns a second home that he rents to others.During the year,he used the second home 50 days for personal use and 100 days for rental use.After allocating the home-related expenses between personal use and rental use,which of the following statements regarding the sequence of deductibility of the expenses allocated to the rental use is correct (assume taxpayer has no expenses to obtain tenants)?

Accepted Answer

A) Depreciation expense,other expenses,property taxes and interest expense. 
B) Other expenses,depreciation expense,property taxes and interest expense. 
C) Property taxes and interest expense,depreciation expense,other expenses. 
D) Other expenses,property taxes and interest expense,depreciation expense. 
E) None of the choices are correct. 
A) Depreciation expense,other expenses,property taxes and interest expense. 
B) Other expenses,depreciation expense,property taxes and interest expense. 
C) Property taxes and interest expense,depreciation expense,other expenses. 
D) Other expenses,property taxes and interest expense,depreciation expense. 
E) None of the choices are correct.

Question 10

Mason paid $4,100 of interest on a loan that paid tuition for him to attend a private university this year.How much of this payment can Mason deduct as interest expense on an educational loan if he files single and reports modified AGI of $90,000?

Accepted Answer

A) $4,100 
B) $4,000 
C) $2,667 
D) $2,000 
E) None of the choices are correct 
A) $4,100 
B) $4,000 
C) $2,667 
D) $2,000 
E) None of the choices are correct

Question 11

Expenses of a vacation home allocated to rental use are deductible for AGI.

Accepted Answer

A) True 
 B)False

Question 12

Careen owns a condominium near Newport Beach in California.This year,she incurs the following expenses in connection with her condo:
 
 $\begin{array}{l}
\begin{array}{lll}
\text { Insurance } \
\text { Mortgage interest } \
\text { Property taxes } \
\text { Repairs ard maintenance } \
\text { Utilities } \
\text { Depreciation }
\end{array}
\begin{array}{lll}
\$1,500 \
8,500 \
4,000 \
950 \
1,900 \
5,500
\end{array}
\end{array}$

During the year,Careen rented the condo for 90 days,receiving $20,000 of gross income.She personally used the condo for 50 days.Assuming Careen uses the IRS method of allocating expenses to rental use of the property.What is Careen's net rental income for the year (Assume there are 365 days in the year)?

Accepted Answer

$5,633 See

Question 13

Which of the following statements regarding IRAs is false?

Accepted Answer

A) Taxpayers who participate in an employer-sponsored retirement plan may be allowed to make deductible contributions to a traditional IRA. 
B) The ability to make deductible contributions to a traditional IRA and nondeductible contributions to a Roth IRA may be subject to phase-out based on AGI. 
C) A taxpayer may contribute to a traditional IRA in 2019 but deduct the contribution in 2018. 
D) Taxpayers who have made nondeductible contributions to a traditional IRA are taxed on the full proceeds when they receive distributions from the IRA. 
A) Taxpayers who participate in an employer-sponsored retirement plan may be allowed to make deductible contributions to a traditional IRA. 
B) The ability to make deductible contributions to a traditional IRA and nondeductible contributions to a Roth IRA may be subject to phase-out based on AGI. 
C) A taxpayer may contribute to a traditional IRA in 2019 but deduct the contribution in 2018. 
D) Taxpayers who have made nondeductible contributions to a traditional IRA are taxed on the full proceeds when they receive distributions from the IRA.

Question 14

Harriet owns a second home that she rents to others.During the year,she used the second home for 10 personal days and for 200 rental days.Which of the following statements regarding the manner in which she should account for her income and/or expenses associated with the home is incorrect?

Accepted Answer

A) Harriet's deductible expenses are not limited to the amount of gross rental income from the property. 
B) Harriet will be allowed to deduct all of the mortgage interest on the loan secured by the property. 
C) Harriet is required to include all of the rental receipts in gross income. 
D) Harriet is required to allocate all expenses associated with the home to rental use or personal use. 
A) Harriet's deductible expenses are not limited to the amount of gross rental income from the property. 
B) Harriet will be allowed to deduct all of the mortgage interest on the loan secured by the property. 
C) Harriet is required to include all of the rental receipts in gross income. 
D) Harriet is required to allocate all expenses associated with the home to rental use or personal use.

Question 15

Max,a single taxpayer,has a $270,000 loss from his sole proprietorship.How much of this loss is not deductible after considering the excess business loss rules?

Accepted Answer

A) $270,000. 
B) $250,000. 
C) $20,000. 
D) $0. 
E) All of the choices are correct 
A) $270,000. 
B) $250,000. 
C) $20,000. 
D) $0. 
E) All of the choices are correct

Question 16

All business expense deductions are claimed as "below the line" deductions.

Accepted Answer

A) True 
 B)False

Question 17

For married taxpayers filing separate,excess business losses are defined as aggregate business deductions over the sum of aggregate business gross income or gain of the taxpayer plus $250,000.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements regarding limitations on the deductibility of home office expenses of employees is correct?

Accepted Answer

A) Home office expenses of employees are deductible as itemized deductions. 
B) Home office expenses of employees are not deductible. 
C) Home office expenses of employees are for AGI deductions limited to gross income from the business. 
D) Home office expenses of employees are for AGI deductions not limited to gross income from the business. 
A) Home office expenses of employees are deductible as itemized deductions. 
B) Home office expenses of employees are not deductible. 
C) Home office expenses of employees are for AGI deductions limited to gross income from the business. 
D) Home office expenses of employees are for AGI deductions not limited to gross income from the business.

Question 19

Kenneth lived in his home for the entire year except when he rented his home (near a very nice ski resort)to a married couple for 14 days in December.The couple paid Kenneth $14,000 in rent for the two weeks.Kenneth incurred $1,000 in expenses relating to the home for the 14 days.Which of the following statements accurately describes the manner in which Kenneth should report his rental receipts and expenses for tax purposes?

Accepted Answer

A) Kenneth would include the rental receipts in gross income and deduct the rental expenses for AGI. 
B) Kenneth would exclude the rental receipts from gross income and deduct the rental expenses for AGI. 
C) Kenneth would include the rental receipts in gross income and would not deduct the rental expenses because he used the residence for personal purposes for most of the year. 
D) Kenneth would exclude the rental receipts,and he would not deduct the rental expenses. 
A) Kenneth would include the rental receipts in gross income and deduct the rental expenses for AGI. 
B) Kenneth would exclude the rental receipts from gross income and deduct the rental expenses for AGI. 
C) Kenneth would include the rental receipts in gross income and would not deduct the rental expenses because he used the residence for personal purposes for most of the year. 
D) Kenneth would exclude the rental receipts,and he would not deduct the rental expenses.

Question 20

Taxpayers with home offices must allocate indirect expenses of the home between personal use and home office use.Only expenses allocated to the home office use are deductible.

Accepted Answer

A) True 
 B)False

Which of the following statements regarding Roth IRAs distributions is true?

Which of the following is a true statement?

Taxpayers who participate in an employer-sponsored retirement plan are not allowed to deduct contributions to individual retirement accounts (IRAs).

The phrase "Ordinary and necessary" means that an expense must be appropriate in and helpful for generating a profit.

Mason paid $4,100 of interest on a loan that paid tuition for him to attend a private university this year.How much of this payment can Mason deduct as interest expense on an educational loan if he files single and reports modified AGI of $90,000?

Expenses of a vacation home allocated to rental use are deductible for AGI.

Which of the following statements regarding IRAs is false?

Harriet owns a second home that she rents to others.During the year,she used the second home for 10 personal days and for 200 rental days.Which of the following statements regarding the manner in which she should account for her income and/or expenses associated with the home is incorrect?

Max,a single taxpayer,has a $270,000 loss from his sole proprietorship.How much of this loss is not deductible after considering the excess business loss rules?

All business expense deductions are claimed as "below the line" deductions.

For married taxpayers filing separate,excess business losses are defined as aggregate business deductions over the sum of aggregate business gross income or gain of the taxpayer plus $250,000.

Which of the following statements regarding limitations on the deductibility of home office expenses of employees is correct?

Taxpayers with home offices must allocate indirect expenses of the home between personal use and home office use.Only expenses allocated to the home office use are deductible.

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

Which of the following statements regarding Roth IRAs distributions is true?

Which of the following is a true statement?

Taxpayers who participate in an employer-sponsored retirement plan are not allowed to deduct contributions to individual retirement accounts (IRAs).

The phrase "Ordinary and necessary" means that an expense must be appropriate in and helpful for generating a profit.

Mason paid $4,100 of interest on a loan that paid tuition for him to attend a private university this year.How much of this payment can Mason deduct as interest expense on an educational loan if he files single and reports modified AGI of $90,000?

Expenses of a vacation home allocated to rental use are deductible for AGI.

Which of the following statements regarding IRAs is false?

Harriet owns a second home that she rents to others.During the year,she used the second home for 10 personal days and for 200 rental days.Which of the following statements regarding the manner in which she should account for her income and/or expenses associated with the home is incorrect?

Max,a single taxpayer,has a $270,000 loss from his sole proprietorship.How much of this loss is not deductible after considering the excess business loss rules?

All business expense deductions are claimed as "below the line" deductions.

For married taxpayers filing separate,excess business losses are defined as aggregate business deductions over the sum of aggregate business gross income or gain of the taxpayer plus $250,000.

Which of the following statements regarding limitations on the deductibility of home office expenses of employees is correct?

Taxpayers with home offices must allocate indirect expenses of the home between personal use and home office use.Only expenses allocated to the home office use are deductible.

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