Question 1

Which of the following statements about tax subsidies for higher education is false?

Accepted Answer

A)  Individuals can deduct a limited amount of qualified tuition expenses as an above-the-line deduction. 
B)  Individuals can deduct a limited amount of interest paid on qualified education loans as an above-the-line deduction. 
C)  Individuals can claim an American Opportunity Credit for a limited amount of college tuition, fees, and course materials. 
D)  None of the above is false. 
A)  Individuals can deduct a limited amount of qualified tuition expenses as an above-the-line deduction. 
B)  Individuals can deduct a limited amount of interest paid on qualified education loans as an above-the-line deduction. 
C)  Individuals can claim an American Opportunity Credit for a limited amount of college tuition, fees, and course materials. 
D)  None of the above is false.

Question 2

On February 1, 2012, Alan, a single individual, purchased his first personal residence for $400,000. On July 1, 2012, Alan sold this residence for $460,000 because he wanted to rent a newly constructed condominium. Consequently, Alan occupied the home for only 150 days. How much gain must Alan recognize?

Accepted Answer

A)  $0 
B)  $8,630 
C)  $51,370 
D)  $60,000 
A)  $0 
B)  $8,630 
C)  $51,370 
D)  $60,000

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Lori owns a vacation home that she rents out for about three months each year. Her deduction for expenses allocable to the rental periods is limited to her gross rental income.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Mr. and Mrs. Stimson incurred $3,937 of miscellaneous itemized deductions this year. Their AGI was $97,300, and their marginal rate on ordinary income was 25%. Which of the following statements is false?

Accepted Answer

A)  If the Stimsons itemized deductions and do not owe any alternative minimum tax (AMT), the tax savings from their miscellaneous itemized deductions is $498. 
B)  If the Stimsons do not itemize deductions, the tax savings from their miscellaneous itemized deductions is zero. 
C)  If the Stimsons owe alternative minimum tax (AMT), the tax savings from their miscellaneous itemized deductions is zero. 
D)  None of the above statements is false. 
A)  If the Stimsons itemized deductions and do not owe any alternative minimum tax (AMT), the tax savings from their miscellaneous itemized deductions is $498. 
B)  If the Stimsons do not itemize deductions, the tax savings from their miscellaneous itemized deductions is zero. 
C)  If the Stimsons owe alternative minimum tax (AMT), the tax savings from their miscellaneous itemized deductions is zero. 
D)  None of the above statements is false.

Question 7

Which of the following deductions is allowed in the computation of alternative minimum taxable income (AMTI)?

Accepted Answer

A)  Property taxes paid on a personal residence. 
B)  Interest paid on a mortgage incurred to purchase a personal residence. 
C)  Interest paid on a home equity debt. 
D)  All of the above deductions are allowed. 
A)  Property taxes paid on a personal residence. 
B)  Interest paid on a mortgage incurred to purchase a personal residence. 
C)  Interest paid on a home equity debt. 
D)  All of the above deductions are allowed.

Question 8

Losses realized on the sale of personal use assets are deductible.

Accepted Answer

A) True 
 B)False

Question 9

A flood destroyed an antique Persian rug owned by Mr. and Mrs. McConnel. The couple purchased the rug for $13,000 fifteen years ago, but its appraised FMV before the flood was $42,500. Unfortunately, their homeowners' insurance policy does not cover flood damage. Compute the McConnels' casualty loss resulting from the flood.

Accepted Answer

A)  $41,900 
B)  $42,000 
C)  $13,000 
D)  $12,900 
A)  $41,900 
B)  $42,000 
C)  $13,000 
D)  $12,900

Question 10

Mr. and Mrs. Frazier recognized a $723,000 gain on sale of a home that had been their principal residence for 29 years. They moved into a rented condominium in Naples, Florida. What are the tax consequences of the sale to the Fraziers?

Accepted Answer

A)  $723,000 long-term capital gain 
B)  $223,000 long-term capital gain 
C)  $473,000 ordinary gain 
D)  $473,000 long-term capital gain 
A)  $723,000 long-term capital gain 
B)  $223,000 long-term capital gain 
C)  $473,000 ordinary gain 
D)  $473,000 long-term capital gain

Question 11

Mr. and Mrs. Blake suffered two casualty losses this year. Mr. Blake's wallet containing $1,300 cash was stolen, and their uninsured sailboat (basis $67,000; FMV $50,000) sunk after colliding with a reef. Compute the Blakes' itemized deduction for casualty losses if their AGI was $112,200.

Accepted Answer

A)  $40,080 
B)  $56,080 
C)  $39,980 
D)  None of the above. 
A)  $40,080 
B)  $56,080 
C)  $39,980 
D)  None of the above.

Question 12

Mr. and Mrs. McGraw received $50,160 Social Security benefits this year. They also received $108,000 taxable pension payments and earned $47,300 interest and dividends from their investment portfolio. How much of the McGraw's Social Security is included in gross income?

Accepted Answer

A)  $0 
B)  $25,080 
C)  $42,636 
D)  $50,160 
A)  $0 
B)  $25,080 
C)  $42,636 
D)  $50,160

Question 13

Under the terms of a divorce decree, Harold transferred his one-half interest in the marital residence to his former wife Francine. Francine must include the value of the interest in gross income.

Accepted Answer

A) True 
 B)False

Which of the following statements about tax subsidies for higher education is false?

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

Lori owns a vacation home that she rents out for about three months each year. Her deduction for expenses allocable to the rental periods is limited to her gross rental income.

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?

Mr. and Mrs. Stimson incurred $3,937 of miscellaneous itemized deductions this year. Their AGI was $97,300, and their marginal rate on ordinary income was 25%. Which of the following statements is false?

Which of the following deductions is allowed in the computation of alternative minimum taxable income (AMTI)?

Losses realized on the sale of personal use assets are deductible.

Mr. and Mrs. Frazier recognized a $723,000 gain on sale of a home that had been their principal residence for 29 years. They moved into a rented condominium in Naples, Florida. What are the tax consequences of the sale to the Fraziers?

Mr. and Mrs. Blake suffered two casualty losses this year. Mr. Blake's wallet containing $1,300 cash was stolen, and their uninsured sailboat (basis $67,000; FMV $50,000) sunk after colliding with a reef. Compute the Blakes' itemized deduction for casualty losses if their AGI was $112,200.

Mr. and Mrs. McGraw received $50,160 Social Security benefits this year. They also received $108,000 taxable pension payments and earned $47,300 interest and dividends from their investment portfolio. How much of the McGraw's Social Security is included in gross income?

Under the terms of a divorce decree, Harold transferred his one-half interest in the marital residence to his former wife Francine. Francine must include the value of the interest in gross income.

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

Which of the following statements about tax subsidies for higher education is false?

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

Lori owns a vacation home that she rents out for about three months each year. Her deduction for expenses allocable to the rental periods is limited to her gross rental income.

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?

Mr. and Mrs. Stimson incurred $3,937 of miscellaneous itemized deductions this year. Their AGI was $97,300, and their marginal rate on ordinary income was 25%. Which of the following statements is false?

Which of the following deductions is allowed in the computation of alternative minimum taxable income (AMTI)?

Losses realized on the sale of personal use assets are deductible.

Mr. and Mrs. Frazier recognized a $723,000 gain on sale of a home that had been their principal residence for 29 years. They moved into a rented condominium in Naples, Florida. What are the tax consequences of the sale to the Fraziers?

Mr. and Mrs. Blake suffered two casualty losses this year. Mr. Blake's wallet containing $1,300 cash was stolen, and their uninsured sailboat (basis $67,000; FMV $50,000) sunk after colliding with a reef. Compute the Blakes' itemized deduction for casualty losses if their AGI was $112,200.

Mr. and Mrs. McGraw received $50,160 Social Security benefits this year. They also received $108,000 taxable pension payments and earned $47,300 interest and dividends from their investment portfolio. How much of the McGraw's Social Security is included in gross income?

Under the terms of a divorce decree, Harold transferred his one-half interest in the marital residence to his former wife Francine. Francine must include the value of the interest in gross income.

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