Exam 17: Tax Consequences of Personal Activities

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?

Gains realized on the sale of personal use assets are taxable.

Carl had $2,000 gambling winnings and $8,400 gambling losses this. Carl must include $2,000 in gross income and can deduct $8,400 as an itemized deduction.

Spencer paid the following taxes this year. Compute Spencer's itemized deduction for taxes.

This year, David paid his physician $6,200 for routine examinations and received a $3,000 reimbursement from his medical insurance company. David is allowed a $3,200 medical expense as an above-the-line deduction.

Congress provides an indirect subsidy to charities by allowing a deduction for charitable contributions.

Mr. and Mrs. Oliva, ages 70 and 67, incurred the following unreimbursed medical expenses this year. If the Olivas' AGI is $23,200, compute their medical expense deduction.

On February 1, 2013, Alan, a single individual, purchased his first personal residence for $400,000. On July 1, 2013, 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?

Which of the following items is not included in the recipient's gross income?

Damage to a personal residence by a tornado is an example of a casualty loss.

Which of the following is excluded from gross income?

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?

Gary is a successful architect who also sings at weddings. This year, he received $5,400 of fees for his singing and spent $6,250 on voice lessons, sheet music, and travel to the weddings. Which of the following statements is true?

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

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

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

A taxpayer must purchase a new personal residence in order to exclude any gain from the sale of the old residence.

Mia inherited $1 million from her deceased grandfather. Mia must include the inheritance in gross income.

Any gain recognized on the sale of a personal residence is excluded from the seller's gross income.

Real estate taxes deducted for regular tax purposes must be added back in computing alternative minimum taxable income (AMTI).