Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Interest paid on debt incurred to acquire, build, or improve a personal residence is a preference item for computing the alternative minimum tax.

Accepted Answer

A) True 
 B)False

Question 3

Ms. Ruang owns a principal residence subject to an $817,000 acquisition mortgage. The home has an $875,000 appraised FMV. What is the maximum home equity debt that Ms. Ruang could incur for federal tax purposes?

Accepted Answer

A)  $183,000 
B)  $100,000 
C)  $58,000 
D)  $0 
A)  $183,000 
B)  $100,000 
C)  $58,000 
D)  $0

Question 4

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

Accepted Answer

A)  Alimony 
B)  Unemployment compensation from a state government 
C)  Gain on sale of an antique car 
D)  Welfare payments from a state government 
A)  Alimony 
B)  Unemployment compensation from a state government 
C)  Gain on sale of an antique car 
D)  Welfare payments from a state government

Question 5

Which of the following expenditures is not a medical expense for federal tax purposes?

Accepted Answer

A)  Payment for eyeglasses 
B)  Health insurance premiums 
C)  Payment for prescription antibiotics 
D)  All of the above are deductible medical expenses 
A)  Payment for eyeglasses 
B)  Health insurance premiums 
C)  Payment for prescription antibiotics 
D)  All of the above are deductible medical expenses

Question 6

Gary is a successful architect who also sings at weddings. This year, he received $5,400 fees from his singing and spent $6,250 on singing lessons, sheet music, and travel to the weddings. If Gary reports this activity as a hobby for federal tax purposes, which of the following statements is true?

Accepted Answer

A)  Gary is not required to include the $5,400 in gross income. 
B)  Gary is not allowed to deduct any of his hobby expenses. 
C)  Gary is allowed to deduct $5,400 as an above-the-line deduction. 
D)  None of the above is true. 
A)  Gary is not required to include the $5,400 in gross income. 
B)  Gary is not allowed to deduct any of his hobby expenses. 
C)  Gary is allowed to deduct $5,400 as an above-the-line deduction. 
D)  None of the above is true.

Question 7

Unemployment benefits are excluded from gross income.

Accepted Answer

A) True 
 B)False

Question 8

Mr. and Mrs. King had only one casualty loss this year. A tornado severely damaged their home, decreasing its value by $70,000. The couple received a $48,000 reimbursement from their insurance company. Compute the Kings' itemized deduction for casualty losses if their AGI was $98,200.

Accepted Answer

A)  $22,000 
B)  $21,900 
C)  $12,080 
D)  $60,080 
A)  $22,000 
B)  $21,900 
C)  $12,080 
D)  $60,080

Question 9

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 10

Which of the following statements about divorce settlements is true?

Accepted Answer

A)  Property transfers pursuant to divorce have no income tax consequences. 
B)  Child support is excluded from the recipient's gross income. 
C)  Child support is an above-the-line deduction for the payer. 
D)  Statements A. and B. are true. 
A)  Property transfers pursuant to divorce have no income tax consequences. 
B)  Child support is excluded from the recipient's gross income. 
C)  Child support is an above-the-line deduction for the payer. 
D)  Statements A. and B. are true.

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

A taxpayer must have owned and lived in a personal residence at least two of the last five years in order to qualify for the maximum exclusion of gain on sale of that residence.

Accepted Answer

A) True 
 B)False

Question 13

Mr. Rex had his car stolen this year. The car had $35,600 basis and a $22,000 FMV. Rex received a $16,500 reimbursement from his insurance company. Compute Rex's casualty loss resulting from the theft.

Accepted Answer

A)  $5,400 
B)  $5,500 
C)  $19,000 
D)  $22,000 
A)  $5,400 
B)  $5,500 
C)  $19,000 
D)  $22,000

Question 14

The cost of commuting to and from a place of employment is a nondeductible personal expense.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Josh donated a painting to the local art museum. He purchased the painting twenty years ago for $34,000, and its appraised FMV at date of gift was $115,000. Which of the following statements about this donation is true?

Accepted Answer

A)  Josh must recognize an $81,000 long-term capital gain and is allowed a $115,000 charitable contribution deduction. 
B)  Josh recognizes no gain and is allowed a $115,000 charitable contribution deduction. 
C)  Josh recognizes no gain and is allowed a $34,000 charitable contribution deduction. 
D)  None of the above is true. 
A)  Josh must recognize an $81,000 long-term capital gain and is allowed a $115,000 charitable contribution deduction. 
B)  Josh recognizes no gain and is allowed a $115,000 charitable contribution deduction. 
C)  Josh recognizes no gain and is allowed a $34,000 charitable contribution deduction. 
D)  None of the above is true.

Question 17

For federal income tax purposes, a taxpayer may elect to deduct state and local sales taxes as an itemized deduction.

Accepted Answer

A) True 
 B)False

Question 18

Mr. Lightfoot owns three mortgaged residences that he occupies at different times of the year. He can treat the interest paid on only one mortgage as qualified residence interest.

Accepted Answer

A) True 
 B)False

Question 19

Mr. and Mrs. Nguyen, ages 71 and 61, reported $70,200 AGI and were allowed a $6,400 itemized medical expense deduction this year. Compute their medical expense deduction for alternative minimum tax (AMT) purposes.

Accepted Answer

A)  $0 
B)  $4,645 
C)  $5,114 
D)  $6,300 
A)  $0 
B)  $4,645 
C)  $5,114 
D)  $6,300

Question 20

Helen makes quilts and sells them at the regional county fairs. This year, she earned $950 from quilt sales and spent $3,300 on supplies and travel relating to her quilting activity. If the IRS determines that this activity is a hobby instead of a business, Helen can't deduct her $2,350 net loss.

Accepted Answer

A) True 
 B)False

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

Interest paid on debt incurred to acquire, build, or improve a personal residence is a preference item for computing the alternative minimum tax.

Ms. Ruang owns a principal residence subject to an $817,000 acquisition mortgage. The home has an $875,000 appraised FMV. What is the maximum home equity debt that Ms. Ruang could incur for federal tax purposes?

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

Which of the following expenditures is not a medical expense for federal tax purposes?

Gary is a successful architect who also sings at weddings. This year, he received $5,400 fees from his singing and spent $6,250 on singing lessons, sheet music, and travel to the weddings. If Gary reports this activity as a hobby for federal tax purposes, which of the following statements is true?

Unemployment benefits are excluded from gross income.

Mr. and Mrs. King had only one casualty loss this year. A tornado severely damaged their home, decreasing its value by $70,000. The couple received a $48,000 reimbursement from their insurance company. Compute the Kings' itemized deduction for casualty losses if their AGI was $98,200.

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

Which of the following statements about divorce settlements is true?

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

A taxpayer must have owned and lived in a personal residence at least two of the last five years in order to qualify for the maximum exclusion of gain on sale of that residence.

Mr. Rex had his car stolen this year. The car had $35,600 basis and a $22,000 FMV. Rex received a $16,500 reimbursement from his insurance company. Compute Rex's casualty loss resulting from the theft.

The cost of commuting to and from a place of employment is a nondeductible personal expense.

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

Josh donated a painting to the local art museum. He purchased the painting twenty years ago for $34,000, and its appraised FMV at date of gift was $115,000. Which of the following statements about this donation is true?

For federal income tax purposes, a taxpayer may elect to deduct state and local sales taxes as an itemized deduction.

Mr. Lightfoot owns three mortgaged residences that he occupies at different times of the year. He can treat the interest paid on only one mortgage as qualified residence interest.

Mr. and Mrs. Nguyen, ages 71 and 61, reported $70,200 AGI and were allowed a $6,400 itemized medical expense deduction this year. Compute their medical expense deduction for alternative minimum tax (AMT) purposes.

Helen makes quilts and sells them at the regional county fairs. This year, she earned $950 from quilt sales and spent $3,300 on supplies and travel relating to her quilting activity. If the IRS determines that this activity is a hobby instead of a business, Helen can't deduct her $2,350 net loss.

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

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

Interest paid on debt incurred to acquire, build, or improve a personal residence is a preference item for computing the alternative minimum tax.

Ms. Ruang owns a principal residence subject to an $817,000 acquisition mortgage. The home has an $875,000 appraised FMV. What is the maximum home equity debt that Ms. Ruang could incur for federal tax purposes?

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

Which of the following expenditures is not a medical expense for federal tax purposes?

Gary is a successful architect who also sings at weddings. This year, he received $5,400 fees from his singing and spent $6,250 on singing lessons, sheet music, and travel to the weddings. If Gary reports this activity as a hobby for federal tax purposes, which of the following statements is true?

Unemployment benefits are excluded from gross income.

Mr. and Mrs. King had only one casualty loss this year. A tornado severely damaged their home, decreasing its value by $70,000. The couple received a $48,000 reimbursement from their insurance company. Compute the Kings' itemized deduction for casualty losses if their AGI was $98,200.

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

Which of the following statements about divorce settlements is true?

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

A taxpayer must have owned and lived in a personal residence at least two of the last five years in order to qualify for the maximum exclusion of gain on sale of that residence.

Mr. Rex had his car stolen this year. The car had $35,600 basis and a $22,000 FMV. Rex received a $16,500 reimbursement from his insurance company. Compute Rex's casualty loss resulting from the theft.

The cost of commuting to and from a place of employment is a nondeductible personal expense.

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

Josh donated a painting to the local art museum. He purchased the painting twenty years ago for $34,000, and its appraised FMV at date of gift was $115,000. Which of the following statements about this donation is true?

For federal income tax purposes, a taxpayer may elect to deduct state and local sales taxes as an itemized deduction.

Mr. Lightfoot owns three mortgaged residences that he occupies at different times of the year. He can treat the interest paid on only one mortgage as qualified residence interest.

Mr. and Mrs. Nguyen, ages 71 and 61, reported $70,200 AGI and were allowed a $6,400 itemized medical expense deduction this year. Compute their medical expense deduction for alternative minimum tax (AMT) purposes.

Helen makes quilts and sells them at the regional county fairs. This year, she earned $950 from quilt sales and spent $3,300 on supplies and travel relating to her quilting activity. If the IRS determines that this activity is a hobby instead of a business, Helen can't deduct her $2,350 net loss.

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