Question 1

Which of the following statements is correct?

Accepted Answer

A) Contributions to SEP plans by self-employed taxpayers are generally limited to the lesser of 15 percent of their net earned income (before the SEP deduction) or $45,000. 
B) The contribution limits for SEPs are the lesser of 25 percent of net self-employment income or $53,000 for a self-employed taxpayer. 
C) Employees may elect to make annual contributions to 401(k) plans up to the lesser of 15 percent of their net earned income (before the 401(k) deduction) or $45,000. 
D) The contribution limits for SEPs are a maximum of $18,000 ($24,000 for taxpayers 50 or older). 
A) Contributions to SEP plans by self-employed taxpayers are generally limited to the lesser of 15 percent of their net earned income (before the SEP deduction) or $45,000. 
B) The contribution limits for SEPs are the lesser of 25 percent of net self-employment income or $53,000 for a self-employed taxpayer. 
C) Employees may elect to make annual contributions to 401(k) plans up to the lesser of 15 percent of their net earned income (before the 401(k) deduction) or $45,000. 
D) The contribution limits for SEPs are a maximum of $18,000 ($24,000 for taxpayers 50 or older).

Question 2

Polly, age 45, participates in her employer's Section 401(k) plan which allows employees to contribute up to 15 percent of their salary. Her annual salary is $100,000 in 2016. What is the maximum she can contribute to this plan on a tax-deferred basis under a salary reduction agreement?

Accepted Answer

A) $20,500 
B) $15,000 
C) $19,000 
D) $25,000 
E) None of the above 
A) $20,500 
B) $15,000 
C) $19,000 
D) $25,000 
E) None of the above

Question 3

Rob and Julie, both in their 30s, file a joint income tax return for 2016. Rob's wages are $25,000 and Julie's wages are $33,000 for the year. Their total adjusted gross income is $58,000, and Julie is covered by a qualified pension plan at work but Rob is not.
a.What is the maximum amount that Rob and Julie may each contribute to their Roth IRAs?
b.​
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If Julie's wages are $110,000 for 2016, instead of $33,000, and their adjusted gross income is $135,000, (1) what is the maximum amount that Rob and Julie may each deduct for contributions to their individual retirement accounts, and (2) what is the maximum amount they could each contribute to Roth IRAs instead?

Accepted Answer

The answer of Rob and Julie, both in their 30s,...

Question 4

For the current year, Robert, a single taxpayer, earned wages of $235,000 from Big Shot Corporation. He also received interest income of $1,000 from Little Credit Union. Robert had a $9,000 loss from his rental property which he actively manages. $2,000 of income was also reported on his Schedule K-1 from ABC Limited Partnership. Neither the rental property nor the partnership investment has passive losses carried over from prior years. Since Robert is not an active participant in a retirement plan, he decides to contribute $5,500 to his IRA.
a.Calculate Robert's adjusted gross income using the above information.
b.How much is Robert's unallowed loss from his passive investments?
c.What happens to the unallowed passive loss?
d.Calculate Robert's adjusted gross income assuming his wages were only $35,000.

Accepted Answer

a. $230,500, calculated as $235,000 + $1

Question 5

Donald, a 40-year-old married taxpayer, has a salary of $55,000 and interest income of $6,000. He is an active participant in his employer's pension plan. What is the maximum amount Donald can contribute to a Roth IRA in 2016?

Accepted Answer

A) $550 
B) $610 
C) $1,220 
D) $3,000 
E) $5,500 
A) $550 
B) $610 
C) $1,220 
D) $3,000 
E) $5,500

Question 6

Arnold purchased two rental properties 6 years ago. He actively participates in their management. During 2016, Arnold had income of $22,000 from one of the rentals. He had a loss from the other rental of $32,000, as well as salary income of $35,000, and dividend income of $2,000. What is Arnold's net passive income or loss deduction?

Accepted Answer

A) $8,000 net loss 
B) $10,000 net loss 
C) $22,000 net loss 
D) $32,000 net loss 
E) None of the above 
A) $8,000 net loss 
B) $10,000 net loss 
C) $22,000 net loss 
D) $32,000 net loss 
E) None of the above

Question 7

Under the SEP plan provisions, deductible contributions to a qualified retirement plan on behalf of an employee whose net earned income is $20,000 are limited to:

Accepted Answer

A) $1,500 
B) $2,000 
C) $4,000 
D) $5,000 
E) None of the above 
A) $1,500 
B) $2,000 
C) $4,000 
D) $5,000 
E) None of the above

Question 8

Monica has a Roth IRA to which she contributed $15,000. The IRA has a current value of $37,500. She is 54 years old and takes a distribution of $25,000. How much of the distribution will be taxable to Monica?

Accepted Answer

A) $0 
B) $10,000 
C) $15,000 
D) $25,000 
E) $37,500 
A) $0 
B) $10,000 
C) $15,000 
D) $25,000 
E) $37,500

Question 9

XYZ Corporation has assigned Allison to inspect their zipper manufacturing plant in China for the next 4 months. Allison has incurred the following expenses:
How much may Allison deduct as moving expenses?

Accepted Answer

$0. Since Allison is assigned to be in C

Question 10

Penny, age 52, takes a distribution of $30,000 from her Traditional IRA account. She plans to deposit it in an IRA with a different bank. Shortly after the distribution she drives her car through the front window of her credit union in a freak accident, and uses the funds to pay for the damages. What income and/or penalties related to the failure to rollover the IRA must she show on her tax return ?

Accepted Answer

Penny must report the full $30,000 distr

Question 11

What is the maximum amount a 30-year-old taxpayer and a 35-year-old spouse can put into a Traditional or Roth IRA for 2016, assuming they earn $50,000 in total and are not covered by pension plans?

Accepted Answer

$11,000. $5,500 for

Question 12

What is the maximum amount a 55-year-old taxpayer and a 48-year-old spouse can put into a Traditional or Roth IRA for 2016, assuming they earn $85,000 in total and are not participants in pension plans?

Accepted Answer

$12,000. $6,500 for the over-a

Question 13

Which of the following statements is true about health savings accounts (HSAs)?

Accepted Answer

A) There is no restriction on the kind of health insurance taxpayers must carry in order to qualify for an HSA. 
B) Contributions to HSAs are not deductible for adjusted gross income (AGI), but are treated as an itemized deduction. 
C) Individuals taking distributions from HSAs which are not for medical expenses are subject to a 50 percent penalty. 
D) Distributions from HSAs are tax and penalty free when used for qualified medical expenses. 
E) Taxpayers may take tax and penalty free distributions from HSAs to purchase automobiles after age 65. 
A) There is no restriction on the kind of health insurance taxpayers must carry in order to qualify for an HSA. 
B) Contributions to HSAs are not deductible for adjusted gross income (AGI), but are treated as an itemized deduction. 
C) Individuals taking distributions from HSAs which are not for medical expenses are subject to a 50 percent penalty. 
D) Distributions from HSAs are tax and penalty free when used for qualified medical expenses. 
E) Taxpayers may take tax and penalty free distributions from HSAs to purchase automobiles after age 65.

Question 14

Without regard to their involvement in the management of the rental property, individual taxpayers may deduct up to $25,000 of rental real estate losses against other income, provided their income does not exceed certain limits.

Accepted Answer

A) True 
 B)False

Question 15

Walt and Jackie rent out their residence in San Diego to friends for 10 days while they vacation in Europe. They collect $1,000 of rental income. How is the rental income treated on their tax return? Explain.

Accepted Answer

Since the residence was rented

Question 16

Which of the following statements is true?

Accepted Answer

A) A distribution rollover from a retirement plan can only be done as a direct transfer from one account to another account. 
B) The trustee must withhold 10 percent of the amount distributed whenever assets are transferred from one retirement plan to another retirement plan. 
C) If a taxpayer decides to rollover an IRA to a new account, then the whole IRA must be rolled over. 
D) A taxpayer is allowed only one direct transfer each year from one retirement account to another retirement account. 
E) There are no current-year tax consequences for a direct transfer. 
A) A distribution rollover from a retirement plan can only be done as a direct transfer from one account to another account. 
B) The trustee must withhold 10 percent of the amount distributed whenever assets are transferred from one retirement plan to another retirement plan. 
C) If a taxpayer decides to rollover an IRA to a new account, then the whole IRA must be rolled over. 
D) A taxpayer is allowed only one direct transfer each year from one retirement account to another retirement account. 
E) There are no current-year tax consequences for a direct transfer.

Question 17

Donald rents out his vacation home for 9 months and lives in his vacation home for the remainder of the year. His gross rental income for 2016 is $7,200. The expenses attributable to the vacation home for the entire year are as follows:
What amount would Donald report as net income or loss from the rental of the vacation home?

Accepted Answer

None. $7,200 (rent income) - (

Question 18

Under the passive loss rules, real estate rental activities are specifically defined as passive, even if the taxpayer actively manages the property.

Accepted Answer

A) True 
 B)False

Question 19

What percentage of medical insurance payments can self-employed taxpayers deduct for adjusted gross income on their 2016 tax returns, assuming their self-employment income exceeds their medical insurance payments? ​

Accepted Answer

A) 60 percent 
B) 70 percent 
C) 50 percent 
D) 90 percent 
E) 100 percent 
A) 60 percent 
B) 70 percent 
C) 50 percent 
D) 90 percent 
E) 100 percent

Question 20

Which of the following is not an exception to the 10% early withdrawal penalty of a traditional IRA: ​

Accepted Answer

A) Paying the costs of higher education, including tuition, fees, books, and room and board for a dependent child 
B) Withdrawing up to $30,000 of first-time home-buying expenses 
C) Using the withdrawals for medical expenses in excess of 10 percent of their AGI, for persons younger than 65 years old 
D) Over 59 1/2 years old 
A) Paying the costs of higher education, including tuition, fees, books, and room and board for a dependent child 
B) Withdrawing up to $30,000 of first-time home-buying expenses 
C) Using the withdrawals for medical expenses in excess of 10 percent of their AGI, for persons younger than 65 years old 
D) Over 59 1/2 years old

Which of the following statements is correct?

Polly, age 45, participates in her employer's Section 401(k) plan which allows employees to contribute up to 15 percent of their salary. Her annual salary is $100,000 in 2016. What is the maximum she can contribute to this plan on a tax-deferred basis under a salary reduction agreement?

Donald, a 40-year-old married taxpayer, has a salary of $55,000 and interest income of $6,000. He is an active participant in his employer's pension plan. What is the maximum amount Donald can contribute to a Roth IRA in 2016?

Under the SEP plan provisions, deductible contributions to a qualified retirement plan on behalf of an employee whose net earned income is $20,000 are limited to:

Monica has a Roth IRA to which she contributed $15,000. The IRA has a current value of $37,500. She is 54 years old and takes a distribution of $25,000. How much of the distribution will be taxable to Monica?

XYZ Corporation has assigned Allison to inspect their zipper manufacturing plant in China for the next 4 months. Allison has incurred the following expenses: How much may Allison deduct as moving expenses?

What is the maximum amount a 30-year-old taxpayer and a 35-year-old spouse can put into a Traditional or Roth IRA for 2016, assuming they earn $50,000 in total and are not covered by pension plans?

What is the maximum amount a 55-year-old taxpayer and a 48-year-old spouse can put into a Traditional or Roth IRA for 2016, assuming they earn $85,000 in total and are not participants in pension plans?

Which of the following statements is true about health savings accounts (HSAs)?

Without regard to their involvement in the management of the rental property, individual taxpayers may deduct up to $25,000 of rental real estate losses against other income, provided their income does not exceed certain limits.

Walt and Jackie rent out their residence in San Diego to friends for 10 days while they vacation in Europe. They collect $1,000 of rental income. How is the rental income treated on their tax return? Explain.

Which of the following statements is true?

Under the passive loss rules, real estate rental activities are specifically defined as passive, even if the taxpayer actively manages the property.

What percentage of medical insurance payments can self-employed taxpayers deduct for adjusted gross income on their 2016 tax returns, assuming their self-employment income exceeds their medical insurance payments?

Which of the following is not an exception to the 10% early withdrawal penalty of a traditional IRA:

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses Part I

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Capital Gains and Losses

Withholding Estimated Payments and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

Exam 4: Business Income and Expenses Part II

Which of the following statements is correct?

Polly, age 45, participates in her employer's Section 401(k) plan which allows employees to contribute up to 15 percent of their salary. Her annual salary is $100,000 in 2016. What is the maximum she can contribute to this plan on a tax-deferred basis under a salary reduction agreement?

Donald, a 40-year-old married taxpayer, has a salary of $55,000 and interest income of $6,000. He is an active participant in his employer's pension plan. What is the maximum amount Donald can contribute to a Roth IRA in 2016?

Under the SEP plan provisions, deductible contributions to a qualified retirement plan on behalf of an employee whose net earned income is $20,000 are limited to:

Monica has a Roth IRA to which she contributed $15,000. The IRA has a current value of $37,500. She is 54 years old and takes a distribution of $25,000. How much of the distribution will be taxable to Monica?

XYZ Corporation has assigned Allison to inspect their zipper manufacturing plant in China for the next 4 months. Allison has incurred the following expenses: How much may Allison deduct as moving expenses?

What is the maximum amount a 30-year-old taxpayer and a 35-year-old spouse can put into a Traditional or Roth IRA for 2016, assuming they earn $50,000 in total and are not covered by pension plans?

What is the maximum amount a 55-year-old taxpayer and a 48-year-old spouse can put into a Traditional or Roth IRA for 2016, assuming they earn $85,000 in total and are not participants in pension plans?

Which of the following statements is true about health savings accounts (HSAs)?

Without regard to their involvement in the management of the rental property, individual taxpayers may deduct up to $25,000 of rental real estate losses against other income, provided their income does not exceed certain limits.

Walt and Jackie rent out their residence in San Diego to friends for 10 days while they vacation in Europe. They collect $1,000 of rental income. How is the rental income treated on their tax return? Explain.

Which of the following statements is true?

Under the passive loss rules, real estate rental activities are specifically defined as passive, even if the taxpayer actively manages the property.

What percentage of medical insurance payments can self-employed taxpayers deduct for adjusted gross income on their 2016 tax returns, assuming their self-employment income exceeds their medical insurance payments? ​

Which of the following is not an exception to the 10% early withdrawal penalty of a traditional IRA: ​

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses Part I

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Capital Gains and Losses

Withholding Estimated Payments and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

What percentage of medical insurance payments can self-employed taxpayers deduct for adjusted gross income on their 2016 tax returns, assuming their self-employment income exceeds their medical insurance payments?

Which of the following is not an exception to the 10% early withdrawal penalty of a traditional IRA: