Question 1

Which of the following statements is not true about vacation home properties?

Accepted Answer

A)  Property rented for 15 days or more and used for personal use for 14 days or less would be categorized as primarily rental 
B)  A property rented for 15 days or more and used for personal use for more than 14 days would be categorized as personal/rental 
C)  A property categorized as primarily personal is rented for 0 days 
D) A primarily personal property does not need to report the income from the property 
A)  Property rented for 15 days or more and used for personal use for 14 days or less would be categorized as primarily rental 
B)  A property rented for 15 days or more and used for personal use for more than 14 days would be categorized as personal/rental 
C)  A property categorized as primarily personal is rented for 0 days 
D) A primarily personal property does not need to report the income from the property

Question 2

Darius and Chantal own a cabin in Lake Arrowhead, California. During the year, they rented it for 45 days for $10,000 and used it for 12 days for personal use. The house remained vacant for the remainder of the year. The expenses for the house included $9,000 in mortgage interest, $2,000 in property taxes, $1,000 in utilities, $600 in maintenance, and $3,000 in depreciation. What is their net income or loss from their cabin (without considering the passive loss limitation)? Use the IRS method for allocation of expenses. (Round your answer to the nearest whole dollar)

Accepted Answer

A)  $0 
B)  $2,316 net loss 
C)  $5,600 net loss 
D) $10,000 net income 
A)  $0 
B)  $2,316 net loss 
C)  $5,600 net loss 
D) $10,000 net income

Question 3

Nathan owns a tri-plex in Santa Maria, California. He lives in one and rents the other two remaining units. All three units are identical. He incurred the following expenses for the entire building:   How much in rental expenses can Nathan deduct against the rental income on a Schedule E in the current year (without considering any passive loss limitations)? (Round your answers to the nearest whole dollar)

Accepted Answer

A)  $14,733 
B)  $20,000 
C)  $29,467 
D) $44,200 
A)  $14,733 
B)  $20,000 
C)  $29,467 
D) $44,200

Question 4

If a taxpayer materially participates in a real estate activity as a real estate professional, the income and expenses of the activity should be reported on:

Accepted Answer

A)  Schedule A 
B)  Schedule C 
C)  Schedule E 
D) None of these 
A)  Schedule A 
B)  Schedule C 
C)  Schedule E 
D) None of these

Question 5

Explain the three categories that a rental activity may fall under if used for both personal and rental purposes. How are the categories determined?

Accepted Answer

Rental property can be categorized as pr

Question 6

What is meant by a passive activity? Why is a rental activity classified as a passive activity? Can a rental activity be classified as active? Explain.

Accepted Answer

A passive activity is an activity in whi

Question 7

A property that has been rented for 120 days and used for personal use for 13 days should be categorized as:

Accepted Answer

A)  Primarily rental 
B)  Primarily personal 
C)  Personal/rental 
D) None of these 
A)  Primarily rental 
B)  Primarily personal 
C)  Personal/rental 
D) None of these

Question 8

May owns a four-plex in Garden Grove, CA. She rents out 3 units and lives in the fourth. Her income and expenses for the entire four-plex are as follows: mortgage interest $8,200, property taxes $9,000, insurance $3,000, utilities $2,000, repairs and maintenance $1,000, depreciation on the entire complex of $5,000, and rental income of $25,000. What amount of net rental income or loss should May report on her current tax return?

Accepted Answer

A)  $3,200 net loss 
B)  $3,850 net income 
C)  $21,150 net loss 
D) $25,000 net income 
A)  $3,200 net loss 
B)  $3,850 net income 
C)  $21,150 net loss 
D) $25,000 net income

Question 9

Royalties can be earned from allowing others the right to use or exploit:

Accepted Answer

A)  Copyrights 
B)  Formulas 
C)  Coal mines 
D) All of these 
A)  Copyrights 
B)  Formulas 
C)  Coal mines 
D) All of these

Question 10

Rental activities by definition are passive activities.

Accepted Answer

A) True 
 B)False

Question 11

A personal/rental property (that is not a trade or business) may report its income and expenses on Schedule A.

Accepted Answer

A) True 
 B)False

Question 12

There are two methods available to taxpayers to allocate expenses between personal and rental use of properties.

Accepted Answer

A) True 
 B)False

Question 13

Jamison owns a rental cabin in Mammoth, and travels there for maintenance three times a year, between January and June. The round trip to Mammoth from San Diego where Jamison lives, is approximately 405 miles. How much travel costs can Jamison deduct per year related to his rental cabin? (Round your answer to the nearest whole number)

Accepted Answer

A)  $233 
B)  $699 
C)  $743 
D) $1,215 
A)  $233 
B)  $699 
C)  $743 
D) $1,215

Question 14

On June 1st of the current year, Kayla and Ralph purchased a rental beach house for $700,000. Of that amount, $400,000 was for the land value. How much depreciation deduction can they take in the current year? (You may need to refer to the depreciation tables.)

Accepted Answer

A)  $0. 
B)  $5,910. 
C)  $7,880. 
D) $13,790. 
A)  $0. 
B)  $5,910. 
C)  $7,880. 
D) $13,790.

Question 15

Royalties resulting from a non-trade or non-business activity should be reported on a Schedule

Accepted Answer

A) True 
 B)False

Question 16

Elizabeth rented her personal residence for 12 days to summer vacationers for $4,800. Rest of the year, she and her family used the home as their personal residence. She has AGI of $105,000, excluding the rental income. Related expenses for Elizabeth's personal residence for the year include the following:   What is Elizabeth's AGI after taking into consideration the rental income and related expenses for her home?

Accepted Answer

A)  $4,800. 
B)  $100,200. 
C)  $105,000. 
D) $109,800. 
A)  $4,800. 
B)  $100,200. 
C)  $105,000. 
D) $109,800.

Question 17

Royalty income is income received from the use of books, stories, plays, copyrights, trademarks, etc. owned by the taxpayer.

Accepted Answer

A) True 
 B)False

Question 18

Generally, a taxpayer uses Schedule C to report royalty income.

Accepted Answer

A) True 
 B)False

Question 19

Katie and Mike own a home in Newport Beach, California. During the year, they rented the house for 80 days for $24,000 and used it for personal use for 30 days. The expenses for the house included $20,000 in mortgage interest, $8,500 in property taxes, $6,000 in utilities, $2,000 in maintenance, and $12,000 in depreciation. What is the deductible loss for the rental of their home (without considering the passive loss limitation)? Use the IRS method for allocation of expenses.

Accepted Answer

A)  $0. 
B)  $5,000 net income. 
C)  $17,414 net loss. 
D) $27,500 net loss. 
A)  $0. 
B)  $5,000 net income. 
C)  $17,414 net loss. 
D) $27,500 net loss.

Question 20

Assume the same facts as #71, but Meredith rented her house (at fair value) to her brother and his family for 9 days (in addition to her personal use) and total days rented was 180 days. How is the cabin categorized now? Explain your answer.

Accepted Answer

The cabin is now categorized as personal

Which of the following statements is not true about vacation home properties?

If a taxpayer materially participates in a real estate activity as a real estate professional, the income and expenses of the activity should be reported on:

Explain the three categories that a rental activity may fall under if used for both personal and rental purposes. How are the categories determined?

What is meant by a passive activity? Why is a rental activity classified as a passive activity? Can a rental activity be classified as active? Explain.

A property that has been rented for 120 days and used for personal use for 13 days should be categorized as:

Royalties can be earned from allowing others the right to use or exploit:

Rental activities by definition are passive activities.

A personal/rental property (that is not a trade or business) may report its income and expenses on Schedule A.

There are two methods available to taxpayers to allocate expenses between personal and rental use of properties.

On June 1^st of the current year, Kayla and Ralph purchased a rental beach house for $700,000. Of that amount, $400,000 was for the land value. How much depreciation deduction can they take in the current year? (You may need to refer to the depreciation tables.)

Royalties resulting from a non-trade or non-business activity should be reported on a Schedule

Royalty income is income received from the use of books, stories, plays, copyrights, trademarks, etc. owned by the taxpayer.

Generally, a taxpayer uses Schedule C to report royalty income.

Assume the same facts as #71, but Meredith rented her house (at fair value) to her brother and his family for 9 days (in addition to her personal use) and total days rented was 180 days. How is the cabin categorized now? Explain your answer.

Introduction to Taxation, the Income Tax Formula, and Form 1040ez

Expanded Tax Formula, Forms 1040a and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income

Capital Gains and Other Sales of Property

Tax Credits

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities:

Special Property Transactions

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Corporate Taxation

Filters

Exam 8: Rental Property, Royalties, Income From Flow-Through Entities

Which of the following statements is not true about vacation home properties?

If a taxpayer materially participates in a real estate activity as a real estate professional, the income and expenses of the activity should be reported on:

Explain the three categories that a rental activity may fall under if used for both personal and rental purposes. How are the categories determined?

What is meant by a passive activity? Why is a rental activity classified as a passive activity? Can a rental activity be classified as active? Explain.

A property that has been rented for 120 days and used for personal use for 13 days should be categorized as:

Royalties can be earned from allowing others the right to use or exploit:

Rental activities by definition are passive activities.

A personal/rental property (that is not a trade or business) may report its income and expenses on Schedule A.

There are two methods available to taxpayers to allocate expenses between personal and rental use of properties.

On June 1st of the current year, Kayla and Ralph purchased a rental beach house for $700,000. Of that amount, $400,000 was for the land value. How much depreciation deduction can they take in the current year? (You may need to refer to the depreciation tables.)

Royalties resulting from a non-trade or non-business activity should be reported on a Schedule

Royalty income is income received from the use of books, stories, plays, copyrights, trademarks, etc. owned by the taxpayer.

Generally, a taxpayer uses Schedule C to report royalty income.

Assume the same facts as #71, but Meredith rented her house (at fair value) to her brother and his family for 9 days (in addition to her personal use) and total days rented was 180 days. How is the cabin categorized now? Explain your answer.

Introduction to Taxation, the Income Tax Formula, and Form 1040ez

Expanded Tax Formula, Forms 1040a and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income

Capital Gains and Other Sales of Property

Tax Credits

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities:

Special Property Transactions

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Corporate Taxation

Filters

On June 1^st of the current year, Kayla and Ralph purchased a rental beach house for $700,000. Of that amount, $400,000 was for the land value. How much depreciation deduction can they take in the current year? (You may need to refer to the depreciation tables.)