Question 1

Which of the following statements regarding limitations on the deductibility of home office expenses of employees is correct?

Accepted Answer

A)  Deductible home office expenses of employees are miscellaneous itemized deductions subject to the 2 percent of AGI floor. 
B)  Deductible home office expenses of employees are miscellaneous itemized deductions not subject to the 2 percent floor. 
C)  Deductible home office expenses of employees are for AGI deductions limited to gross income from the business. 
D)  Deductible home office expenses of employees are for AGI deductions not limited to gross income from the business. 
A)  Deductible home office expenses of employees are miscellaneous itemized deductions subject to the 2 percent of AGI floor. 
B)  Deductible home office expenses of employees are miscellaneous itemized deductions not subject to the 2 percent floor. 
C)  Deductible home office expenses of employees are for AGI deductions limited to gross income from the business. 
D)  Deductible home office expenses of employees are for AGI deductions not limited to gross income from the business. A

Question 2

The definition of qualifying expenses is more restrictive for the qualified educational expense deduction than it is for the education loan interest expense deduction.

Accepted Answer

A) True 
 B)False  True

Question 3

Ashton owns a condominium near San Diego, California. This year, he incurs the following expenses in connection with his condo: $\begin{array}{| l| r| }
\hline\text { Revenue trom auto repairs } & \$ 143,930 \
\hline \text { Salaries paid to mechanics } & 72,210 \
\hline \text { Supplies and tools } & 18,500 \
\hline \text { Revenues from gas station partnership (Alexandra's share) } & 125,000 \
\hline \text { Expenses from gas station partnership (Alexandra's share) } & 95,200 \
\hline \text { Self-employment tax (1/2 is employer's share) } & 12,702 \
\hline
\end{array}$ During the year, Ashton rented the condo for 120 days and he received $24,000 of rental receipts. He did not use the condo at all for personal purposes during the year. Ashton is considered to be an active participant in the property. Ashton's AGI from all sources other than the rental property is $120,000. Ashton does not have passive income from any other sources. What is Ashton's AGI?

Accepted Answer

$119,600
Explanation: $120,000 + (400). $$\begin{array} { | l | r | } 
\hline \text { Health insurance premiums } & \$ 4,200 \
\hline \text { Life insurance premiums (whole lite) } & 1,900 \
\hline \text { Books on investing } & 200 \
\hline \text { Repairs of the rental property } & 450 \
\text { Advertising for inw estment clients } & 1,770 \
\hline \text { State income taxes } & 4,300 \
\hline \text { Self employment tax (1/2 is employer share) } & 11,732 \
\hline
\end{array}$$

Question 4

This year Riley files single and reports AGI of $71,000. Riley paid $1,200 of interest on a qualified education loan. What amounts can Riley deduct for qualifying education interest?

Accepted Answer

A)  The deduction for qualifying education interest is $1,200. 
B)  The deduction for qualifying education interest is $1,000. 
C)  The deduction for qualifying education interest is $720. 
D)  The deduction for qualifying education interest is $200. 
E)  None of the above. 
A)  The deduction for qualifying education interest is $1,200. 
B)  The deduction for qualifying education interest is $1,000. 
C)  The deduction for qualifying education interest is $720. 
D)  The deduction for qualifying education interest is $200. 
E)  None of the above.

Question 5

All business expense deductions are claimed as "above the line" deductions.

Accepted Answer

A) True 
 B)False

Question 6

When a taxpayer experiences a net loss from a nonresidence (rental property):

Accepted Answer

A)  The taxpayer will not be allowed to deduct the loss under any circumstance if the taxpayer does not have passive income from other sources. 
B)  The loss is fully deductible against the taxpayer's ordinary income no matter the circumstances. 
C)  If the taxpayer is not an active participant in the rental, the taxpayer can deduct the loss even if the taxpayer does not have any sources of passive income. 
D)  If the taxpayer is not allowed to deduct the loss due to the passive activity limitations, the loss is suspended and carried forward until the taxpayer generates passive income or until the taxpayer sells the property. 
A)  The taxpayer will not be allowed to deduct the loss under any circumstance if the taxpayer does not have passive income from other sources. 
B)  The loss is fully deductible against the taxpayer's ordinary income no matter the circumstances. 
C)  If the taxpayer is not an active participant in the rental, the taxpayer can deduct the loss even if the taxpayer does not have any sources of passive income. 
D)  If the taxpayer is not allowed to deduct the loss due to the passive activity limitations, the loss is suspended and carried forward until the taxpayer generates passive income or until the taxpayer sells the property.

Question 7

Which of the following statements regarding IRAs is false?

Accepted Answer

A)  Taxpayers who participate in an employer-sponsored retirement plan may be allowed to make deductible contributions to a traditional IRA. 
B)  The ability to make deductible contributions to a traditional IRA and nondeductible contributions to a Roth IRA may be subject to phase-out based on AGI. 
C)  A taxpayer may contribute to a traditional IRA in 2017 but deduct the contribution in 2016. 
D)  Taxpayers who have made nondeductible contributions to a traditional IRA are taxed on the full proceeds when they receive distributions from the IRA. 
A)  Taxpayers who participate in an employer-sponsored retirement plan may be allowed to make deductible contributions to a traditional IRA. 
B)  The ability to make deductible contributions to a traditional IRA and nondeductible contributions to a Roth IRA may be subject to phase-out based on AGI. 
C)  A taxpayer may contribute to a traditional IRA in 2017 but deduct the contribution in 2016. 
D)  Taxpayers who have made nondeductible contributions to a traditional IRA are taxed on the full proceeds when they receive distributions from the IRA.

Question 8

Jorge owns a home that he rents for 360 days and uses for personal purposes for five days. Jorge is not required to allocate expenses associated with the home between rental and personal use.

Accepted Answer

A) True 
 B)False

Question 9

Han is a self-employed carpenter and his wife, Christine, works full-time as a grade school teacher. Han paid $525 for carpentry tools and supplies, and Christine paid $3,600 as her share of health insurance premiums (not with pre-tax dollars) for Han and herself in a qualified plan provided by the school district. Which of the following is a true statement?

Accepted Answer

A)  The tools and supplies are deductible for AGI while the health insurance is an itemized deduction. 
B)  Both expenditures are deductible for AGI. 
C)  The tools and supplies are an itemized deduction but the health insurance is deductible for AGI. 
D)  Both expenditures are itemized deductions. 
E)  Neither of the expenditures is deductible. 
A)  The tools and supplies are deductible for AGI while the health insurance is an itemized deduction. 
B)  Both expenditures are deductible for AGI. 
C)  The tools and supplies are an itemized deduction but the health insurance is deductible for AGI. 
D)  Both expenditures are itemized deductions. 
E)  Neither of the expenditures is deductible.

Question 10

Taxpayers with home offices must allocate indirect expenses of the home between personal use and home office use. Only expenses allocated to the home office use are deductible.

Accepted Answer

A) True 
 B)False

Question 11

Tyson (48 years old) owns a traditional IRA with a current balance of $50,000. The balance consists of $30,000 of deductible contributions and $20,000 of account earnings. Convinced that his marginal tax rate will increase in the future, Tyson receives a distribution of the entire $50,000 balance of his traditional IRA and he immediately contributes the $50,000 to a Roth IRA. Assuming his marginal tax rate is 25%, what amount of penalty, if any, must Tyson pay on the distribution from the traditional IRA?

Accepted Answer

A)  $0. 
B)  $1,250. 
C)  $3,750. 
D)  $5,000. 
A)  $0. 
B)  $1,250. 
C)  $3,750. 
D)  $5,000.

Question 12

Daniela retired at the age of 65. The current balance in her Roth IRA is $200,000. Daniela established the Roth IRA 10 years ago. Through a rollover and annual contributions Daniela has contributed $80,000 to her account. If Daniela receives a $50,000 distribution from the Roth IRA, what amount of the distribution is taxable?

Accepted Answer

A)  $0 
B)  $20,000 
C)  $30,000 
D)  $50,000 
A)  $0 
B)  $20,000 
C)  $30,000 
D)  $50,000

Question 13

On January 1, 2016, Jill contributed $18,000 of cash to the XYZ limited partnership for a 25 percent limited partnership interest (without management rights). On April 6, 2016, XYZ, limited partnership distributed $2,000 to Jill. For the year ended December 31, 2016, Jill received the following income/loss allocations from her partnership investments: (1) XYZ, limited partnership allocated a $5,000 loss to Jill (2) ABC limited partnership allocated $2,300 of income to Jill. Jill is a limited partner in ABC with no management rights. How much of the $5,000 loss from XYZ limited partnership can Jill deduct in 2016?

Accepted Answer

$2,300 of loss from XYZ is deducted in 2

Question 14

Brice is a single, self-employed electrician who earns $60,000 per year in self-employment income. Brice paid the following expenses this year. Which of the expenses are deductible for AGI? 1. The cost of health insurance
2) The employer portion of self-employment tax paid
3) Penalty on early withdrawal of funds from a certificate of deposit

Accepted Answer

A)  Numbers 1 and 2 only. 
B)  Numbers 1 and 3 only. 
C)  Numbers 2 and 3 only. 
D)  None of the above is deductible for AGI. 
E)  All of the above are deductible for AGI 
A)  Numbers 1 and 2 only. 
B)  Numbers 1 and 3 only. 
C)  Numbers 2 and 3 only. 
D)  None of the above is deductible for AGI. 
E)  All of the above are deductible for AGI

Question 15

Jennifer owns a home that she rents for 364 days and uses for personal purposes for one day. Jennifer is required to allocate expenses associated with the home between rental and personal use.

Accepted Answer

A) True 
 B)False

Question 16

To be deductible, business expenses must be directly related to a business activity.

Accepted Answer

A) True 
 B)False

Question 17

Ryan, age 48, received an $8,000 distribution from his traditional IRA to pay for medical expenses. Ryan has made only deductible contributions to the IRA and his marginal tax rate is 28 percent. What amount of taxes and early distribution penalties will Ryan be required to pay on the distribution?

Accepted Answer

$2,240 tax; $0 penalty.
Explanation: The

Question 18

Which of the following is a true statement?

Accepted Answer

A)  Congress allows self-employed taxpayers to deduct the employer portion of their self-employment tax. 
B)  To deduct expenses associated with any profit motivated activity taxpayers must maintain a high level of involvement or effort in the activity throughout the year. 
C)  Business activities never require a relatively high level of involvement or effort from the taxpayer. 
D)  All business expenses are deducted for AGI. 
E)  All of the above are true. 
A)  Congress allows self-employed taxpayers to deduct the employer portion of their self-employment tax. 
B)  To deduct expenses associated with any profit motivated activity taxpayers must maintain a high level of involvement or effort in the activity throughout the year. 
C)  Business activities never require a relatively high level of involvement or effort from the taxpayer. 
D)  All business expenses are deducted for AGI. 
E)  All of the above are true.

Question 19

Which of the following statements regarding limitations on the deductibility of home office expenses of self-employed taxpayers is correct?

Accepted Answer

A)  Deductible home office expenses are miscellaneous itemized deductions subject to the 2 percent of AGI floor. 
B)  Deductible home office expenses are miscellaneous itemized deductions not subject to the 2 percent floor. 
C)  Deductible home office expenses are for AGI deductions limited to gross income from the business minus non-home office related expenses. 
D)  Deductible home office expenses are for AGI deductions and may be deducted without limitation. 
A)  Deductible home office expenses are miscellaneous itemized deductions subject to the 2 percent of AGI floor. 
B)  Deductible home office expenses are miscellaneous itemized deductions not subject to the 2 percent floor. 
C)  Deductible home office expenses are for AGI deductions limited to gross income from the business minus non-home office related expenses. 
D)  Deductible home office expenses are for AGI deductions and may be deducted without limitation.

Question 20

An individual who forfeits a penalty for prematurely withdrawing a certificate of deposit (CD) is allowed to net the penalty against the interest income from the CD.

Accepted Answer

A) True 
 B)False

Which of the following statements regarding limitations on the deductibility of home office expenses of employees is correct?

The definition of qualifying expenses is more restrictive for the qualified educational expense deduction than it is for the education loan interest expense deduction.

This year Riley files single and reports AGI of $71,000. Riley paid $1,200 of interest on a qualified education loan. What amounts can Riley deduct for qualifying education interest?

All business expense deductions are claimed as "above the line" deductions.

When a taxpayer experiences a net loss from a nonresidence (rental property):

Which of the following statements regarding IRAs is false?

Jorge owns a home that he rents for 360 days and uses for personal purposes for five days. Jorge is not required to allocate expenses associated with the home between rental and personal use.

Taxpayers with home offices must allocate indirect expenses of the home between personal use and home office use. Only expenses allocated to the home office use are deductible.

Jennifer owns a home that she rents for 364 days and uses for personal purposes for one day. Jennifer is required to allocate expenses associated with the home between rental and personal use.

To be deductible, business expenses must be directly related to a business activity.

Ryan, age 48, received an $8,000 distribution from his traditional IRA to pay for medical expenses. Ryan has made only deductible contributions to the IRA and his marginal tax rate is 28 percent. What amount of taxes and early distribution penalties will Ryan be required to pay on the distribution?

Which of the following is a true statement?

Which of the following statements regarding limitations on the deductibility of home office expenses of self-employed taxpayers is correct?

An individual who forfeits a penalty for prematurely withdrawing a certificate of deposit (CD) is allowed to net the penalty against the interest income from the CD.

An Introduction to Tax

Tax Compliance , the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual From Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Formations and Operations

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S: Corporations

Filters

Exam 6: Individual for Agi Deductions

Which of the following statements regarding limitations on the deductibility of home office expenses of employees is correct?

The definition of qualifying expenses is more restrictive for the qualified educational expense deduction than it is for the education loan interest expense deduction.

This year Riley files single and reports AGI of $71,000. Riley paid $1,200 of interest on a qualified education loan. What amounts can Riley deduct for qualifying education interest?

All business expense deductions are claimed as "above the line" deductions.

When a taxpayer experiences a net loss from a nonresidence (rental property):

Which of the following statements regarding IRAs is false?

Jorge owns a home that he rents for 360 days and uses for personal purposes for five days. Jorge is not required to allocate expenses associated with the home between rental and personal use.

Taxpayers with home offices must allocate indirect expenses of the home between personal use and home office use. Only expenses allocated to the home office use are deductible.

Jennifer owns a home that she rents for 364 days and uses for personal purposes for one day. Jennifer is required to allocate expenses associated with the home between rental and personal use.

To be deductible, business expenses must be directly related to a business activity.

Ryan, age 48, received an $8,000 distribution from his traditional IRA to pay for medical expenses. Ryan has made only deductible contributions to the IRA and his marginal tax rate is 28 percent. What amount of taxes and early distribution penalties will Ryan be required to pay on the distribution?

Which of the following is a true statement?

Which of the following statements regarding limitations on the deductibility of home office expenses of self-employed taxpayers is correct?

An individual who forfeits a penalty for prematurely withdrawing a certificate of deposit (CD) is allowed to net the penalty against the interest income from the CD.

An Introduction to Tax

Tax Compliance , the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual From Agi Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Formations and Operations

Corporate Nonliquidating and Liquidating Distributions

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S: Corporations

Filters