Question 1

The profit motive distinguishes "business" activities from "personal" activities.

Accepted Answer

A) True 
 B)False

Question 2

Taxpayers traveling for the primary purpose of receiving essential and deductible medical care may deduct the cost of travel.

Accepted Answer

A) True 
 B)False

Question 3

Qualified education expenses for purposes of the deduction of interest on educational loans are expenses paid for the education of the taxpayer, the taxpayer's spouse, or a taxpayer's dependent to attend a post-secondary institution of higher education.

Accepted Answer

A) True 
 B)False

Question 4

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.See discussion of the self-employment deduction in the text. 
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.See discussion of the self-employment deduction in the text.

Question 5

Which of the following is a true statement?

Accepted Answer

A) For purposes of the deduction for educational interest, an educational loan must be used to pay tuition to any type of school. 
B) The maximum deduction for educational interest is $5,000 for married taxpayers filing jointly. 
C) Self-employed taxpayers are not allowed to deduct health care premiums if the taxpayer is eligible to participate in their spouse's employer-provided health plan. 
D) Self-employment taxes paid by self-employed taxpayers are deductible as business expenses. 
E) All of the above are truE.Simply being eligible to participate in a spouse's employer-provided health plan precludes the deduction for health care premiums for self-employed taxpayers. 
A) For purposes of the deduction for educational interest, an educational loan must be used to pay tuition to any type of school. 
B) The maximum deduction for educational interest is $5,000 for married taxpayers filing jointly. 
C) Self-employed taxpayers are not allowed to deduct health care premiums if the taxpayer is eligible to participate in their spouse's employer-provided health plan. 
D) Self-employment taxes paid by self-employed taxpayers are deductible as business expenses. 
E) All of the above are truE.Simply being eligible to participate in a spouse's employer-provided health plan precludes the deduction for health care premiums for self-employed taxpayers.

Question 6

Hector is a married self-employed taxpayer, and this year he paid $3,000 for his health insurance premiums (not through an exchange). Under which of the following alternative conditions can Hector deduct the cost of the premiums for AGI?

Accepted Answer

A) Hector chose not to participate in the employer-sponsored plan of his spouse. 
B) Hector's spouse participates in an employer-sponsored plan but Hector is not eligible to participate in this plan. 
C) Neither Hector nor his spouse participates in an employer-sponsored plan although both are eligible to participate in a plan. 
D) Hector can deduct the health insurance premiums regardless of the insurance status of his spouse. 
E) None of the above - health insurance premiums can only be deducted as an itemized deduction. 
A) Hector chose not to participate in the employer-sponsored plan of his spouse. 
B) Hector's spouse participates in an employer-sponsored plan but Hector is not eligible to participate in this plan. 
C) Neither Hector nor his spouse participates in an employer-sponsored plan although both are eligible to participate in a plan. 
D) Hector can deduct the health insurance premiums regardless of the insurance status of his spouse. 
E) None of the above - health insurance premiums can only be deducted as an itemized deduction.

Question 7

Justin and Georgia file married jointly with one dependent. This year, their AGI is $325,300. What dollar amount of personal and dependency exemptions would they be allowed to deduct this year?

Accepted Answer

$10,692
Ex

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

The medical expense deduction is designed to provide relief for doctors and medical practitioners.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is a true statement?

Accepted Answer

A) The deduction for interest on educational loans is subject to a phase-out limitation. 
B) The deduction for moving expenses is subject to a phase-out limitation. 
C) Self-employed taxpayers are allowed to deduct health care premiums even if the taxpayer is eligible to participate in an employer-provided health plan. 
D) Taxpayers are not allowed to receive a moving allowance from their employers. 
E) All of the above are falsE.Self-employed taxpayers are not allowed to deduct health care premiums if they are eligible to participate in an employer-provided health plan. 
A) The deduction for interest on educational loans is subject to a phase-out limitation. 
B) The deduction for moving expenses is subject to a phase-out limitation. 
C) Self-employed taxpayers are allowed to deduct health care premiums even if the taxpayer is eligible to participate in an employer-provided health plan. 
D) Taxpayers are not allowed to receive a moving allowance from their employers. 
E) All of the above are falsE.Self-employed taxpayers are not allowed to deduct health care premiums if they are eligible to participate in an employer-provided health plan.

Question 11

Max paid $5,000 of tuition for him to attend a private university this year. How much of this payment can Mason deduct as a qualifying education expense if he files single and reports modified AGI of $60,000?

Accepted Answer

A) $5,000. 
B) $4,000. 
C) $2,000. 
D) $0. 
E) None of the abovE.The deduction is limited to $4,000 for single taxpayers with modified AGI of $65,000 or less. 
A) $5,000. 
B) $4,000. 
C) $2,000. 
D) $0. 
E) None of the abovE.The deduction is limited to $4,000 for single taxpayers with modified AGI of $65,000 or less.

Question 12

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

Question 13

Which of the following expenses can be deducted as moving expenses?
1) The cost of a trip to purchase a new residence
2) The cost of moving personal belongings
3) Lodging (one night) while en route
4) The cost of gasoline when traveling to the new residence
5) One-half of the cost of meals while en route to the new residence

Accepted Answer

A) Numbers 1, 2, and 4 only. 
B) Numbers 1 through 3 only. 
C) Numbers 2 through 4 only. 
D) Numbers 2 through 5 only. 
E) All of the above are deductible as moving expenses. 
A) Numbers 1, 2, and 4 only. 
B) Numbers 1 through 3 only. 
C) Numbers 2 through 4 only. 
D) Numbers 2 through 5 only. 
E) All of the above are deductible as moving expenses.

Question 14

This year Darcy made the following charitable contributions:   
Determine the maximum amount of charitable deduction for Darcy's contribution of the painting if her AGI is $80,000 this year. You may assume that both the stock and painting have been owned for 10 years and that the painting was used by the State Art Museum consistent with museum's charitable purpose.

Accepted Answer

The charitable deduction is $21,000 for

Question 15

This fall Marsha and Jeff paid $5,000 for their son Josh's tuition and fees at State University (a qualified education institution). They also paid $1,000 for Josh's books. How much of these two payments can Marsha and Jeff deduct this year, assuming Josh is their dependent and their modified AGI is $135,000?

Accepted Answer

A) Marsha and Jeff can deduct $5,000 for AGI. 
B) Marsha and Jeff can deduct $4,000 for AGI. 
C) Marsha and Jeff can deduct $2,500 for AGI. 
D) Marsha and Jeff can deduct $2,000 for AGI. 
E) None - the tuition is not deductiblE.Since they paid Josh's tuition and fees to a qualifying institution and their modified AGI exceeds $130,000 and is less than or equal to $160,000, Marsha and Jeff can deduct the tuition and fees up to $2,000. 
A) Marsha and Jeff can deduct $5,000 for AGI. 
B) Marsha and Jeff can deduct $4,000 for AGI. 
C) Marsha and Jeff can deduct $2,500 for AGI. 
D) Marsha and Jeff can deduct $2,000 for AGI. 
E) None - the tuition is not deductiblE.Since they paid Josh's tuition and fees to a qualifying institution and their modified AGI exceeds $130,000 and is less than or equal to $160,000, Marsha and Jeff can deduct the tuition and fees up to $2,000.

Question 16

Which of the following is a true statement?

Accepted Answer

A) Unreimbursed employee business expenses are deductible as miscellaneous itemized deductions. 
B) With one exception, investment expenses are deductible as itemized deductions. 
C) Business deductions are one of the most common deductions for AGI but they are not readily visible on the front of Form 1040. 
D) The distinction between business and investment expenses is critical for determining whether a deduction is claimed above the line (for AGI) or below the line (itemized). 
E) All of the above are true. 
A) Unreimbursed employee business expenses are deductible as miscellaneous itemized deductions. 
B) With one exception, investment expenses are deductible as itemized deductions. 
C) Business deductions are one of the most common deductions for AGI but they are not readily visible on the front of Form 1040. 
D) The distinction between business and investment expenses is critical for determining whether a deduction is claimed above the line (for AGI) or below the line (itemized). 
E) All of the above are true.

Question 17

Self-employed taxpayers can choose between claiming a deduction or a credit for the employer portion of self-employment taxes paid.

Accepted Answer

A) True 
 B)False

Question 18

Karin and Chad (ages 30 and 31, respectively) are married and together have $110,000 of AGI. This year they have recorded the following expenses:   
Karin and Chad will file married joint with two personal exemptions. Calculate their taxable income.

Accepted Answer

$82,800 = $110,000 - ($6,640 + $5,400 +

Question 19

Jenna (age 50) files single and reports AGI of $40,000. This year she has incurred the following medical expenses:   
Calculate the amount of medical expenses that will be included with Jenna's other itemized deductions.

Accepted Answer

$1,910
Explanation: All expenses are qua

Question 20

To qualify as a charitable deduction the donation must be made by cash or by check.

Accepted Answer

A) True 
 B)False

Exam 6: Individual Deductions

The profit motive distinguishes "business" activities from "personal" activities.

Taxpayers traveling for the primary purpose of receiving essential and deductible medical care may deduct the cost of travel.

Qualified education expenses for purposes of the deduction of interest on educational loans are expenses paid for the education of the taxpayer, the taxpayer's spouse, or a taxpayer's dependent to attend a post-secondary institution of higher education.

Which of the following is a true statement?

Which of the following is a true statement?

Hector is a married self-employed taxpayer, and this year he paid $3,000 for his health insurance premiums (not through an exchange). Under which of the following alternative conditions can Hector deduct the cost of the premiums for AGI?

Justin and Georgia file married jointly with one dependent. This year, their AGI is $325,300. What dollar amount of personal and dependency exemptions would they be allowed to deduct this year?

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

The medical expense deduction is designed to provide relief for doctors and medical practitioners.

Which of the following is a true statement?

Max paid $5,000 of tuition for him to attend a private university this year. How much of this payment can Mason deduct as a qualifying education expense if he files single and reports modified AGI of $60,000?

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

Which of the following is a true statement?

Self-employed taxpayers can choose between claiming a deduction or a credit for the employer portion of self-employment taxes paid.

Karin and Chad (ages 30 and 31, respectively) are married and together have $110,000 of AGI. This year they have recorded the following expenses: Karin and Chad will file married joint with two personal exemptions. Calculate their taxable income.

Jenna (age 50) files single and reports AGI of $40,000. This year she has incurred the following medical expenses: Calculate the amount of medical expenses that will be included with Jenna's other itemized deductions.

To qualify as a charitable deduction the donation must be made by cash or by check.

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

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters