Question 1

Taxpayers generally deduct the lesser of their standard deduction or their itemized deductions.

Accepted Answer

A) True 
 B)False

Question 2

The phrase "ordinary and necessary" means that an expense must be appropriate and helpful for generating a profit.

Accepted Answer

A) True 
 B)False

Question 3

Congress allows self-employed taxpayers to deduct the cost of health insurance above the line (for AGI) because:

Accepted Answer

A) employers are allowed to deduct social security (FIC
A)  taxes as a business expense. 
B) self-employed taxpayers need an alternate mechanism for reducing the cost of health care. 
C) this deduction provides a measure of equity between employees and the self-employed. 
D) health insurance premiums cannot be deducted otherwise. 
E) None of these 
A) employers are allowed to deduct social security (FIC
A)  taxes as a business expense. 
B) self-employed taxpayers need an alternate mechanism for reducing the cost of health care. 
C) this deduction provides a measure of equity between employees and the self-employed. 
D) health insurance premiums cannot be deducted otherwise. 
E) None of these

Question 4

Deductible medical expenses include payments to medical care providers such as doctors,dentists,and nurses and medical care facilities such as hospitals.

Accepted Answer

A) True 
 B)False

Question 5

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 these 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 these are deductible as moving expenses.

Question 6

This fall Millie finally repaid her student loan.She originally borrowed the money to pay tuition several years ago when she attended at State University (a qualified educational institution) .This year Millie paid a total of $2,400 of interest on the loan.If Millie files single and reports $65,000 of income and no other items of income or expense how much of the interest can she deduct?

Accepted Answer

A) Millie can deduct $2,400 for AGI. 
B) Millie can deduct $1,600 for AGI. 
C) Millie can deduct $2,400 as an itemized deduction. 
D) Millie can deduct $800 for AGI. 
E) None - the tuition is not deductiblE.Millie may deduct the amount of interest paid ($2,400) reduced by the phase-out amount ($2,400 * [($65,000 - 60,000) /$15,000]] = $800) .Thus,Millie may deduct $1,600 ($2,400 - $800 = $1,600) . 
A) Millie can deduct $2,400 for AGI. 
B) Millie can deduct $1,600 for AGI. 
C) Millie can deduct $2,400 as an itemized deduction. 
D) Millie can deduct $800 for AGI. 
E) None - the tuition is not deductiblE.Millie may deduct the amount of interest paid ($2,400) reduced by the phase-out amount ($2,400 * [($65,000 - 60,000) /$15,000]] = $800) .Thus,Millie may deduct $1,600 ($2,400 - $800 = $1,600) .

Question 7

Opal fell on the ice and injured her hip this winter.As a result she paid $3,000 for a visit to the hospital emergency room and $750 for follow-up visits with her doctor.While she recuperated,Opal paid $500 for prescription medicine and $600 to a therapist for rehabilitation.Insurance reimbursed Opal $1,200 for these expenses.What is the amount of Opal's qualifying medical expense?

Accepted Answer

A) $3,000 
B) $3,750 
C) $3,650 
D) $4,850 
E) All of these 
A) $3,000 
B) $3,750 
C) $3,650 
D) $4,850 
E) All of these

Question 8

Grace is employed as the manager of a sandwich shop.This year she earned a salary of $45,000 and incurred the following expenses associated with her employment:   What amount of miscellaneous itemized deductions can Grace include with her other allowable itemized deductions?

Accepted Answer

A) $150 
B) $1,050 
C) $550 
D) $200 if Grace was reimbursed $50 for her cooking class 
E) None of thesE.The subscriptions and cooking class ($550) are deductible but this sum is reduced to zero by the 2 percent of AGI limitation ($900) . 
A) $150 
B) $1,050 
C) $550 
D) $200 if Grace was reimbursed $50 for her cooking class 
E) None of thesE.The subscriptions and cooking class ($550) are deductible but this sum is reduced to zero by the 2 percent of AGI limitation ($900) .

Question 9

Which of the following is a true statement?

Accepted Answer

A) All business expenses are deducted for AGI. 
B) Investment expenses are typically deducted for AGI. 
C) Tax preparation fees are deducted for AGI. 
D) Rental and royalty expenses are deducted for AGI. 
E) All of these 
A) All business expenses are deducted for AGI. 
B) Investment expenses are typically deducted for AGI. 
C) Tax preparation fees are deducted for AGI. 
D) Rental and royalty expenses are deducted for AGI. 
E) All of these

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 these 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 these 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

This fall,Josh paid $5,000 for his tuition and fees at State University (a qualified education institution) .Assume that Josh is Marsha and Jeff's son and that Marsha and Jeff claim Josh as a dependent.Marsha and Jeff's modified AGI is $100,000.How much of Josh's $5,000 tuition and fees payments can Marsha and Jeff deduct this year?

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 by Marsha and Jeff. 
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 by Marsha and Jeff.

Question 12

All business expense deductions are claimed above the line.Employee business expenses are itemized subject to a 2% of AGI floor.

Accepted Answer

A) True 
 B)False

Question 13

Margaret Lindley paid $15,000 of interest on her $300,000 acquisition debt for her home (fair market value of $500,000) ,$4,000 of interest on her $30,000 home-equity loan,$1,000 of credit card interest,and $3,000 of margin interest for the purchase of stock.Assume that Margaret Lindley has $10,000 of interest income this year and no investment expenses.How much of the interest expense may she deduct this year?

Accepted Answer

A) $23,000. 
B) $22,000. 
C) $19,000. 
D) $18,000. 
E) None of thesE.The credit card interest is nondeductible personal interest.The remaining interest is deductible as qualified residence interest ($15,000 + $4,000) and investment interest ($3,000) .The $3,000 investment interest is not restricted by her net investment income ($10,000) . 
A) $23,000. 
B) $22,000. 
C) $19,000. 
D) $18,000. 
E) None of thesE.The credit card interest is nondeductible personal interest.The remaining interest is deductible as qualified residence interest ($15,000 + $4,000) and investment interest ($3,000) .The $3,000 investment interest is not restricted by her net investment income ($10,000) .

Question 14

The deduction for medical expenses is limited to the amount of unreimbursed qualifying medical expenses paid during the year reduced by five percent of the taxpayer's AGI.10% (7.5% for taxpayer or spouse age 65 or older) of AGI is the floor limit.

Accepted Answer

A) True 
 B)False

Question 15

Fred's employer dispatched him on a business trip from the Dallas headquarters to New York this year.During the trip Fred incurred the following expenses:   What is the amount of Fred's deduction before the application of any AGI limitations?

Accepted Answer

A) $2,870 
B) $2,570 
C) $2,050 
D) $1,300 
E) $0 - the expenses cannot be deducted unless Fred is reimbursed. 
A) $2,870 
B) $2,570 
C) $2,050 
D) $1,300 
E) $0 - the expenses cannot be deducted unless Fred is reimbursed.

Question 16

All investment expenses are itemized deductions.Rental/royalty deductions are above the line.

Accepted Answer

A) True 
 B)False

Question 17

Taxpayers filing single and taxpayers filing married separate have the same basic standard deduction amount.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is a true statement?

Accepted Answer

A) A casualty loss can only occur from storm damage. 
B) Personal casualty losses can only be deducted to the extent that aggregate casualty losses exceed 10 percent of AGI. 
C) Individual casualty losses are only deductible if each individual loss exceeds $5,000. 
D) Uninsured thefts of personal assets are not included with casualty losses. 
E) All of these are truE.Casualties are thefts and any sudden unexpected events such as storms,fires,or shipwrecks and individual casualty losses are subject to a per casualty floor in addition to an aggregate floor limitation of 10 percent of AGI. 
A) A casualty loss can only occur from storm damage. 
B) Personal casualty losses can only be deducted to the extent that aggregate casualty losses exceed 10 percent of AGI. 
C) Individual casualty losses are only deductible if each individual loss exceeds $5,000. 
D) Uninsured thefts of personal assets are not included with casualty losses. 
E) All of these are truE.Casualties are thefts and any sudden unexpected events such as storms,fires,or shipwrecks and individual casualty losses are subject to a per casualty floor in addition to an aggregate floor limitation of 10 percent of AGI.

Question 19

The deduction for charitable contributions is limited to ten percent of the taxpayer's AGI whereas casualty losses on personal assets are only deductible to the extent the losses exceed ten percent of the taxpayer's AGI.50% of AGI is the ceiling for donations.

Accepted Answer

A) True 
 B)False

Question 20

Unreimbursed employee business expenses,investment expenses,hobby expenses,and certain other expenses are classified as miscellaneous itemized deductions and are deductible only to the extent that their sum exceeds 2% of the taxpayer's AGI.

Accepted Answer

A) True 
 B)False

Taxpayers generally deduct the lesser of their standard deduction or their itemized deductions.

The phrase "ordinary and necessary" means that an expense must be appropriate and helpful for generating a profit.

Congress allows self-employed taxpayers to deduct the cost of health insurance above the line (for AGI) because:

Deductible medical expenses include payments to medical care providers such as doctors,dentists,and nurses and medical care facilities such as hospitals.

Grace is employed as the manager of a sandwich shop.This year she earned a salary of $45,000 and incurred the following expenses associated with her employment: What amount of miscellaneous itemized deductions can Grace include with her other allowable itemized deductions?

Which of the following is a true statement?

Which of the following is a true statement?

All business expense deductions are claimed above the line.Employee business expenses are itemized subject to a 2% of AGI floor.

The deduction for medical expenses is limited to the amount of unreimbursed qualifying medical expenses paid during the year reduced by five percent of the taxpayer's AGI.10% (7.5% for taxpayer or spouse age 65 or older) of AGI is the floor limit.

Fred's employer dispatched him on a business trip from the Dallas headquarters to New York this year.During the trip Fred incurred the following expenses: What is the amount of Fred's deduction before the application of any AGI limitations?

All investment expenses are itemized deductions.Rental/royalty deductions are above the line.

Taxpayers filing single and taxpayers filing married separate have the same basic standard deduction amount.

Which of the following is a true statement?

The deduction for charitable contributions is limited to ten percent of the taxpayer's AGI whereas casualty losses on personal assets are only deductible to the extent the losses exceed ten percent of the taxpayer's AGI.50% of AGI is the ceiling for donations.

Unreimbursed employee business expenses,investment expenses,hobby expenses,and certain other expenses are classified as miscellaneous itemized deductions and are deductible only to the extent that their sum exceeds 2% of the taxpayer's AGI.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Tax Overview

Gross Income and Exclusions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Investments

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Filters

Exam 6: Individual Deductions

Taxpayers generally deduct the lesser of their standard deduction or their itemized deductions.

The phrase "ordinary and necessary" means that an expense must be appropriate and helpful for generating a profit.

Congress allows self-employed taxpayers to deduct the cost of health insurance above the line (for AGI) because:

Deductible medical expenses include payments to medical care providers such as doctors,dentists,and nurses and medical care facilities such as hospitals.

Grace is employed as the manager of a sandwich shop.This year she earned a salary of $45,000 and incurred the following expenses associated with her employment: What amount of miscellaneous itemized deductions can Grace include with her other allowable itemized deductions?

Which of the following is a true statement?

Which of the following is a true statement?

All business expense deductions are claimed above the line.Employee business expenses are itemized subject to a 2% of AGI floor.

The deduction for medical expenses is limited to the amount of unreimbursed qualifying medical expenses paid during the year reduced by five percent of the taxpayer's AGI.10% (7.5% for taxpayer or spouse age 65 or older) of AGI is the floor limit.

Fred's employer dispatched him on a business trip from the Dallas headquarters to New York this year.During the trip Fred incurred the following expenses: What is the amount of Fred's deduction before the application of any AGI limitations?

All investment expenses are itemized deductions.Rental/royalty deductions are above the line.

Taxpayers filing single and taxpayers filing married separate have the same basic standard deduction amount.

Which of the following is a true statement?

The deduction for charitable contributions is limited to ten percent of the taxpayer's AGI whereas casualty losses on personal assets are only deductible to the extent the losses exceed ten percent of the taxpayer's AGI.50% of AGI is the ceiling for donations.

Unreimbursed employee business expenses,investment expenses,hobby expenses,and certain other expenses are classified as miscellaneous itemized deductions and are deductible only to the extent that their sum exceeds 2% of the taxpayer's AGI.

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Tax Overview

Gross Income and Exclusions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Investments

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Filters