Exam 4: Business Income and Expenses, Part II

In a distribution rollover from an IRA, the recipient must contribute 80 percent of the distributed amount to the new trustee in order for the rollover to be tax free.

Which of the following taxpayers qualifies for the maximum individual retirement account deduction for 2014?

Choose the incorrect answer. Money removed from a traditional IRA is taxable as ordinary income and subject to a 10 percent penalty except for taxpayers who are:

Carmen owns a house that she rents out for $600 per month. Her expenses for the 2014 tax year are as follows: Carmen bought the property in March of 1991, and her basis for depreciation on the house is $110,000. She uses straight-line depreciation with a 27 ½ -year life, so the depreciation on the house is $4,000. Calculate Carmen's net income or loss from renting the house if her gross rental income is $7,200 ($600 × 12 months).

Which of the following statements is true of a distribution rollover (not a trustee-to-trustee transfer) from a retirement plan?

Ellen supports her family as a self-employed attorney. She reports $90,000 of income on her Schedule C and pays $8,000 for health insurance for her family, $2,500 for dental insurance, $4,000 for health insurance for her 23-year-old daughter who is no longer a dependent, and $3,000 for disability insurance for herself. What is Ellen's self-employed health insurance deduction?

Christian, a single taxpayer, acquired a rental house in 2001. The rental house, which Christian actively manages, generated a $15,000 loss in 2014. In addition, Christian owns a limited partnership interest which he acquired in 2006. His share of the partnership loss for 2014 is $10,000. Christian has modified adjusted gross income, before the rental loss and partnership loss, of $132,000. ​ What is the amount of these losses that Christian may deduct in 2014?

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 failed rollover must she show on her tax return ?

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 2014 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?

In most cases, a taxpayer reports rental income and the related expenses on Schedule E.

Passive losses of one activity may not be used to offset passive income from another activity.

To qualify for the moving expense deduction, an employee must change job sites, move a required distance, and change employers.

Patrick owns a home on the beach in Daytona. He lives in the house for most of the year but leaves town during the big motor sports race that comes through every year. During that time, he rents his home out for 3 weeks to race fans for $5,000. Which of the following is true?

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?

Ned has active modified adjusted gross income before passive losses of $160,000. He has a loss of $15,000 on rental property he actively manages. How much of the loss is he allowed to deduct against his other income?

Net losses on the rental of vacation homes are limited to 15 percent of total gross income.

Lester rents his vacation home for 6 months and lives in the home during the other 6 months of 2014. The gross rental income from the home is $4,500. For the entire year, real estate taxes are $800, interest is $3,000, utilities and maintenance expenses are $2,200, and depreciation expense on the entire home would be $4,000. What is Lester's allowable net loss from renting his vacation home?

Karen is 48 and a single taxpayer, with income of $90,000, all from salary. She is covered by a retirement plan at work. Can Karen make a tax deductible contribution to an IRA? Explain.

If a Section 401(k) plan allows an employee to choose between a direct payment of compensation in cash or a contribution to the retirement plan, the plan is not a "qualified" plan.

Debbie is 63 years old and retired in 2012. She receives Social Security payments of $12,000 a year and interest income of $30,000. She wishes to put the maximum allowed into an IRA. How much can she contribute to her IRA?