Exam 4: Business Income and Expenses, Part II

Subject to the annual dollar limitation and the earned income limitation, deductible IRA contributions are allowed for all taxpayers who do not participate in a qualified retirement plan.

John is a single 40-year-old landscape architect earning $125,000 a year and is not covered by a pension plan at work. How much can he put into a Traditional IRA in 2014?

Arnold purchased interests in two limited partnerships 6 years ago. During 2014, Arnold had income of $22,000 from one of the partnerships. He had a loss from the other partnership of $32,000, salary income of $35,000, and dividend income of $2,000. What is the amount of net passive losses that Arnold may deduct for 2014?

Thelma works at a liquor store in 2014 and makes $45,000. She also has dividend income of $12,000 and interest income of $1,000. She owns a beach house that gives her $11,000 in net rental income and she owns a stake in a limited partnership that generates a $15,000 loss. What is her adjusted gross income in 2014?

Which of the following statements is false about health savings acounts (HSAs)?

Earnings on nondeductible IRA contributions are allowed to accumulate tax-free until they are withdrawn.

The expenses associated with the rental of a residence used for both personal and rental purposes are subject to three possible tax treatments. Which of the following is not included as one of the three?

Without regard to their involvement in the management of the rental property, individual taxpayers may deduct up to $25,000 of rental real estate losses against other income, provided their income does not exceed certain limits.

What is the maximum amount a 30-year-old taxpayer and a 35-year-old spouse can put into a Traditional or Roth IRA for 2014, assuming they earn $50,000 in total and are not covered by pension plans?

What is the amount of the deductible HSA for each of the following taxpayers? a. Amelia and Albert, both age 43, have a qualifying high-deductible insurance plan. They contribute $5,700 to a family HSA. b. Betsy, who is single, 72 years old and covered by Medicare, wants to contribute the maximum amount to an HSA. c. Carlo has health insurance through his employer which has low deductible amounts. He is 34 years old and is married. Carlo wants to contribute the maximum to an HSA. d. Diane is 57 years old. She has a qualifying high-deductible insurance plan. She has contributed $4,300 to her HSA.

If under 50 years of age, a taxpayer may make a contribution to an IRA, subject to the earned income limitation and the $5,500 annual limitation.

Arnold purchased two rental properties 6 years ago. He actively participates in their management. During 2014, Arnold had income of $22,000 from one of the rentals. He had a loss from the other rental of $32,000, as well as salary income of $35,000, and dividend income of $2,000. What is Arnold's net passive income or loss deduction?

Jeremy, age 38, has $25,000 in a traditional IRA account and is considering taking the money out to buy himself a new car. What will be the tax consequences to Jeremy if he withdraws the $25,000 from his IRA in 2014 for this purpose? Explain.

Under the passive loss rules, real estate rental activities are specifically defined as passive, even if the taxpayer actively manages the property.