Exam 4: Business Income and Expenses Part II

Nancy has active modified adjusted gross income before passive losses of $125,000.She has a loss of $15,000 on a rental property she actively manages.How much of the loss is she allowed to deduct against the $125,000 of other income?

Polly,age 45,participates in her employer's Section 401(k)plan which allows employees to contribute up to 15 percent of their salary.Her annual salary is $100,000 in 2017.What is the maximum she can contribute to this plan on a tax-deferred basis under a salary reduction agreement?

If an employer makes a contribution to a qualified retirement plan on behalf of an employee,the amount is currently deductible by the employer,and the employee must include the amount in gross income at the time the contribution is made.

Barrett is a 45-year-old political commentator who has self-employed net earned income of $170,000 in 2017.What is the maximum amount he can deduct for contributions to his simplified employee pension (SEP)for the year?

Chorisia Corporation has a Section 401(k)plan for its employees.The plan provides for maximum contributions equal to 15 percent of the employee's salary.Donna,a 55-year-old employee of Chorisia Corporation,elects to contribute the maximum amount possible to the Section 401(k)plan.During 2017,Donna has $115,000 in wages.For 2017,what is the maximum amount that Donna may contribute to the plan on a tax-deferred basis?

Rob and Julie,both in their 30s,file a joint income tax return for 2017.Rob's wages are $25,000 and Julie's wages are $33,000 for the year.Their total adjusted gross income is $58,000,and Julie is covered by a qualified pension plan at work but Rob is not. a.What is the maximum amount that Rob and Julie may each contribute to their Roth IRAs? b.​ ​ ​ If Julie's wages are $110,000 for 2017,instead of $33,000,and their adjusted gross income is $135,000, (1)what is the maximum amount that Rob and Julie may each deduct for contributions to their individual retirement accounts,and (2)what is the maximum amount they could each contribute to Roth IRAs instead?

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 2017 for this purpose? Explain.

Donald owns a two-family home.He rents out the first floor and resides on the second floor.The following expenses attributable to the total building were incurred by Donald for the year ended December 31,2017: In addition,the depreciation attributable to the entire building would be $2,000.What is the total amount of the expenses that Donald can deduct on Schedule E of Form 1040 (before any limitations)?

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

Wages are considered "active income."

Christine is a self-employed graphics artist who has net earned income of $160,000 from her business.Christine has a defined contribution SEP Plan and plans to contribute the amount that provides the maximum deduction allowable.How much can Christine contribute?

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

Norm is a real estate professional with a real estate trade or business as defined in the tax law.He has $150,000 of business income and $50,000 of losses from actively managed real estate rentals.How much of the $50,000 in losses is he allowed to claim on his tax return?

Arnold purchased interests in two limited partnerships 6 years ago.During 2017,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 2017?

Wilson and Joan,both in their 30s,file a joint income tax return for 2017.Wilson's wages are $15,000 and Joan's wages are $23,000 for the year.Their total adjusted gross income is $38,000,and Joan is covered by a qualified pension plan at work but Wilson is not. a.​ What is the maximum amount that Wilson and Joan may each deduct for contributions to their individual retirement accounts? b.​ ​ If Joan's wages are $88,000 for 2017,instead of $23,000,and their adjusted gross income is $103,000,what is the maximum amount that Wilson and Joan may each deduct for contributions to their individual retirement accounts?

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?

What is the maximum amount a 55-year-old taxpayer and a 48-year-old spouse can put into a Traditional or Roth IRA for 2017,assuming they earn $85,000 in total and are not participants in pension plans?

Moe has a law practice and earns $322,000 which he reports on his Schedule C.His wife,Mindy,works part-time at Wal-Mart and earns $8,300.Mindy does not receive any medical benefits through Wal-Mart.Their 29-year-old daughter,Michelle,who is not a dependent,is working towards earning her Master's degree. Moe and Mindy pay the following amounts: How much may Moe and Mindy claim on their tax return as a self-employed health insurance deduction?

Which of the following is not an exception to the 10% early withdrawal penalty of a traditional IRA: ​

Which of the following is true about the self-employed health insurance deduction?