Question 1

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)  Excess business losses are deductible up to $100,000. 
E)  All of the choices are false. 
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)  Excess business losses are deductible up to $100,000. 
E)  All of the choices are false.

Question 2

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 choices are correct. 
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 choices are correct.

Question 3

Campbell, a single taxpayer, has $400,000 of profits from her general store that she operates as a sole proprietorship. She has $100,000 of employee wages, $40,000 of qualified property, and $500,000 of taxable income before the deduction for qualified business income. How much is Campbell's deduction for qualified business income?

Accepted Answer

A)  $100,000. 
B)  $80,000. 
C)  $50,000. 
D)  $26,000. 
E)  $0. 
A)  $100,000. 
B)  $80,000. 
C)  $50,000. 
D)  $26,000. 
E)  $0.

Question 4

Rachel is an engineer who practices as a sole proprietor. This year, Rachel had net business income of $500,000 from her business. Assume that Rachel pays $20,000 wages to her employees, she has $500,000 of property (unadjusted basis of equipment she purchased last year), has no capital gains, and her taxable income before the deduction for qualified business income is $380,000. Calculate Rachel's deduction for qualified business income.

Accepted Answer

$17,500
Engineering is a qualified trade

Question 5

Alexandra operates a garage as a sole proprietorship. Alexandra also owns a half interest in a partnership that operates a gas station. This year Alexandra paid or reported the following expenses related to her garage and other property. Determine Alexandra's AGI for 2018.

Accepted Answer

$76,669
All of the expenses ar

Question 6

Glenn is an accountant who races stock cars as a hobby. This year Glenn was paid a salary of $80,000 from his employer and won $2,000 in various races. What is the effect of the racing activities on Glenn's taxable income if Glenn has also incurred $4,200 of hobby expenses this year? Assume that Glenn itemizes his deductions but has no other miscellaneous itemized deductions.

Accepted Answer

A)  increase in taxable income of $2,000. 
B)  increase in taxable income of $1,640. 
C)  no change in taxable income. 
D)  decrease in taxable income of $560. 
E)  decrease in taxable income of $2,200. 
A)  increase in taxable income of $2,000. 
B)  increase in taxable income of $1,640. 
C)  no change in taxable income. 
D)  decrease in taxable income of $560. 
E)  decrease in taxable income of $2,200.

Question 7

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 the choices are correct. 
A)  $23,000. 
B)  $22,000. 
C)  $19,000. 
D)  $18,000. 
E)  None of the choices are correct.

Question 8

Carly donated inventory (ordinary income property) to a church. She purchased the inventory last month for $100,000, and on the date of the gift, it had a fair market value of $92,000. What is her maximum charitable contribution deduction for the year related to this inventory if her AGI is $200,000?

Accepted Answer

A)  $100,000. 
B)  $92,000. 
C)  $60,000. 
D)  $46,000 if the church sells the inventory. 
E)  None of the choices are correct. 
A)  $100,000. 
B)  $92,000. 
C)  $60,000. 
D)  $46,000 if the church sells the inventory. 
E)  None of the choices are correct.

Question 9

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 10

In general, taxpayers are allowed to deduct the fair market value of long-term capital gain property on the date of the donation to a qualified charitable organization.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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 13

This year Kelly bought a new auto for $20,000 plus $1,650 in state and local sales taxes. Besides this sales tax, Kelly also paid $8,260 in state income taxes and had mortgage interest of $5,500 ($400,000 acquisition indebtedness on her residence). If Kelly files single with AGI of $56,000, what amount of itemized deductions will she be eligible to claim?

Accepted Answer

$13,760 = $8,260 + $5,500
State income t

Question 14

Bruce is employed as an executive and his wife, Marie, is a self-employed realtor. Besides Bruce's salary, Bruce and Marie own a warehouse that they rent to a local business for storage. This year they paid $1,250 for electric service in the warehouse. Marie also paid self-employment tax of $6,200 and Bruce had $7,000 of Social Security taxes withheld from his pay. Marie paid $45 fee to rent a safe deposit box to store records associated with her realty operation. Which of the following is a true statement?

Accepted Answer

A)  One-half of the social security tax is deductible for AGI. 
B)  Only the electric bill is deductible for AGI. 
C)  The self-employment tax is not deductible. 
D)  The safe deposit fee and the electric bill are deductible for AGI. 
E)  None of the choices are correct. 
A)  One-half of the social security tax is deductible for AGI. 
B)  Only the electric bill is deductible for AGI. 
C)  The self-employment tax is not deductible. 
D)  The safe deposit fee and the electric bill are deductible for AGI. 
E)  None of the choices are correct.

Question 15

Erika (age 62) was hospitalized with injuries from an auto accident this year. She incurred the following expenses from the accident:
   In addition, Erika's auto was completely destroyed in the accident. She bought the car several years ago for $18,000 and it was worth $4,700 at the time of the accident. What are Erika's itemized deductions this year if she was uninsured and her AGI is $40,000?

Accepted Answer

$2,030 of medical expenses.
Th

Question 16

Bunching itemized deductions is one form of tax evasion.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following costs are deductible as an itemized medical expense?

Accepted Answer

A)  The cost of prescription medicine and over-the-counter drugs. 
B)  Medical expenses incurred to prevent disease. 
C)  The cost of elective cosmetic surgery. 
D)  Medical expenses reimbursed by health insurance. 
E)  None of the above costs is deductible. 
A)  The cost of prescription medicine and over-the-counter drugs. 
B)  Medical expenses incurred to prevent disease. 
C)  The cost of elective cosmetic surgery. 
D)  Medical expenses reimbursed by health insurance. 
E)  None of the above costs is deductible.

Question 18

Han is a self-employed carpenter and his wife, Christine, works full-time as a grade school teacher. Han paid $525 for carpentry tools and supplies, and Christine paid $3,600 as her share of health insurance premiums (not with pre-tax dollars) for Han and herself in a qualified plan provided by the school district (not through an exchange). Which of the following is a true statement?

Accepted Answer

A)  The tools and supplies are deductible for AGI while the health insurance is an itemized deduction. 
B)  Both expenditures are deductible for AGI. 
C)  The tools and supplies are an itemized deduction but the health insurance is deductible for AGI. 
D)  Both expenditures are itemized deductions. 
E)  Neither of the expenditures is deductible. 
A)  The tools and supplies are deductible for AGI while the health insurance is an itemized deduction. 
B)  Both expenditures are deductible for AGI. 
C)  The tools and supplies are an itemized deduction but the health insurance is deductible for AGI. 
D)  Both expenditures are itemized deductions. 
E)  Neither of the expenditures is deductible.

Which of the following is a true statement?

Which of the following is a true statement?

Alexandra operates a garage as a sole proprietorship. Alexandra also owns a half interest in a partnership that operates a gas station. This year Alexandra paid or reported the following expenses related to her garage and other property. Determine Alexandra's AGI for 2018.

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.

In general, taxpayers are allowed to deduct the fair market value of long-term capital gain property on the date of the donation to a qualified charitable organization.

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

Bunching itemized deductions is one form of tax evasion.

Which of the following costs are deductible as an itemized medical expense?

An Introduction to Tax

Tax Compliance, the IRS, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, 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

Exam 6: Individual Deductions

Which of the following is a true statement?

Which of the following is a true statement?

Alexandra operates a garage as a sole proprietorship. Alexandra also owns a half interest in a partnership that operates a gas station. This year Alexandra paid or reported the following expenses related to her garage and other property. Determine Alexandra's AGI for 2018.

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.

In general, taxpayers are allowed to deduct the fair market value of long-term capital gain property on the date of the donation to a qualified charitable organization.

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

Bunching itemized deductions is one form of tax evasion.

Which of the following costs are deductible as an itemized medical expense?

An Introduction to Tax

Tax Compliance, the IRS, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, 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