Question 1

For federal income tax purposes,a taxpayer may deduct state and federal employment taxes as an itemized deduction.

Accepted Answer

A) True 
 B)False  False

Question 2

Taxpayers include a maximum of 85% of Social Security benefits in gross income.

Accepted Answer

A) True 
 B)False  True

Question 3

A taxpayer must have owned and lived in a personal residence at least two of the last five years in order to qualify for the maximum exclusion of gain on sale of that residence.

Accepted Answer

A) True 
 B)False  True

Question 4

Ms.Ruang owns a principal residence subject to an $817,000 acquisition mortgage.The home has an $875,000 appraised FMV.What is the maximum home equity debt that Ms.Ruang could incur for federal tax purposes?

Accepted Answer

A)  $183,000
B)  $100,000
C)  $58,000
D)  $0

Question 5

Mr.Jain paid the following taxes this year.   Compute Mr.Jain's itemized deduction for taxes.

Accepted Answer

The answer of Mr.Jain paid the following taxes this year....

Question 6

Which of the following items is included in the recipient's gross income?

Accepted Answer

A)  Life insurance death benefit
B)  Legal award for personal injury
C)  Legal award for punitive damages
D)  Scholarship for college tuition,fees,and books

Question 7

Mr.and Mrs.McGraw received $50,160 Social Security benefits this year.They also received $108,000 taxable pension payments and earned $47,300 interest and dividends from their investment portfolio.How much of the McGraw's Social Security is included in gross income?

Accepted Answer

A)  $0
B)  $25,080
C)  $42,636
D)  $50,160

Question 8

Alimony payments are included in the recipient's gross income.

Accepted Answer

A) True 
 B)False

Question 9

Over the course of the year,Mr.Soo won $8,200 and lost $5,900 gambling in the local casino.Mr.Soo does not itemize deductions on his federal tax return.What is the net effect of his gambling on Mr.Soo's taxable income?

Accepted Answer

A)  No effect on taxable income.
B)  $8,200 increase in taxable income.
C)  $2,300 increase in taxable income.
D)  None of the above.

Question 10

Mr.and Mrs.Stimson incurred $3,937 of miscellaneous itemized deductions this year.Their AGI was $97,300,and their marginal rate on ordinary income was 25%.Which of the following statements is false?

Accepted Answer

A)  If the Stimsons itemized deductions and do not owe any alternative minimum tax (AMT) ,the tax savings from their miscellaneous itemized deductions is $498.
B)  If the Stimsons do not itemize deductions,the tax savings from their miscellaneous itemized deductions is zero.
C)  If the Stimsons owe alternative minimum tax (AMT) ,the tax savings from their miscellaneous itemized deductions is zero.
D)  None of the above statements is false.

Question 11

Which of the following statements about the tax consequences of gambling is true?

Accepted Answer

A)  Gambling winnings are not taxable,and gambling losses are not deductible.
B)  Gambling losses are deductible as miscellaneous itemized deductions only to the extent of gambling winnings.
C)  Gambling losses are deductible as itemized deductions only to the extent of gambling winnings.
D)  Gambling winnings are taxable,but gambling losses are not deductible.

Question 12

William took out a $740,000 mortgage to purchase his personal residence.The residence is worth over $1.4 million,and William wants to take out a $200,000 second mortgage and use the proceeds to consolidate his credit card debt.William can deduct 50% of the interest he will pay on the second mortgage.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following deductions is allowed in the computation of alternative minimum taxable income (AMTI)?

Accepted Answer

A)  Property taxes paid on a personal residence.
B)  Interest paid on a mortgage incurred to purchase a personal residence.
C)  Interest paid on a home equity debt.
D)  All of the above deductions are allowed.

Question 14

Which of the following statements about divorce settlements is true?

Accepted Answer

A)  Property transfers pursuant to divorce have no income tax consequences.
B)  Child support is excluded from the recipient's gross income.
C)  Child support is an above-the-line deduction for the payer.
D)  Statements A.and B.are true.

Question 15

Which of the following donations does not qualify as a charitable contribution for federal tax purposes?

Accepted Answer

A)  $50 cash given to a homeless panhandler
B)  Used furniture valued at $300 given to the Salvation Army
C)  $3,000 cash given to the University of Georgia
D)  $600 cash given to the Boy Scouts of America

Question 16

Gains realized on the sale of personal use assets are generally taxable.

Accepted Answer

A) True 
 B)False

Question 17

Sue,a single taxpayer,purchased a principal residence in 2001 for $415,000.In 2005,she paid $18,000 to add a sunroom.This year,Sue sold the residence for $686,000.Her selling expenses were $5,000.How much gain must Sue recognize on the sale?

Accepted Answer

A)  $0
B)  $3,000
C)  $16,000
D)  $25,000

Question 18

Which of the following itemized deductions is disallowed in the computation of alternative minimum taxable income (AMTI)?

Accepted Answer

A)  Medical expenses in excess of 10% of AGI.
B)  Miscellaneous itemized deductions
C)  Interest paid on a mortgage incurred to purchase a personal residence.
D)  Charitable contribution

Question 19

This year,Mr.and Mrs.Franklin paid $93,000 interest on a mortgage they incurred to build their home in Santa Fe.The average principal balance of the mortgage was $1.43 million.The home has an appraised FMV of only $900,000.Compute the Franklin's itemized deduction for their home mortgage interest.

Accepted Answer

A)  $65,035
B)  $58,531
C)  $93,000
D)  None of the above

Question 20

Mr.and Mrs.Trent divorced last year.Pursuant to the divorce,Mr.Trent transferred marketable securities (FMV $100,000; basis $67,000)to Mrs.Trent.This year,Mrs.Trent sold the securities for $112,000.Which of the following statements is true?

Accepted Answer

A)  Mrs.Trent recognized a $45,000 gain on sale this year.
B)  Mrs.Trent recognized $100,000 income last year.
C)  Mrs.Trent recognized a $12,000 gain on sale this year.
D)  Mrs.Trent recognized no income last year and no gain on sale this year.

Exam 17: Tax Consequences of Personal Activities

For federal income tax purposes,a taxpayer may deduct state and federal employment taxes as an itemized deduction.

Taxpayers include a maximum of 85% of Social Security benefits in gross income.

A taxpayer must have owned and lived in a personal residence at least two of the last five years in order to qualify for the maximum exclusion of gain on sale of that residence.

Ms.Ruang owns a principal residence subject to an $817,000 acquisition mortgage.The home has an $875,000 appraised FMV.What is the maximum home equity debt that Ms.Ruang could incur for federal tax purposes?

Mr.Jain paid the following taxes this year. Compute Mr.Jain's itemized deduction for taxes.

Which of the following items is included in the recipient's gross income?

Mr.and Mrs.McGraw received $50,160 Social Security benefits this year.They also received $108,000 taxable pension payments and earned $47,300 interest and dividends from their investment portfolio.How much of the McGraw's Social Security is included in gross income?

Alimony payments are included in the recipient's gross income.

Over the course of the year,Mr.Soo won $8,200 and lost $5,900 gambling in the local casino.Mr.Soo does not itemize deductions on his federal tax return.What is the net effect of his gambling on Mr.Soo's taxable income?

Mr.and Mrs.Stimson incurred $3,937 of miscellaneous itemized deductions this year.Their AGI was $97,300,and their marginal rate on ordinary income was 25%.Which of the following statements is false?

Which of the following statements about the tax consequences of gambling is true?

Which of the following deductions is allowed in the computation of alternative minimum taxable income (AMTI) ?

Which of the following statements about divorce settlements is true?

Which of the following donations does not qualify as a charitable contribution for federal tax purposes?

Gains realized on the sale of personal use assets are generally taxable.

Sue,a single taxpayer,purchased a principal residence in 2001 for $415,000.In 2005,she paid $18,000 to add a sunroom.This year,Sue sold the residence for $686,000.Her selling expenses were $5,000.How much gain must Sue recognize on the sale?

Which of the following itemized deductions is disallowed in the computation of alternative minimum taxable income (AMTI) ?

This year,Mr.and Mrs.Franklin paid $93,000 interest on a mortgage they incurred to build their home in Santa Fe.The average principal balance of the mortgage was $1.43 million.The home has an appraised FMV of only $900,000.Compute the Franklin's itemized deduction for their home mortgage interest.

Mr.and Mrs.Trent divorced last year.Pursuant to the divorce,Mr.Trent transferred marketable securities (FMV $100,000; basis $67,000) to Mrs.Trent.This year,Mrs.Trent sold the securities for $112,000.Which of the following statements is true?