Question 1

When royalties are paid,at the end of the year the payer sends the recipient a Form _____?

Accepted Answer

A)   Schedule C
B)   Schedule K-1
C)   1099-MISC
D)   1099-INT C

Question 2

A property that has been rented for 120 days and used for personal use for 40 days should be categorized as:

Accepted Answer

A)   Primarily rental.
B)   Primarily personal.
C)   Personal/rental.
D)   All of these are correct. C

Question 3

May owns a four-plex in Garden Grove,CA.She rents out 3 units and lives in the fourth.Her income and expenses for the entire four-plex are as follows: mortgage interest $8,200,property taxes $9,000,insurance $3,000,utilities $2,000,repairs and maintenance $1,000,depreciation on the entire complex of $5,000,and rental income of $25,000.What amount of net rental income or loss should May report on her current tax return?

Accepted Answer

A)   $3,200 net loss
B)   $3,850 net income
C)   $21,150 net loss
D)   $25,000 net income B

Question 4

What is meant by ordinary rental expenses and what criteria must be met to be deductible? Provide some examples of deductible rental expenses.For this question,assume no personal use of the rental property.

Accepted Answer

The answer of What is meant by ordinary rental expenses...

Question 5

Flow-through entities file "informational returns."

Accepted Answer

A) True 
 B)False

Question 6

Georgia owns a home in Colorado that she rents for $1,200 per month (she does not use the home personally).While she was in Europe in November,the roof in her rental home leaked and her tenant repaired it for $900.For the following month's rent (December),her tenant paid her $300 for rent ($1,200 - $900).What amounts should Georgia include for rental income and repair expense,respectively,for December?

Accepted Answer

A)   $300; $900
B)   $900; $300
C)   $1,200; $300
D)   $1,200; $900

Question 7

On June 1st of the current year,Nancy and Dean purchased a rental beach house for $1,200,000.Of that amount,$800,000 was for the land value.How much depreciation deduction can Nancy and Dean take in the current year? (You may need to refer to the depreciation tables.)

Accepted Answer

A)   $7,880.
B)   $14,545.
C)   $15,760.
D)   $23,640.

Question 8

Flow-through entities are named as such because they are taxed continuously.

Accepted Answer

A) True 
 B)False

Question 9

Royalties can be earned from allowing others the right to use:

Accepted Answer

A)   Building.
B)   Equipment.
C)   Furniture.
D)   Copyrighted material.

Question 10

Jamison owns a rental cabin in Mammoth,and travels there for maintenance three times a year,between January and June.The round trip to Mammoth from San Diego where Jamison lives,is approximately 405 miles.How much travel costs can Jamison deduct per year related to his rental cabin? (Round your answer to the nearest whole number)

Accepted Answer

A)   $248
B)   $680
C)   $743
D)   $1,352

Question 11

Hugh and Mary own a cabin in Big Bear that they rented for 45 days at $4,500.They used the cabin for personal use for 30 days during the year.The allocated expenses related to the cabin of $6,000,resulting in a net loss of $1,500 for this rental activity.What is the proper tax treatment of these amounts by Hugh and Mary?

Accepted Answer

A)   Report net income of $4,500
B)   Report rental net loss of $1,500
C)   None of the amounts should be reported
D)   Report income and expenses on Schedule E but expenses cannot exceed income

Question 12

Naomi and Matt received the following amounts from a tenant who is renting their condominium during the current year (rent is $1,500 per month):  Rent for two months would normally have been $3,000,but the tenant paid $800 for a plumbing repair.The repair would normally have been paid by Naomi and Matt but the problem occurred while they were out of town.How much should Naomi and Matt report as rental income for the current tax year?

Accepted Answer

A)   $2,200
B)   $2,400
C)   $3,000
D)   $4,600

Question 13

Mario owns a home in Park City,Utah,that he rented for $1,600 for three weeks during the summer.He lived there for a total of 120 days and the rest of the year,the house was vacant.The expenses for the home included $6,000 in mortgage interest,$900 in property taxes,$1,300 in maintenance and utilities,and $3,500 in depreciation.How much net rental income or loss from the Park City home would Mario report for the current year? Use the IRS method for allocating expenses.

Accepted Answer

A)   $0
B)   $1,600 net income
C)   $6,000 net loss
D)   $9,100 net loss

Question 14

A property rented for less than 15 days and used for personal use the remainder of the year,should have the rental income reported on Schedule E.

Accepted Answer

A) True 
 B)False

Question 15

What are the criteria that determine an amount as capital improvement rather than repair and maintenance expense? What is the proper tax treatment of a capital improvement for rental properties?

Accepted Answer

The answer of What are the criteria that determine an...

Question 16

Capital improvements on rental properties may be deducted in the current year.

Accepted Answer

A) True 
 B)False

Question 17

Samantha is a full-time author and recently published her 8th romance novel.She should report the royalty income she receives from the publisher this year on what Schedule/Form?

Accepted Answer

A)   Schedule C
B)   Schedule K-1
C)   1099-MISC
D)   1099-INT

Question 18

Flow-through entities include,but are not limited to,LLCs,S Corporations,trusts and estates.

Accepted Answer

A) True 
 B)False

Question 19

Jennifer's beach house rented for 175 days and used by her and her family for 15 days,is considered personal/rental property.

Accepted Answer

A) True 
 B)False

Question 20

When royalties are paid,the amount paid is reported to the recipient by the payer on a Form 1099-MISC.

Accepted Answer

A) True 
 B)False

Exam 8: Rental Property, Royalties, and Income From Flow-Through Entities

When royalties are paid,at the end of the year the payer sends the recipient a Form _____?

A property that has been rented for 120 days and used for personal use for 40 days should be categorized as:

What is meant by ordinary rental expenses and what criteria must be met to be deductible? Provide some examples of deductible rental expenses.For this question,assume no personal use of the rental property.

Flow-through entities file "informational returns."

On June 1^st of the current year,Nancy and Dean purchased a rental beach house for $1,200,000.Of that amount,$800,000 was for the land value.How much depreciation deduction can Nancy and Dean take in the current year? (You may need to refer to the depreciation tables.)

Flow-through entities are named as such because they are taxed continuously.

Royalties can be earned from allowing others the right to use:

A property rented for less than 15 days and used for personal use the remainder of the year,should have the rental income reported on Schedule E.

What are the criteria that determine an amount as capital improvement rather than repair and maintenance expense? What is the proper tax treatment of a capital improvement for rental properties?

Capital improvements on rental properties may be deducted in the current year.

Samantha is a full-time author and recently published her 8^th romance novel.She should report the royalty income she receives from the publisher this year on what Schedule/Form?

Flow-through entities include,but are not limited to,LLCs,S Corporations,trusts and estates.

Jennifer's beach house rented for 175 days and used by her and her family for 15 days,is considered personal/rental property.

When royalties are paid,the amount paid is reported to the recipient by the payer on a Form 1099-MISC.