Question 1

In the current year, Marc, a single taxpayer, has ordinary income of $35,000.In addition, he has $3,000 in short-term capital gains, short-term capital losses of $6,000, and long-term capital gains of $4,000.What is Marc's adjusted gross income (AGI)for the current year?

Accepted Answer

A)  $32,000
B)  $39,000
C)  $36,000
D)  $34,000 C

Question 2

Net short-term capital gains may be offset by net long-term capital losses.

Accepted Answer

A) True 
 B)False  True

Question 3

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?

Accepted Answer

A)  None
B)  $2,500
C)  $5,000
D)  $12,500 D

Question 4

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, 2018: $$\begin{array} { l r } 
\text { Real estate taxes } & \$ 1,800 \
\text { Mortgage interest } & 1,600 \
\text { Utilities } & 1,200 \
\text { Repairs (first floor) } & 1,400 \
\text { Painting (second floor) } & 400
\end{array}$$ 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)?

Accepted Answer

A)  $3,300
B)  $3,850
C)  $4,000
D)  $4,700
E)  None of the above

Question 5

Patrick owns a home on the beach in Daytona.He lives in the house for most of the year but leaves town during the popular motor sports race that comes through every year.During that time, he rents his home out for 3 weeks to race fans for $5,000.Which of the following is true?

Accepted Answer

A)  Because Patrick rents the house for such a short period of time, the rental income is not taxable but he may deduct a percentage of expenses such as utilities and depreciation on the home.
B)  Patrick did not rent the house for a long enough period of time to deduct a percentage of expenses such as utilities and depreciation on the home.The rental income he receives is taxable.
C)  Because Patrick rented the home for more than 14 days, he must report the income.He is also allowed to deduct a percentage of expenses such as utilities and depreciation to the extent of the income.
D)  If you live in your house for more than 50 percent of the year, then it is treated as a personal residence and you cannot deduct any expenses such as utilities and depreciation on the home.
E)  None of the above is true.

Question 6

Choose the correct statement.Passive losses

Accepted Answer

A)  May not be used to offset passive income.
B)  May be used to offset portfolio income.
C)  Often result from the rental of real estate.
D)  If unused are lost forever.
E)  If unused are lost forever

Question 7

Bennett purchased a tract of land for $20,000 in 2012 when he heard that a new highway was going to be constructed through the property and the land would soon be worth $200,000.The highway project was abandoned in 2018 and the value of the land fell to $15,000.Bennett can claim a loss in 2018 of:

Accepted Answer

A)  $0
B)  $5,000
C)  $165,000
D)  $180,000
E)  None of the above

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Mort is the owner of an apartment building containing ten identical apartments.Mort resides in one apartment and rents out the remaining units.For 2018, the following information is available: $$\begin{array} { l r } 
\text { Gross rents } & \$ 21,600 \
\text { Utilities for total building } & 2,500 \
\text { Maintenance and repairs (rental apartments only) } & 1,050 \
\text { Advertising for vacant apartments } & 300 \
\text { Depreciation of building (all ten units) } & 4,000
\end{array}$$ What amount should Mort report as net rental income for 2018?

Accepted Answer

A)  $12,750
B)  $13,500
C)  $13,750
D)  $14,400
E)  None of the above

Question 10

Bev owns an apartment complex she purchased 10 years ago for $480,000 with a $80,000 cash down payment accompanied by a $400,000 loan.Bev has made $70,000 of capital improvements on the complex and her depreciation claimed on the building to date is $100,000.Calculate Bev's adjusted basis in the building.

Accepted Answer

The answer of Bev owns an apartment complex she purchased...

Question 11

Dividend income is considered "passive income."

Accepted Answer

A) True 
 B)False

Question 12

Carmen owns a house that she rents out for $600 per month.Her expenses for the 2018 tax year are as follows: $\begin{array}{llcc}
  \text { Real estate taxes } &\$900  \
 \text {Mortgage interest  } &4,000\
 \text {  Insurance} &300\
 \text {General repairs  } &320\
\end{array}$
 Carmen bought the property in March of 2004, and her basis for depreciation on the house is $110,000.She uses straight-line depreciation with a 27 ½ -year life, so the depreciation on the house is $4,000.Calculate Carmen's net income or loss from renting the house if her gross rental income is $7,200 ($600 × 12 months).

Accepted Answer

The answer of Carmen owns a house that she rents...

Question 13

A taxpayer's personal automobile is a capital asset.

Accepted Answer

A) True 
 B)False

Question 14

Sol purchased land as an investment on January 12, 2012 for $85,000.On January 31, 2018, Sol sold the land for $30,000 cash.In addition, the purchaser assumed the mortgage of $70,000 on the land.What is the amount of the realized gain or loss on the sale?

Accepted Answer

A)  $65,000 loss
B)  $15,000 gain
C)  $5,000 gain
D)  $90,000 gain
E)  None of the above

Question 15

The qualified business income deduction is limited to 20% of taxable income not including long-term gains and qualified dividends.

Accepted Answer

A) True 
 B)False

Question 16

An asset's adjusted basis is computed as:

Accepted Answer

A)  Original basis + capital improvements − accumulated depreciation.
B)  Original basis − capital improvements + accumulated depreciation.
C)  Original basis + capital improvements + accumulated depreciation.
D)  Original basis + capital improvements + gain or loss realized.
E)  None of the above.

Question 17

In 2018, Paul, a single taxpayer, has taxable income of $30,000 exclusive of capital gains and losses.Paul incurred a $1,000 short-term capital loss and a $4,000 long-term capital loss.What is the amount of his long-term capital loss carryover to 2019?

Accepted Answer

A)  $0
B)  $2,000
C)  $3,000
D)  $5,000
E)  None of the above

Question 18

Warren invested in a limited partnership tax shelter in 2011.During 2018, his losses from the partnership amount to $100,000.If Warren has no passive income, what is the amount of Warren's deduction for passive losses for 2018?

Accepted Answer

A)  $0
B)  $10,000
C)  $20,000
D)  $40,000
E)  None of the above

Question 19

For the current year, Susan had salary income of $20,000.In addition, she reported the following capital transactions during the year: $\begin{array}{llcc}
  \text {  Long-term capital gain} &\$7,000  \
 \text {  Short-term capital gain} &3,000\
 \text {  Long-term capital loss} &(2,000)\
 \text {Short-term capital loss  } &(5,000)\
\end{array}$
 There were no other items includable in her gross income.What is the amount of her adjusted gross income for the current year?

Accepted Answer

A)  $19,000
B)  $23,000
C)  $24,000
D)  $25,000
E)  None of the above

Question 20

Martha has a net capital loss of $17,000 and other ordinary taxable income of $45,000 for the current year.What is the amount of Martha's capital loss carryforward?

Accepted Answer

A)  $0
B)  $10,000
C)  $14,000
D)  $17,000
E)  None of the above

Exam 4: Additional Income Part 2

In the current year, Marc, a single taxpayer, has ordinary income of $35,000.In addition, he has $3,000 in short-term capital gains, short-term capital losses of $6,000, and long-term capital gains of $4,000.What is Marc's adjusted gross income (AGI) for the current year?

Net short-term capital gains may be offset by net long-term capital losses.

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?

Patrick owns a home on the beach in Daytona.He lives in the house for most of the year but leaves town during the popular motor sports race that comes through every year.During that time, he rents his home out for 3 weeks to race fans for $5,000.Which of the following is true?

Choose the correct statement.Passive losses

Bennett purchased a tract of land for $20,000 in 2012 when he heard that a new highway was going to be constructed through the property and the land would soon be worth $200,000.The highway project was abandoned in 2018 and the value of the land fell to $15,000.Bennett can claim a loss in 2018 of:

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

Dividend income is considered "passive income."

A taxpayer's personal automobile is a capital asset.

Sol purchased land as an investment on January 12, 2012 for $85,000.On January 31, 2018, Sol sold the land for $30,000 cash.In addition, the purchaser assumed the mortgage of $70,000 on the land.What is the amount of the realized gain or loss on the sale?

The qualified business income deduction is limited to 20% of taxable income not including long-term gains and qualified dividends.

An asset's adjusted basis is computed as:

In 2018, Paul, a single taxpayer, has taxable income of $30,000 exclusive of capital gains and losses.Paul incurred a $1,000 short-term capital loss and a $4,000 long-term capital loss.What is the amount of his long-term capital loss carryover to 2019?

Warren invested in a limited partnership tax shelter in 2011.During 2018, his losses from the partnership amount to $100,000.If Warren has no passive income, what is the amount of Warren's deduction for passive losses for 2018?

Martha has a net capital loss of $17,000 and other ordinary taxable income of $45,000 for the current year.What is the amount of Martha's capital loss carryforward?