Question 1

In October of the current year, Mike sold a share of Berkshire-Hathaway for $73,000.He had acquired it several years ago at a cost of $42,000.He also sold Microsoft stock he had held for 3 years at a gain of $17,000.He had a short-term $2,000 loss on the sale of stock of a start-up technology company.He has $85,000 in taxable income before capital transactions are taken into account.Assuming Mike is single with no dependents, what is the amount of Mike's tax on the capital transactions?

Accepted Answer

The answer of In October of the current year, Mike...

Question 2

Passive losses are fully deductible as long as they do not exceed $50,000 during the year.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is a capital asset?

Accepted Answer

A) A literary work held by the author 
B) Real estate held by a developer 
C) A taxpayer's principle residence 
D) A truck used in a taxpayer's business 
E) None of the above

Question 4

If a residence is rented for 15 days or more and is used for personal purposes for not more than 14 days or 10 percent of the days rented, whichever is greater, no allocation of expenses is required and the taxpayer may claim a deduction for the full amount of the expenses.

Accepted Answer

A) True 
 B)False

Question 5

Sol purchased land as an investment on January 12, 2015, for $85,000.On January 31, 2018, Sol sold the land for $25,000 cash.In addition, the purchaser assumed the mortgage of $70,000 on the land.What is the amount realized (not gain realized)on the sale of the land?

Accepted Answer

A) $10,000 
B) $25,000 
C) $70,000 
D) $95,000 
E) None of the above

Question 6

Wages are considered "active income."

Accepted Answer

A) True 
 B)False

Question 7

Karen was ill for most of the current year.She received tax-free disability income that covered most of her expenses.She paid the deductible expense of owning her home, interest on the mortgage, and property taxes out of this income.Her tax return shows negative taxable income of $25,000.Can this loss be carried forward to future years? Why or why not?

Accepted Answer

The answer of Karen was ill for most of the...

Question 8

Regardless of a taxpayer's involvement in the management of their rental property, individual taxpayers may deduct up to $25,000 of rental real estate losses against other income, provided their income does not exceed certain limits.

Accepted Answer

A) True 
 B)False

Question 9

Accounts receivable are capital assets.

Accepted Answer

A) True 
 B)False

Question 10

An asset has an original basis of $25,000 and depreciation has been claimed for the asset in the amount of $20,000.If the asset's adjusted basis is $15,000, what is the amount of capital improvements that have been made to the asset?

Accepted Answer

A) $5,000 
B) $10,000 
C) $20,000 
D) $30,000 
E) None of the above

Question 11

Pat's taxable income exceeds $157,500 and thus he is required to phase out his QBI deduction.The phase-out calculation is:

Accepted Answer

A) The greater of 50% of business wages or 25% of wages plus 2.5% of the unadjusted basis of qualifying property 
B) The lesser of 50% of business wages or 25% of wages plus 2.5% of the unadjusted basis of qualifying property 
C) 50% of taxable income without the QBI deduction 
D) 50% of the amount over $157,500

Question 12

Emily sold the following investments during the year: 
$\begin{array}{llcc}
\quad\quad\quad\quad  \text {  Stock} &\quad\quad\quad\quad\text { Date Purchased} &\quad \text {Date Sold }&\quad \text { Sales Price}  \
\end{array}$
a. $\begin{array}{llcc}
  \text {1,000 shares Dot Com Co.   } &  03-21-2007 &02-04-2018& \$ 20,000\ 
\end{array}$

b.$\begin{array}{llcc}
  \text {500 shares Big Box Store  } & 05-19-2017& 01-22-2018 & \$ 8,200 \  
\end{array}$

c.$\begin{array}{llcc}
  \text {300 shares Lotta Fun, Inc.  } & 10-02-2017 &09-21-2018  & \$ 3,000\
\end{array}$

d.$\begin{array}{llcc}
  \text {700 shares Local Gas Co. } & 06-17-2017  &11-11-2018 & \$ 14,000\
\end{array}$ For each stock, calculate the amount and the nature of the gain or loss.

Accepted Answer

The answer of Emily sold the following investments during the...

Question 13

Selma owns a beach cottage that she rents to tourists.In the current year she rented the cottage for 180 days.What is the maximum number of days Selma can use the cottage before her expense deduction will be limited to her gross rental income?

Accepted Answer

A) 0 days 
B) 9 days 
C) 14 days 
D) 18 days

Question 14

The following are owned by Robert.Indicate which are capital assets.
a.Rental property at 123 Main Street ______
b.Tables and chairs sold in his furniture business ______
c.The cash register used in his furniture business ______
d.A 1972 Porsche 916 ______
e.The rights to Taylor Swift's song, "Blank Space" ______

Accepted Answer

The answer of The following are owned by Robert.Indicate which...

Question 15

In 2018, Keri has wages of $20,000, a Schedule C business loss of $30,000, and nonbusiness capital gains of $4,000.She deducts the standard deduction of $12,000 for a taxable loss of $18,000.Compute Keri's NOL to carry forward to 2018.

Accepted Answer

The answer of In 2018, Keri has wages of $20,000,...

Question 16

Carey, a single taxpayer, purchased a rental house in 2018, which he actively manages.During 2018, Carey had a loss of $14,000 from the rental house.If Carey's adjusted gross income for 2018 is $138,000 before the rental loss, what is the amount of Carey's allowable deduction for the rental activity for 2018?

Accepted Answer

A) $0 
B) $3,000 
C) $6,000 
D) $12,000 
E) None of the above

Question 17

At the end of the current year, Falstaff sold for $4,800 General Martin stock that was purchased 5 months ago for $4,000.He also sold Cedar stock for $6,000 at the same time.The Cedar stock cost $4,000, 2 years ago.In addition, Falstaff has a short-term capital loss of $500 on the sale of silver.
a.Calculate the amount of Falstaff's net short-term and net long-term capital gain or loss.
b.If Falstaff has a net capital gain, what is the maximum rate at which the gain will be taxed?

Accepted Answer

The answer of At the end of the current year,...

Question 18

Karen has a net operating loss in 2018.If she does not make any special elections, what is the first year to which Karen can carry the net operating loss?

Accepted Answer

A) 2015 
B) 2016 
C) 2017 
D) 2019 
E) 2020

Question 19

The first day a capital asset acquired on August 31, 2017 may be sold for long-term capital gain or loss treatment is September 1, 2018.

Accepted Answer

A) True 
 B)False

Question 20

Sol purchased land as an investment on January 12, 2015 for $85,000.On January 31, 2018 Sol sold the land for $90,000 cash.What is the nature of the gain or loss?​

Accepted Answer

A) Long-term capital loss 
B) Long-term capital gain 
C) Short-term capital gain 
D) Short-term capital loss 
E) None of the above

Exam 4: Additional Income Part 2

Passive losses are fully deductible as long as they do not exceed $50,000 during the year.

Which of the following is a capital asset?

If a residence is rented for 15 days or more and is used for personal purposes for not more than 14 days or 10 percent of the days rented, whichever is greater, no allocation of expenses is required and the taxpayer may claim a deduction for the full amount of the expenses.

Sol purchased land as an investment on January 12, 2015, for $85,000.On January 31, 2018, Sol sold the land for $25,000 cash.In addition, the purchaser assumed the mortgage of $70,000 on the land.What is the amount realized (not gain realized) on the sale of the land?

Wages are considered "active income."

Regardless of a taxpayer's involvement in the management of their rental property, individual taxpayers may deduct up to $25,000 of rental real estate losses against other income, provided their income does not exceed certain limits.

Accounts receivable are capital assets.

An asset has an original basis of $25,000 and depreciation has been claimed for the asset in the amount of $20,000.If the asset's adjusted basis is $15,000, what is the amount of capital improvements that have been made to the asset?

Pat's taxable income exceeds $157,500 and thus he is required to phase out his QBI deduction.The phase-out calculation is:

Selma owns a beach cottage that she rents to tourists.In the current year she rented the cottage for 180 days.What is the maximum number of days Selma can use the cottage before her expense deduction will be limited to her gross rental income?

The following are owned by Robert.Indicate which are capital assets. a.Rental property at 123 Main Street b.Tables and chairs sold in his furniture business c.The cash register used in his furniture business d.A 1972 Porsche 916 e.The rights to Taylor Swift's song, "Blank Space" __

In 2018, Keri has wages of $20,000, a Schedule C business loss of $30,000, and nonbusiness capital gains of $4,000.She deducts the standard deduction of $12,000 for a taxable loss of $18,000.Compute Keri's NOL to carry forward to 2018.

Karen has a net operating loss in 2018.If she does not make any special elections, what is the first year to which Karen can carry the net operating loss?

The first day a capital asset acquired on August 31, 2017 may be sold for long-term capital gain or loss treatment is September 1, 2018.

Sol purchased land as an investment on January 12, 2015 for $85,000.On January 31, 2018 Sol sold the land for $90,000 cash.What is the nature of the gain or loss?

Exam 4: Additional Income Part 2

Passive losses are fully deductible as long as they do not exceed $50,000 during the year.

Which of the following is a capital asset?

If a residence is rented for 15 days or more and is used for personal purposes for not more than 14 days or 10 percent of the days rented, whichever is greater, no allocation of expenses is required and the taxpayer may claim a deduction for the full amount of the expenses.

Sol purchased land as an investment on January 12, 2015, for $85,000.On January 31, 2018, Sol sold the land for $25,000 cash.In addition, the purchaser assumed the mortgage of $70,000 on the land.What is the amount realized (not gain realized) on the sale of the land?

Wages are considered "active income."

Regardless of a taxpayer's involvement in the management of their rental property, individual taxpayers may deduct up to $25,000 of rental real estate losses against other income, provided their income does not exceed certain limits.

Accounts receivable are capital assets.

An asset has an original basis of $25,000 and depreciation has been claimed for the asset in the amount of $20,000.If the asset's adjusted basis is $15,000, what is the amount of capital improvements that have been made to the asset?

Pat's taxable income exceeds $157,500 and thus he is required to phase out his QBI deduction.The phase-out calculation is:

Selma owns a beach cottage that she rents to tourists.In the current year she rented the cottage for 180 days.What is the maximum number of days Selma can use the cottage before her expense deduction will be limited to her gross rental income?

In 2018, Keri has wages of $20,000, a Schedule C business loss of $30,000, and nonbusiness capital gains of $4,000.She deducts the standard deduction of $12,000 for a taxable loss of $18,000.Compute Keri's NOL to carry forward to 2018.

Karen has a net operating loss in 2018.If she does not make any special elections, what is the first year to which Karen can carry the net operating loss?

The first day a capital asset acquired on August 31, 2017 may be sold for long-term capital gain or loss treatment is September 1, 2018.

Sol purchased land as an investment on January 12, 2015 for $85,000.On January 31, 2018 Sol sold the land for $90,000 cash.What is the nature of the gain or loss?​

Sol purchased land as an investment on January 12, 2015 for $85,000.On January 31, 2018 Sol sold the land for $90,000 cash.What is the nature of the gain or loss?