Question 1

During the current year,Jack personally uses his summer home for 25 days.He also rented his summer home to a group of vacationers for 12 days for $600 per day.How much income does Jack report from the rental of his summer home?

Accepted Answer

The answer of During the current year,Jack personally uses his...

Question 2

Self-employed individuals may claim,as a deduction for adjusted gross income,50 percent of their

Accepted Answer

A) traditional IRA contributions. 
B) disability insurance premiums. 
C) health insurance premiums. 
D) self-employment tax.

Question 3

Kickbacks and bribes paid to federal officials are deductible only if related to the taxpayer's trade or business.

Accepted Answer

A) True 
 B)False

Question 4

Expenses related to a hobby are deductible only to the extent of the gross income from the hobby.

Accepted Answer

A) True 
 B)False

Question 5

Donald sells stock with an adjusted basis of $38,000 to his son,Kiefer,for its fair market value of $30,000.Kiefer sells the stock three years later for $32,000.Kiefer will recognize a gain on the subsequent sale of

Accepted Answer

A) $0. 
B) $2,000. 
C) ($6,000). 
D) ($8,000).

Question 6

Deductions for adjusted gross income include all of the following except

Accepted Answer

A) contributions to certain retirement plan arrangements. 
B) alimony. 
C) expenses attributable to production of rental income. 
D) unreimbursed employee business expenses.

Question 7

Three years ago,Myriah refinanced her home mortgage and was required to pay two points on the refinanced loan.The loan was secured by the property,and the charging of points was the established lending practice in the area.The term of the loan was 20 years.Myriah sold the house earlier this year and paid off the refinanced mortgage.In this year of the home sale,is Myriah allowed any deduction with respect to the points paid on the refinanced mortgage?

Accepted Answer

A) Yes,she can deduct the full amount of the refinanced loan points in the year of sale because none of these points have been previously deducted. 
B) Yes,she can deduct the unamortized balance of the refinanced loan points in the year of sale. 
C) No,the full amount of the refinanced loan points were already deducted in the year the home mortgage was refinanced. 
D) No,points paid to refinance a home mortgage are never deductible.

Question 8

Lloyd purchased 100 shares of Gold Corporation common stock for $20 per share for a total basis of $2,000.Several years later,on May 1 of the current year,Lloyd sells all 100 shares for $500.On May 29 of the current year,Lloyd purchases 30 shares of Gold Corporation common stock for $180.
a.How much loss is Lloyd allowed to recognize?
b.What is Lloyd's basis in the 30 new shares?

Accepted Answer

The answer of Lloyd purchased 100 shares of Gold Corporation...

Question 9

The Super Bowl is played in Tasha's home town.Tasha moves out of her house for 10 days and stays with her parents.She rents her house for a very high fee to a crew from ESPN.With respect to this rental activity,Tasha will

Accepted Answer

A) report the rental income but be allowed a deduction for AGI for the related expenses (e.g.interest,taxes,utilities,depreciation). 
B) report the rental income but be allowed a deduction from AGI for the related expenses (e.g.interest,taxes,utilities,depreciation). 
C) report the rental income,but she will not be allowed any deductions other than the mortgage interest and property taxes. 
D) not be required to report the income,but she will not take any deductions other than her normal mortgage interest and property taxes.

Question 10

Jimmy owns a trucking business.During the current year he incurred the following:  The fines for speeding were a necessary cost because missing deadlines would cause lost business and are ordinary in the industry.What is the total amount of deductible expenses?

Accepted Answer

A) $115,000 
B) $123,000 
C) $108,000 
D) $144,000

Question 11

Hobby expenses are deductible as for AGI deductions.

Accepted Answer

A) True 
 B)False

Question 12

A taxpayer opens a new business this year.Prior to opening,she incurred $45,000 of business investigation and preopening costs.The taxpayer can elect to currently deduct $5,000 and amortize the balance over 180 months.

Accepted Answer

A) True 
 B)False

Question 13

Losses incurred on wash sales of stock or securities are generally disallowed in the year of sale.

Accepted Answer

A) True 
 B)False

Question 14

Bart owns 100% of the stock of Octo Corporation,which uses the accrual method.Bart's sister Samantha,a cash-method taxpayer,did some advertising work for Octo in November 2017.In December,Octo received a billing statement from Samantha for $5,000 and paid Samantha the $5,000 in January 2018.Samantha is a calendar-year taxpayer.When may Octo deduct the $5,000?

Accepted Answer

A) 2017 
B) 2018 
C) Either 2017 or 2018 
D) The expense is not deductible since Samantha is Bart's sister.

Question 15

A sole proprietor paid legal fees in connection with the acquisition of a building that he uses in his business.The sole proprietor can deduct the legal fees for AGI.

Accepted Answer

A) True 
 B)False

Question 16

Brent must substantiate his travel and entertainment expenses.Which of the following is not required for documentation?

Accepted Answer

A) company expense report 
B) business relationship to the taxpayer of individuals entertained 
C) purpose of the expenditure 
D) time and place of the travel or entertainment

Question 17

A wash sale occurs when a taxpayer realizes a loss on the sale of stock or securities and the taxpayer acquires substantially identical stock or securities within a 61-day period after the date of sale.

Accepted Answer

A) True 
 B)False

Question 18

Kaitlyn owns a hotel in Phoenix,Arizona.The Arizona legislature has proposed legislation to increase the hotel room tax.Kaitlyn incurs $1,000 of lobbying expenses to discourage passage of the legislation.Kaitlyn can deduct the $1,000.

Accepted Answer

A) True 
 B)False

Question 19

Kyle drives a race car in his spare time and on weekends.His records regarding this activity reflect the following information for the year.  What is the allowable deduction (before any AGI limitation)for depreciation assuming that this activity is not engaged in for profit and Kyle can itemize his deductions?

Accepted Answer

A) $0 
B) $300 
C) $1,400 
D) $1,700

Question 20

In 2017,Venkat,who is single and age 37,received $60,000 of gross income and had $6,800 of itemized deductions.Venkat's taxable income is

Accepted Answer

A) $49,150. 
B) $53,200. 
C) $55,950. 
D) $49,600.

Exam 22: Deductions and Losses

During the current year,Jack personally uses his summer home for 25 days.He also rented his summer home to a group of vacationers for 12 days for $600 per day.How much income does Jack report from the rental of his summer home?

Self-employed individuals may claim,as a deduction for adjusted gross income,50 percent of their

Kickbacks and bribes paid to federal officials are deductible only if related to the taxpayer's trade or business.

Expenses related to a hobby are deductible only to the extent of the gross income from the hobby.

Donald sells stock with an adjusted basis of $38,000 to his son,Kiefer,for its fair market value of $30,000.Kiefer sells the stock three years later for $32,000.Kiefer will recognize a gain on the subsequent sale of

Deductions for adjusted gross income include all of the following except

The Super Bowl is played in Tasha's home town.Tasha moves out of her house for 10 days and stays with her parents.She rents her house for a very high fee to a crew from ESPN.With respect to this rental activity,Tasha will

Jimmy owns a trucking business.During the current year he incurred the following: The fines for speeding were a necessary cost because missing deadlines would cause lost business and are ordinary in the industry.What is the total amount of deductible expenses?

Hobby expenses are deductible as for AGI deductions.

A taxpayer opens a new business this year.Prior to opening,she incurred $45,000 of business investigation and preopening costs.The taxpayer can elect to currently deduct $5,000 and amortize the balance over 180 months.

Losses incurred on wash sales of stock or securities are generally disallowed in the year of sale.

A sole proprietor paid legal fees in connection with the acquisition of a building that he uses in his business.The sole proprietor can deduct the legal fees for AGI.

Brent must substantiate his travel and entertainment expenses.Which of the following is not required for documentation?

A wash sale occurs when a taxpayer realizes a loss on the sale of stock or securities and the taxpayer acquires substantially identical stock or securities within a 61-day period after the date of sale.

Kaitlyn owns a hotel in Phoenix,Arizona.The Arizona legislature has proposed legislation to increase the hotel room tax.Kaitlyn incurs $1,000 of lobbying expenses to discourage passage of the legislation.Kaitlyn can deduct the $1,000.

In 2017,Venkat,who is single and age 37,received $60,000 of gross income and had $6,800 of itemized deductions.Venkat's taxable income is