Taxes Chapter 4

E

All of the following assets are capital assets, except: a. A personal automobile b. IBM stock c. A child's bicycle d. Personal furniture e. Used car inventory held by a car dealer

C

Bob sells a stock investment for $35,000 cash, and the purchaser assumes Bob's $32,500 debt on the investment. The basis of Bob's stock investment is $55,000. What is the gain or loss realized on the sale? a. $10,000 loss b. $10,000 gain c. $12,500 gain d. $22,500 loss e. $22,500 gain

A

Bonita earns $31,000 from her job, and she has $1,000 of interest income. She has itemized deductions of $35,000. There are no casualty or theft losses in the itemized deductions. What is Bonita's net operating loss for the current year? a. $0 b. $1,000 c. $3,000 d. $4,000 e. Some other amount

B

Gene, a single taxpayer, purchased a house 18 months ago for $350,000. If Gene sells his house due to unforeseen circumstances for $550,000 after living in it for a full 18 months, what is his taxable gain? a. $0 b. $12,500 c. $50,000 d. $200,000

A

Harold, a single taxpayer, has $30,000 of ordinary income after the standard deduc-tion, and $10,000 in long-term capital gains, for total taxable income of $40,000. For 2020, single taxpayers pay 0 percent on long-term gains up to $40,000. Assuming a tax of $3,406 on the $30,000 of ordinary income, what is Harold's tax? a. $3,406 b. $3,503 c. $3,623 d. $4,094 e. $4,906

E

Helen, a single taxpayer, has modified adjusted gross income (before passive losses) of $124,000. During the tax year, Helen's rental house generated a loss of $15,000. Assuming Helen is actively involved in the management of the property, what is the amount of Helen's passive loss deduction from the rental house? a. $0 b. $3,000 c. $10,000 d. $12,000 e. $13,000

B

In 2020, Tim, a single taxpayer, has ordinary income of $30,000. In addition, he has $2,000 in short-term capital gains, long-term capital losses of $10,000, and long-term capital gains of $4,000. What is Tim's AGI for 2020? a. $26,000 b. $27,000 c. $30,000 d. $32,000

A

In 2020, Tracy generates a $10,000 loss from an otherwise qualified business activity. Fortunately, she also works as an employee and has taxable wages of $40,000. Tracy's 2020 QBI deduction is a. $0 b. $2,000 c. $8,000 d. $6,000

B

In 2020, what is the top tax rate for individual long-term capital gains and the top tax rate for long-term capital gains of collectible items assuming that the Medicare tax does not apply. a. 10; 20 b. 20; 28 c. 15; 25 d. 25; 28

B

In November 2020, Ben and Betty (married, filing jointly) have a long-term capital gain of $54,000 on the sale of stock. They have no other capital gains and losses for the year. Their ordinary income for the year after the standard deduction is $72,500, making their total taxable income for the year $126,500 ($72,500 1 $54,000). In 2020, married taxpayers pay 0 percent on long-term gains up to $80,000. What will be their 2020 total tax liability assuming a tax of $8,308 on the $72,500 of ordinary income? a. $8,322 b. $15,283 c. $15,478 d. $16,408

A

Jim has a net operating loss in 2020. If he does not make any special elections, what is the first year to which Jim carries the net operating loss? a. 2015 b. 2016 c. 2017 d. 2018 e. 2020

D

John owns a second home in Palm Springs, CA. During the year, he rented the house for $5,000 for 56 days and used the house for 14 days during the summer. The house remained vacant during the remainder of the year. The expenses for the home included $5,000 in mortgage interest, $850 in property taxes, $900 for utilities and maintenance, and $3,500 of depreciation. What is John's deductible rental loss, before considering the passive loss limitations? a. $200 b. $875 c. $2,500 d. $3,200 e. $0

A

Kevin purchased a house 20 years ago for $100,000 and he has always lived in the house. Three years ago Kevin married Karen, and she has lived in the house since their marriage. If they sell Kevin's house in December 2020 for $425,000, what is their taxable gain on a joint tax return? a. $0 b. $75,000 c. $125,000 d. $250,000

C

Nancy has active modified adjusted gross income before passive losses of $75,000. She has a loss of $5,000 on a rental property she actively manages. How much of the loss is she allowed to take against the $75,000 of other income? a. None b. $2,500 c. $5,000 d. $25,000

D

Ned has active modified adjusted gross income before passive losses of $250,000. He has a loss of $15,000 on rental property he actively manages. How much of the loss is he allowed to take against the $250,000 of other income? a. $15,000 b. $10,000 c. $5,000 d. None

A

Norm is a real estate professional with a real estate trade or business as defined in the tax law. He has $80,000 of business income and $40,000 of losses from actively managed real estate rentals. How much of the $40,000 in losses is he allowed to claim on his tax return? a. $40,000 b. $25,000 c. $20,000 d. None

E

Oscar, a single taxpayer, sells his residence of the last 10 years in January of 2020 for $190,000. Oscar's basis in the residence is $45,000, and his selling expenses are $11,000. If Oscar does not buy a new residence, what is the taxable gain on the sale of his residence? a. $145,000 b. $134,000 c. $45,000 d. $9,000 e. $0

D

Qualified business income does not include which of the following: a. Income from sales of goods b. Deductions related to cost of goods sold c. Deductions for business expenses such as rent d. Interest income from an investment in bonds

B

The qualified business income deduction is unavailable to which of the following businesses: a. A sole proprietor dental practice that generates about $70,000 in income each year b. An incorporated small tools manufacturer c. A partnership operated by a husband and wife that sells wood carvings over the Internet d. A S corporation that owns and operates a restaurant. The S corporation has six different owners. e. The QBI deduction is available to all of the above.

D

Vijay sells land and receives $5,000 cash, a motorcycle worth $1,600, and two tickets to the Super Bowl with a total face value (cost) of $800 but worth $1,200. In addition, the buyer assumes the mortgage on the land of $12,000. What is Vijay's amount received in this transaction? a. $5,000 b. $7,800 c. $8,200 d. $19,800 e. $20,200

E

Which of the following is a capital asset? a. Account receivable b. Copyright created by the taxpayer c. Copyright (held by the writer) d. Business inventory e. A taxpayer's residence

E

Which of the following is classified as active income? a. Self-employment income from a small business b. Interest income c. Limited partnership income d. Bonus paid by an employer to an employee e. a. and d.

C

Which of the following is not classified as portfolio income for tax purposes? a. Interest income on savings accounts b. Dividends paid from a credit union c. Net rental income from real estate partnership d. Dividend income from stock e. All of the above are classified as portfolio income

E

Which of the following is true about the rental of real estate? a. Depreciation and maintenance expenses for an apartment complex are deductible. b. The expenses deductions for a home rented for 100 days and used for personal use for 17 days will be limited to the gross rental income. c. If a home is rented for less than 15 days a year, the rent is not taxable. d. Repairs on rental property are deductible by the taxpayer. e. All of the above.

A

Which of the following types of income is passive income? a. Net rental income from real estate limited partnership investments b. Dividends from domestic corporations c. Wages d. Interest income from certificates of deposit e. None of the above

B

Yasmeen purchases stock on January 30, 2019. If she wishes to achieve a long-term holding period, what is the first date that she can sell the stock as a long-term gain? a. January 20, 2020 b. January 31, 2020 c. February 1, 2020 d. July 31, 2019 e. July 30, 2019