Tax Exam 2

Donny's medical expenses before reimbursement for the year include the following: Medical premiums-after tax: $11,000 Doctors, hospitals: $3,500 Prescriptions: $600 Donny's AGI for the year is $50,000. He is single and age 58. Donny also receives a reimbursement for medical expenses of $1,000. Donny's deductible medical expenses that will be added to other itemized deductions will be: A) $10,300 B) $9,100 C) $14,100 D) $15,100

A

Generally, deductions FOR adjusted gross income on an individual's tax return include all the following types of expenses except those A) Incurred in gambling activities B) incurred in a trade or business C) incurred in the production of rent income D) incurred in the production of royalty income

A

If an individual is liable for self-employment tax, a portion of the self-employment tax is: A) a FOR AGI deduction B) FROM AGI as an itemized deduction C) a Schedule C business expense D) nondeductible

A

In 2018, Sean, who is single and age 44, received $55,000 of gross income and had $5,000 of deductions for AGI and $12,600 of itemized deductions. Sean's taxable income is A) 37,400 B) 38,000 C) 42,400 D) 50,000

A

Nonrefundable tax credits: A) only offset a taxpayer's tax liability B) may only be used if the taxpayer is receiving a refund C) can be carried back two years and carried forward 15 years if they exceed tax liability in the current year D) allow the excess over the taxpayer's tax liability to be paid to the taxpayer

A

Antonio is single and has taxable income of $150,000, without considering the sale of a capital asset (land held for investment) in September of 2018 for $25,000. That asset was purchased six years earlier and has a tax basis of $5,000. The tax liability applicable to only the capital gain is A) 1,000 B) 3,000 C) 5,600 D) 7,000

B

Harley's tentative minimum tax is computed by multiplying the AMT tax rate by her A) taxable income B) alternative minimum tax base C) alternative minimum taxable income D) tentative alternative taxable income

B

Max and Alexandra are married and incur $5,500 of qualifying expenses to care for their two children, ages 2 and 5. Max's earned income is $35,000 and Alexandra's earnings from a part-time job are $5,000. What is the amount of the qualifying expenses for purpose of computing the child and dependent care credit? A) $3,000 B) $5,000 C) $5,500 D) $6,000

B

Sasha purchased land in 2010 for $15,000 that she held as a capital asset. In 2018, she contributed the land to the Boy Scouts of America for use as a site for a summer camp. The mkt value of the land at the date of contribution is $50,000. Sasha's adjusted gross income is $90,000. Assuming no special elections, Sasha's maximum deductible contribution for 2018 is generally: A) 13,000 B) 27,000 C) 35,000 D) 40,000

B

To be tax deductible, an expense must be all of the following except: A) ordinary and necessary B) paid in cash C) reasonable in amount D) en expense of the taxpayer

B

David gave property with a basis of $133,000 to Hannah when the property had a FMV of $100,000 and paid gift taxes of $8,000. If Hannah later sells the property for $140,000, Hannah's basis (to determine gain) in the property immediately before the sale, ignoring any gift tax consequences is: A) $100,000. B) $108,000. C) $133,000. D) $141,000.

C

John has $55,000 profit from a sole proprietorship. John is also employed part-time by a major corporation and is paid $25,000 in wages. John's self-employment tax (rounded) for 2018 is: A) $3,886 B) $4,208 C) $7,771 D) $8,415

C

Jordan paid $30,000 for equipment two years ago and has claimed total depreciation deductions of $15,600 for the two years. The cost of repairs during the same time period was $2,000 while a major overhaul which extended the life of the equipment cost of $7,000. What is Jordan's adjusted basis in the equipment at the end of the two-year period? A) 14,400 B) 16,400 C) 21,400 D) 30000

C

Which of the following individuals is not considered a relative for purposes of the related parties loss disallowance rules under Sec. 267? A) brother B) husband C) sister-in-law D) grandfather

C

All of the following payments for medical items are potentially deductible with the exception of the payment for A) insulin B) general appointment for teeth cleaning C) acupuncture for specific purposes D) nonprescription medicine for treatment of a specific medical condition

D

Allison buys equipment and pays cash of $50,000, signs a note of $10,000 and assumes a liability on the property for $3,000. Also, Allison pays an installation cost of $500 and a delivery cost of $800. Allison's basis in the asset is A) $60,000. B) $63,000. C) $63,500. D) $64,300.

D

Kathleen received land as a gift from her grandfather. At the time of the gift, the land had a FMV of $85,000 and an adjusted basis of $110,000 to Kathleen's grandfather. One year later, Kathleen sold the land for $80,000. What was her gain or (loss) on this transaction? A) no gain or loss B) ($5,000) C) $5,000 D) $30,000

D

Which of the following factors is not used to determine whether an activity is a hobby or a business? A) the taxpayer's expertise in the activity B) the taxpayer's financial status C) the personal pleasure derived from the activity D) the success of the taxpayer in other dissimilar activities

D

Matt paid the following taxes in 2018: Real estate taxes on rental property he owns: $4,000 Real estate taxes on his own residence: $3,600 Federal income taxes: $12,000 State income taxes: $3,400 Local city income taxes: $500 State sales taxes: $1,800 What amount could Matt deduct as an itemized deductions on his tax return? A) $13,300 B) $21,300 C) $9,300 D) $10,000 E) $7500

E

Which of the following, is deductible as interest expense, if any? A) personal credit card interest B) interest to purchase tax-exempt bonds C) bank service charges on personal account D) interest on a home equity loan to purchase a car E) none of the above

E