ACCT3350-3
Hannah makes the following charitable donations in the current year: Basis Fair: Market Value Inventory held for resale in Hannah's business (a sole proprietorship): $ 8,000: $ 7,200 Stock in HBM, Inc., held as an investment (acquired four years ago): 16,000: 40,000 Baseball card collection held as an investment (acquired six years ago): 4,000: 20,000 The HBM stock and the inventory were given to Hannah's church, and the baseball card collection was given to the United Way. Both donees promptly sold the property for the stated fair market value. Disregarding percentage limitations, Hannah's current charitable contribution deduction is: a.$28,000. b.$51,200. c.$52,000. d.$67,200.
$51200 7200+40000+4000= 51200
Alicia is the sole shareholder and CEO of ABC, Inc., an S corporation that is a qualified trade or business. During the current year, ABC has net income of $325,000 after deducting Alicia's $100,000 salary. In addition to her compensation, ABC pays Alicia dividends of $250,000. After reviewing comparable companies, you determine that reasonable compensation for someone with her experience and responsibilities is $200,000. What is Alicia's qualified business income? a.$200,000. b.$225,000. c.$-0-. d.$325,000.
225000
Phillip, age 66, developed hip problems and was unable to climb the stairs to reach his second-floor bedroom. His physician advised him to add a first-floor bedroom to his home. The cost of constructing the room was $32,000. The increase in the value of the residence as a result of the room addition was determined to be $17,000. In addition, Phillip paid the contractor $5,500 to construct an entrance ramp to his home and $8,500 to widen the hallways to accommodate his wheelchair. Phillip's AGI for 2021 was $75,000. What is the amount of Phillip's medical expense deduction in 2021? a.$23,375 b.$0 c.$29,000 d.$21,500
23375
Pat generated self-employment income in 2021 of $76,000. The self-employment tax is: a.$0. b.$11,628.00. c.$10,738.46. d.$5,369.23.
76000x12.4%=9424 76000x2.9%=2204 =11628
Refundable tax credits include the: a.Credit for certain retirement plan contributions. b.Earned income credit. c.Tax credit for rehabilitation expenses. d.Work opportunity tax credit
b. Earned income credit
Which of the following factors, if any, is not a characteristic of independent contractor status? a.Work-related expenses are reported on Schedule A (Form 1040). b.Receipt of a Form 1099 reporting payments received. c.Workplace fringe benefits are not available. d.Services are performed for more than one party
a. Work-related expenses are reported on Schedule A (form 1040)
Which of the following expenses, if any, qualify as deductible? a.Contributions to a Coverdell Education Savings Account (CESA). b.Contributions to a qualified tuition program (§ 529 plan). c.Contribution to a traditional IRA. d.Job-hunting expense of FBI agent who applies for the job of city manager of Beaumont, TX.
c. contributions to a traditional IRA
Which of the following taxpayers is potentially eligible for a qualified business income deduction based on the noted activity? (circle all that apply) a.A self-employed doctor. b.A sole proprietor operating a restaurant. c.A shareholder of General Electric. d.Jennifer, owner of a winery operated as an S corporation.
a. a self-employed doctor b. a sole proprietor operating a restaurant
A worker may prefer to be classified as an employee (rather than an independent contractor) for which of the following reasons: a.To avoid the self-employment tax. b.To avoid the overall limitation (50%) on unreimbursed business entertainment expenses. c.To avoid the limitations on unreimbursed work-related expenses. d.To claim unreimbursed work-related expenses as a deduction for AGI.
a. to avoid the self-employment tax
In which of the following plans is this statement true: A deduction is allowed for contributions to the plan, and no income tax consequences result from distributions to the participant at retirement. a.None of the above. b.Traditional IRAs. c.Keogh (H.R. 10) plans. d.Roth IRAs.
a.Noneoftheabove
Under the actual cost method, which of the following expenses, if any, will not be allowed? a.Car registration fees. b.Interest expense on a car loan (taxpayer is an employee). c.Dues to auto clubs. d.Auto insurance.
b. Interest expense on a car loan (taxpayer is an employee)
Which of the following, if any, correctly describes the earned income credit? a.Is not available to a surviving spouse. b.Would be available regardless of the amount of the taxpayer's adjusted gross income. c.Is a refundable credit. d.Requires a taxpayer to have a qualifying child to take advantage of the credit.
c. Is a refundable credit
Which of the following is considered qualified property in the calculation of the deduction for qualified business income (§ 199A)? a.All business property (both tangible and intangible). b.Fully depreciated tangible business property. c.Tangible business property subject to depreciation. d.Tangible property placed in service during the year, but not used in the production of qualified business income.
c. Tangible business property subject to depreciation
During the year, Walt who is self-employed travels from Seattle to Tokyo, Japan, on business. His time was spent as follows: two days travel (one day each way), two days business, and two days personal. His expenses for the trip were as follows (meals and lodging reflect only the business portion): Airfare: $3,000 Lodging: 2,000 Meals: 1,000 Presuming no reimbursement, Walt's deductible expenses are: a.$5,500. b.$6,000. c.$3,500. d.$4,500.
a. $5500 3000+2000+(1000x50%)=5500
This year, Carol, a single taxpayer, purchased a vacation home for $400,000 using a home equity loan of $350,000 on her principal residence. She has no other debt on her principal residence. Carol paid $16,000 of interest on the debt this year. How much of this interest is deductible assuming that Carol itemizes her deductions? a.$0 b.$10,000 c.$125,000 d.$16,000
a. $0
Brad, who would otherwise qualify as Faye's dependent, had gross income of $9,000 during the year. Faye, who had AGI of $120,000, paid the following medical expenses in 2021: Cataract operation for Brad: $ 5,400 Brad's prescribed contact lenses: 1,800 Faye's doctor and dentist bills: 12,600 Prescribed drugs for Faye: 2,550 Total: $22,350 Faye has a medical expense deduction of: a.$13,350 b.$22,350 c.$6,150 d.$10,350
a. $13350 120000x7.5% = 9000 22350-9000= 13350
Realizing that providing for a comfortable retirement is up to them, Jim and Julie commit to regular contributions to traditional IRAs, beginning this year. Consequently, each makes a $2,000 contribution to his or her traditional IRA. If their AGI is $35,000 on their joint return, what is the amount of any "saver's credit" for retirement plan contributions? a.$2,000 b.$1,000 c.$400 d.$200
a. $2000 2000x2=4000/2=2000
In Lawrence County, the real property tax year is the calendar year. The real property tax becomes a personal liability of the owner of real property on January 1 in the current real property tax year (assume that this year is not a leap year). The tax is payable on June 1. On May 1, Reggie sells his house to Dana for $350,000. On June 1, Dana pays the entire real estate tax of $7,950 for the year ending December 31. Assuming that Reggie itemizes his deductions and the $10,000 limit on state and local taxes does not apply, how much of the property taxes may Reggie deduct? a.$2,614 b.$0 c.$7,950 d.$2,625
a. $2614 120/365x7950=2614
Layla has $200,000 of QBI from her neighborhood clothing store (a sole proprietorship). Her proprietorship paid $30,000 in W-2 wages and has $20,000 of qualified property. Layla's spouse earned $50,000 of wages as an employee, and the couple earned $20,000 of interest income during the year. They will be filing jointly and take the standard deduction of $25,100.What is their QBI deduction for 2021? a.$40,000. b.$54,000. c.$-0-. d.$48,980.
a. $40000 taxable income = 50000+20000-25100=44900 qbid= 200000x20% = 40000
Jermaine and Kesha are married, file a joint tax return, have AGI of $82,500, and have two children. Devona is beginning her freshman year at State University during fall 2021, and Arethia is beginning her senior year at Northeast University during fall 2021 after having completed her junior year during the spring of that year. Both Devona and Arethia are claimed as dependents on their parents' tax return.Devona's qualifying tuition expenses and fees total $4,000 for the fall semester and Arethia's qualifying tuition expenses and fees total $6,200 for each semester during 2021. Full payment is made for the tuition and related expenses for both children during each semester. The American Opportunity credit available to Jermaine and Kesha for 2021 is: a.$5,000. b.$2,500. c.$6,000. d.$3,000.
a. $5000 2500 per eligible student
Jenna owns and manages her single-member LLC, which provides a wide variety of financial services to her clients. She is married and will file a joint tax return with her spouse, Paul. Her LLC reports $300,000 of net income, W-2 wages of $120,000, and assets with an unadjusted basis of $75,000. Their taxable income before the QBI deduction is $285.000 (this is also their modified taxable income). What is their QBI deduction for 2021? a.$57,000. b.$-0-. c.$70,000. d.$60,000.
a. $57000 285000<329800 300000x20%=60000 285000x20%=57000 (limit becomes qbid)
Matilda, a calendar year taxpayer, made the following donations to qualified charitable organizations during the year: Basis: Fair Market ValueCash donation to State University: $30,000: $30,000 Unimproved land to the City of Terre Haute, IN: 70,000 : 210,000 The land had been held as an investment and was acquired four years ago. Shortly after receipt, the City of Terre Haute sold the land for $210,000. Matilda's AGI is $450,000. The allowable charitable contribution deduction this year is: a.$240,000. b.$225,000. c.$100,000. d.$165,000.
a. 165000
Aiden performs services for Lucas. Which of the following factors indicates that Aiden is an employee rather than an independent contractor? a.Aiden is paid based on hours worked. b.Aiden provides his own support services (e.g., work assistants). c.Aiden makes his services available to others. d.Aiden obtained his training (i.e., job skills) from his father.
a. Aiden is paid based on hours worked
Which of the following expenses, if any, are deductible? a.Bottled water purchased by a gig driver for passengers. b.Tax return preparation fee paid by a nonemployed retiree. c.Safety shoes purchased by a plumber employed by a company. d.Unreimbursed employee expenses.
a. Bottled water purchased by a gig driver for passengers
Statutory employees: a.Claim their expenses as deductions for AGI. b.Include common law employees. c.Report their expenses as miscellaneous itemized deductions. d.Are subject to income tax withholdings
a. Claim their expenses as deductions for AGI
Which of the following self-employed individuals are in a specified service trade or business? (circle all that apply) a.Dentist. b.Consultant. c.CPA. d.Architect.
a. Dentist b. consultant c. cpa.
Which of the following taxpayers is eligible for a qualified business income deduction regarding the activity noted? (circle all that apply) a.A driver for Uber or Lyft. b.An employee working for Apple, Inc. c.Tom's Burger Place, a sole proprietorship. d.A partner of a Big 4 firm.
a. Driver for Uber/Lyft c. Tom's burger Place, a sole proprietorship d. A partner of a Big 4 firm
Which of the following statements concerning the credit for child and dependent care expenses is not correct for 2021? a.If a taxpayer is a full-time student with no earned income, no credit for child and dependent care expenses can be claimed. b.A taxpayer is not allowed both a deduction as a medical expense and the credit for child and dependent care expenses on the same amount. c.If a taxpayer's adjusted gross income is $123,000, the rate for the credit for child and dependent care expenses is 50%. d.A taxpayer is not allowed both an exclusion from income and the credit for child and dependent care expenses on the same amount.
a. If a taxpayer is a full-time student with no earned income, no credit for child and dependent care expenses can be claimed
Which of the following, if any, is an advantage of using the simplified method for determining the office in the home deduction? a.No depreciation on the personal residence has to be computed. b.It allows the expense to be classified as a deduction for AGI. c.It can also be used for a residence that is rented (not owned) by the taxpayer. d.The exclusive use requirement does not have to be met.
a. No depreciation on the personal residence has to be computed
Under the actual expense method, which of the following expenses, if any, will not be allowed? a.Parking fines incurred during business use of a car. b.Auto club dues. c.Interest expense on a car loan (taxpayer is self-employed). d.Auto insurance.
a. Parking fines incurred during business use of a car
Under the deemed substantiation method of accounting for expenses, what is the maximumamount taxpayers are allowed as a deduction without being required to substantiate the amount of the expenses? a.The appropriate Federal per diem amount. b.The per diem rate established by the state in which they live. c.All expenses up to $25 per day. d.$75 per day.
a. The appropriate Federal per diem amount
In describing FICA taxes, which (if any) of the following statements is incorrect? a.The base amounts for the Social Security and Medicare portions are the same. b.The base amounts for 2022 probably will increase from the 2021 amounts. c.If both spouses work, excess FICA taxes need not result. d.Excess FICA taxes can be claimed as an income tax credit.
a. The base amounts for the social security and medicare are the same
Which of the following statements is true regarding the education tax credits? a.The American Opportunity credit is calculated per eligible student and the lifetime learning credit is available per taxpayer. b.Continuing education expenses do not qualify for either education credit. c.The lifetime learning credit is available for qualifying tuition and related expenses incurred by students pursuing only graduate degrees. d.The American Opportunity credit permits a maximum credit of 20% of qualified expenses up to $10,000 per year.
a.The American Opportunity credit is calculated per eligible student and the lifetime learning credit is available per taxpayer.
Where is the § 199A deduction taken on Form 1040? a.It is a deduction from AGI, much like the standard deduction or itemized deductions, and is the last deduction taken in determining taxable income. b.It is a deduction that reduces self-employment income and is taken on Schedule SE (Form 1040). c.It is an itemized deduction taken on Schedule A (Form 1040). d.It is a business deduction and is taken on Schedule C (Form 1040).
a.itisaeductionfromAGI,muchlikethestandarddeductionoritemizeddeductionsandisthelastdeductiontakenindeterminingtaxableincome
During the current year, Eleanor earns $120,000 in wages as an employee of an accounting firm. She also earns $13,000 in gross income from a consulting service she operates. Deductible expenses paid in connection with the consulting work amount to $3,000. Eleanor also incurs a recognized long-term capital gain of $1,000 from the sale of a stock investment. She must pay a self-employment tax on: a.$14,000. b.$10,000. c.$13,000. d.$0.
b. $10000 13000-3000=10000
Ellie (a single taxpayer) is the owner of ABC, LLC. The LLC (a sole proprietorship) reports QBI of $900,000 and is not a specified services business. ABC paid total W-2 wages of $300,000, and the total unadjusted basis of property held by ABC is $30,000. Ellie's taxable income before the QBI deduction is $740,000 (this is also her modified taxable income). What is Ellie's QBI deduction for 2021? a.$75,750. b.$148,000. c.$150,000. d.$180,000.
b. $148000 900000x20%=180000 300000x50%= 150000 740000x20%=148000 (limit = qbid)
Which of the following expenses, if any, is/are deductible? a.Cost of moving to first job location. Taxpayer just graduated from college. b.Contribution to an IRA. c.Job-hunting expenses of a fishing guide to become an insurance salesman. d.Costs involved in maintaining an office in the home by a self-employed insurance adjuster. Taxpayer's wife also uses the office as a meeting place for her bridge club.
b. Contribution to an IRA
Harry and Wei are married and file a joint income tax return. On their 2021 tax return, they report $44,000 of adjusted gross income ($20,000 salary earned by Harry and $24,000 salary earned by Wei) and report two dependent children. During the year, they pay the following amounts to care for their four-year old son and six-year old daughter while they work. ABC Day Care Center: $3,200 Blue Ridge Housekeeping Services: 2,000 Mindy Mason (Harry's mother): 1,000 Harry and Wei may claim a credit for child and dependent care expenses of: a.$1,600. b.$3,100. c.$2,100. d.$2,600.
b. $3100 3200+2000+1000=6200 6200/2=3100
Fred and Lucy are married, ages 33 and 32, and together have AGI of $120,000 in 2021. They have four dependents and file a joint return. They pay $5,000 for a high deductible health insurance policy and contribute $2,600 to a qualified Health Savings Account. During the year, they paid the following amounts for medical care: $9,200 in doctor and dentist bills and hospital expenses, and $3,000 for prescribed medicine and drugs. In October 2021, they received an insurance reimbursement of $4,400 for the hospitalization. They expect to receive an additional reimbursement of $1,000 in January 2022. Determine the maximum itemized deduction allowable for medical expenses in 2021. a.$12,800 b.$3,800 c.$9,200 d.$800
b. $3800 120000x7.5% = 9000 5000+9200+3000= 17200 17200-4400-9000=3800
Zeke made the following donations to qualified charitable organizations during the year: Basis: Fair Market Value Used clothing of taxpayer and his family (all acquired more than a year ago): $ 1,350: $ 375 Stock in ABC, Inc., held as an investment for 15 months: 12,000: 10,875 Stock in MNO, Inc., held as an investment for 11 months: 15,000: 18,000 Real estate held as an investment for two years: 15,000: 30,000 The used clothing was donated to the Salvation Army; the other items of property were donated to Eastern State University. Both are qualified charitable organizations. Disregarding percentage limitations, Zeke's charitable contribution deduction for the year is: a.$43,350. b.$56,250. c.$60,375. d.$59,250.
b. $56250 375+10875+15000+30000=56250
Nancy paid the following taxes during the year: Tax on residence (for the period from March 1 through August 31): $5,250 State motor vehicle tax (based on the value of the personal use automobile): 430 State sales tax: 3,500 State income tax: 3,050 Nancy sold her personal residence on June 30 of this year under an agreement in which the real estate taxes were not prorated between the buyer and the seller. What amount qualifies as a deduction from AGI for Nancy? a.$9,180 b.$7,382 c.$5,382 d.$9,130
b. $7382
Which of the following would constitute an employer-employee relationship? a.A plumber who comes to your home to fix a leaking faucet. b.A physician who hires a nurse to help her with patient screening and preliminary tests in the office. c.A CPA who prepares a client's tax return. d.A gardener who takes care of individual lawns for a monthly fee.
b. A physician who hires a nurse to help her with patient screening and preliminary tests in the office
In 2021, Sam and Betty, each single, both generate sole proprietor income of $240,000. Sam's income is generated from a wholesale business whereas Betty's is earned from her law practice. Neither has any employees or qualified assets. Both claim the standard deduction and have other income equal to the standard deduction amount. a.Sam can obtain a QBI deduction, but Betty cannot because of the taxable income level and law practice is a specified service business. b.Neither Sam nor Betty will generate a QBI deduction due to their taxable income levels. c.Both Sam and Betty will have a QBI deduction of $48,000. d.None of these choices are correct.
b. Neither sam nor Betty will generate a QBI deduction due to their taxable income levels
In contrasting the reporting procedures of employees and self-employed persons regarding job-related transactions, which of the following items involve people who are self-employed? a.Form W-4. b.Schedule C (Form 1040). c.Schedule A (Form 1040). d.Form W-2.
b. Schedule C (form 1040)
In the current year, Jerry pays $8,000 to become a charter member of Mammoth University's Athletic Council. The membership ensures that Jerry will receive choice seating at all of Mammoth's home basketball games. Also this year, Jerry pays $2,200 (the regular retail price) for season tickets for himself and his wife. For these items, how much qualifies as a charitable contribution? a.$8,000 b.$6,400 c.$0 d.$10,200
c. $0
In 2021, Kendra has taxable income before the QBI deduction of $274,000. Kendra is single and has income from her law firm (a sole proprietorship operating as an LLC) of $200,000. Her law firm paid wages of $82,000 and has qualified property of $20,000. What is Kendra's QBI deduction? a.$41,000. b.$54,800. c.$0. d.$40,000.
c. $0 bc taxable income > 214900 = no deduction
Byron owned stock in Blossom Corporation that he donated to a museum (a qualified charitable organization) on June 8 this year. What is the amount of Byron's deduction assuming that he had purchased the stock for $10,500 last year on August 7, and the stock had a fair market value of $13,800 when he made the donation? a.$3,300 b.$12,150 c.$10,500 d.$13,800
c. $10500
Emily, who lives in Indiana, volunteered to travel to Louisiana in March to work on a home-building project for Habitat for Humanity (a qualified charitable organization). She was in Louisiana for three weeks. She normally makes $500 per week as a carpenter's assistant and plans to deduct $1,500 as a charitable contribution. In addition, she incurred the following costs in connection with the trip: $600 for transportation, $1,200 for lodging, and $400 for meals. What is Emily's deduction associated with this charitable activity? a.$1,200 b.$1,800 c.$2,200 d.$600
c. $2200 600+1200+400= 2200
Jason and Paula are married. They file a joint return for 2021 on which they report taxable income before the QBI deduction of $200,000. Jason operates a sole proprietorship, and Paula is a partner in the PQRS Partnership. Both are a qualified trade or business and neither is a specified services business. Jason's sole proprietorship reports $150,000 of net income, W-2 wages of $45,000, and has qualified property of $50,000. Paula's partnership reports a loss for the year, and her allocable share of the loss is $40,000. The partnership reports no W-2 wages and Paula's share of the partnership's qualified property is $20,000. What is their qualified business income deduction for the year? a.$-0-. b.$30,000. c.$22,000. d.$11,750. e.None of these choices are correct.
c. $22000 200000<329800 150000x20%=30000 40000x20% = 8000 30000-8000=22000
Quinn, who is single and lives alone, is physically disabled as a result of a diving accident. To live independently, he modifies his personal residence at a cost of $30,000. The modifications included widening halls and doorways for a wheelchair, installing support bars in the bathroom and kitchen, installing a stairway lift, and rewiring so he could reach electrical outlets and appliances. Quinn pays $200 for an appraisal that places the value of the residence at $129,000 before the improvements and $140,000 after. As a result of the operation of the stairway lift, Quinn experienced an increase of $680 in his utility bills for the current year. Disregarding the AGI floor for medical expenses, how much of these expenditures qualify as medical expense deductions? a.$30,880 b.$30,680 c.$11,680 d.$34,880
c. $30680 30000+680=30680
Kevin and Shuang have two children, ages 8 and 14. In 2021 they spend $16,200 on eligible employment related expenses for the care of their children after school. Kevin earned a salary of $15,200 and Shuang earned a salary of $68,000. What is the amount of the couple's credit for child and dependent care expenses for 2021? a.$7,600 b.$8,100 c.$4,000 d.$8,000
c. $4000
In 2022, George and Martha are married and file a joint tax return claiming their two children, ages 10 and 8 as dependents. Assuming their AGI is $119,650, George and Martha's child tax credit is: a.$0. b.$3,000. c.$4,000. d.$2,000.
c. $4000 2000 each child
Ralph made the following business gifts during the year. To Robert (a key client) at Christmas: $50 To Angel (Robert's 8-year old daughter) on her birthday: 20 To Art (Ralph's secretary) on his birthday ($3 was for gift wrapping): 30 To Paige (Ralph's boss) at Christmas: 40 Presuming proper substantiation, Ralph's deduction is: a.$73. b.$0. c.$53. d.$78
c. $53
Sandra is single and does considerable business entertaining at home. Because Arthur, Sandra's 80-year-old dependent grandfather who lived with Sandra, needs medical and nursing care, he moved to Twilight Nursing Home. During the year, Sandra made the following payments on behalf of Arthur: Room at Twilight: $4,500 Meals for Arthur at Twilight: 850 Doctor and nurse fees: 700 Cable TV service for Arthur's room: 107 Total: $6,157 Twilight has medical staff in residence. Disregarding the AGI floor, how much, if any, of these expenses qualify for a medical deduction by Sandra? a.$6,157 b.$5,200 c.$6,050 d.$1,550
c. $6050 6157-107=6050
Chang is a self-employed practical nurse who works from his home. He provides nursing care for disabled persons living in their residences. During the day, he drives his car as follows. Chang's home to patient Louise: 12 Patient Louise to patient Car: 4 Patient Carl to patient Betty: 6 Patient Betty to Chang's home: 10 Chang's deductible mileage for each workday is: a.20 miles. b.12 miles. c.32 miles. d.22 miles.
c. 32miles 12+4+6+10=32
Cristiano performs services for Ryan. Which of the following factors, if any, indicates that Cristiano is an independent contractor rather than an employee? a.Ryan provides the tools used. b.Cristiano follows a specific set of instructions from Ryan to complete tasks. c.Cristiano is paid based on tasks performed. d.Ryan sets the work schedule.
c. Cristiano is paid based on tasks performed
Which of the following trips, if any, will qualify for the travel expense deduction? a.Dr. Brown, a self-employed surgeon, attends a two-day seminar on financial planning. b.Paul, a romance language high school teacher, spends summer break in France, Portugal, and Spain improving his language skills. c.Dr. Jones, a self-employed general dentist, attends a two-day seminar on developing a dental practice. d.Myrna went on a two-week vacation in Boston. While there, she visited her employer's home office to have lunch with former coworkers.
c. Dr. Jones, a self-employed general dentist, attends a two-day seminar on developing a dental practice.
Which of the following items would be an itemized deduction on Schedule A of Form 1040? a.Subscription to the Wall Street Journal. b.Job-hunting costs. c.Gambling losses to the extent of gambling winnings. d.Professional dues paid by an accountant (employed by Ford Motor Co.) to the National Association of Accountants.
c. Gambling losses to the extent of gambling winnings
What happens to the § 199A deduction if a qualified trade or business generates a loss? a.If the net amount of income, gain, deduction, and loss is less than zero, the net amount of the deduction can be carried back to a previous year or the taxpayer can elect to carry it forward. b.If the net amount of income, gain, deduction, and loss is less than zero, the net amount of the deduction is lost and is not available to carryforward or carryback. c.If the net amount of income, gain, deduction, and loss is less than zero, the net amount is treated as a loss in the succeeding year. d.None of these choices are correct.
c. If the net amount of income, gain. deduction, and loss, is less than zero, the net amount is treated as a loss in the succeeding year
Which of the following, if any, is subject to an overall limitation on meals? a.Meals provided to employees during a business meeting. b.Meals provided to employees during a training event or retreat at an off-site location. c.Meals provided at cost to employees at a cafeteria funded by the employer. d.A Fourth of July company picnic for employees.
c.Mealsprovidedatcosttoemployeesatacafeteriafundedbytheemoployer
Robert entertains several of his key clients on January 1 of the current year; total expenses were $1,220 ($60 cab fare and $1,160 club charges). The charges at the club are combined into a single charge of $1,160. Robert estimates that if charged separately, the costs would be as follows: Cover charge at supper club: $200 Dinner at club: 800 Tips to waiter: 160 Presuming proper substantiation, Robert's deduction is: a.$740. b.$1,220. c.$640. d.$0.
d. $0
Tanuja Singh is a CPA and operates her own accounting firm (Singh CPA, LLC). As a single-member LLC, she reports her accounting firm operations as a sole proprietor. Tanuja has QBI from her accounting firm of $540,000, reports W-2 wages of $156,000, and the unadjusted basis of property used in the LLC is $425,000. Tanuja is married and will file a joint tax return with her spouse. Their taxable income before the QBI deduction is $475,000, and their modified taxable income is $448,000. What is Tanuja's QBI deduction for 2021. a.$49,625. b.$78,000. c.$89,600. d.$-0-.
d. $0 475000>429800 specialized business over limit = no qbid
Darnell, age 50, is employed as an actuary. For calendar year 2021, he had AGI of $130,000 and paid the following medical expenses: Medical insurance premiums: $5,300 Doctor and dentist bills for Derrick and Jane (Darnell's parents): 7,900 Doctor and dentist bills for Darnell: 5,100 Prescribed medicines for Darnell: 830 Nonprescribed insulin for Darnell: 960 Derrick and Jane would qualify as Darnell's dependents except that they file a joint return. Darnell's medical insurance policy does not cover them. Darnell filed a claim for $4,800 of his own expenses with his insurance company in November 2021 and received the reimbursement in January 2022. What is Darnell's maximum allowable medical expense deduction for 2021? a.$0 b.$7,090 c.$20,090 d.$10,340
d. $10340 130000x7.5%=9750 5300+7900+5100+830+960=20090 20090-9750=10340
Taylor, a single taxpayer, has taxable income before the QBI deduction of $194,900 in 2021. Taylor, a CPA, operates an accounting practice as a single-member LLC (which he reports as a sole proprietorship). During 2021, his proprietorship reports net income of $150,000, W-2 wages of $125,000, and $10,000 of qualified property. What is Taylor's qualified business income deduction? a.$-0-. b.$30,000. c.$31,500. d.$12,000.
d. $12000 100%-(194900-164900)/50000=40% 150000x20%x40%=12,000
Paul, a calendar year single taxpayer, has the following information for 2021: AGI:$175,000 State income taxes: 13,500 State sales tax: 3,000 Real estate taxes:18,900 Gambling losses (gambling gains were $12,000): 6,800 Paul's allowable itemized deductions for 2021 are: a.$10,000. b.$39,200. c.$42,200. d.$16,800.
d. $16800 10000+6800=16800
Danielle is a partner in and sales manager for DG Partners, a domestic business that is not a specified service trade or business. During the tax year, she receives guaranteed payments of $250,000 from DG Partners for her services to the partnership as its sales manager. In addition, her distributive share of DG Partners' ordinary income (its only item of income or loss) was $175,000. What is Danielle's qualified business income? a.$-0-. b.$250,000. c.$425,000. d.$175,000.
d. $175000
Fran is a CPA who has a small tax practice in addition to working as the controller for a local manufacturing business. Fran runs her tax practice out of a 150-square foot office in her home where she meets clients and works on their tax returns and researches their tax issues. She meets the exclusive use test for this space. The gross income from her tax practice amounts to $7,500 for the year. Business expenses amount to $1,000. Based on square footage, $4,000 of Fran's mortgage interest and real estate taxes are allocable to the home office. The allocable portion of maintenance, utilities, and depreciation is $4,500. Assuming no other expenses related to the business were incurred, what amount of the maintenance, utilities, and depreciation is deductible by Fran? a.$0. b.$3,500. c.$4,500. d.$2,500.
d. $2500 7500-1000= 6500 6500-4000= 2500
Sang-hoon, who uses the cash method of accounting, lives in a state that imposes an income tax (including withholding from wages). On April 14, 2021, he files his state return for 2020, paying an additional $600 in state income taxes. During 2021, his withholdings for state income tax purposes amount to $3,550. On April 13, 2022, he files his state return for 2021 claiming a refund of $800. Sang-hoon receives the refund on June 3, 2022. If he itemizes deductions, how much may Sang-hoon claim as a deduction for state income taxes on his Federal income tax return for calendar year 2021 (filed in April 2022)? a.$3,350 b.$5,150 c.$3,550 d.$4,150
d. $4150 3550+600 = 4150
During the year, John (a self-employed management consultant) went from Milwaukee to Hawaii on business. Preceding a five-day business meeting, he spent four days vacationing at the beach. Excluding the vacation costs, his expenses for the trip are: Airfare: $3,200 Lodging: 900 Meals: 800 Entertainment: 600 Presuming no reimbursement, deductible expenses are: a.$3,200. b.$3,900. c.$5,500. d.$4,500.
d. $4500
Hugh, a self-employed individual, paid the following amounts during the year: Real estate tax on Iowa residence: $3,800 State income tax: 1,700 Real estate taxes on a vacation home: 2,100 Gift tax paid on gift to daughter: 1,200 State sales taxes: 1,750 State occupational license fee: 300 Property tax on value of his automobile (used 100% for business): 475 What is the maximum amount Hugh can claim as taxes in itemizing deductions from AGI? a.$8,850 b.$10,000 c.$9,625 d.$7,650
d. $7650 3800+2100+1750=7650
Pedro's child attends a school operated by the church the family attends. Pedro made a donation of $1,000 to the church in lieu of the normal registration fee of $200. In addition, Pedro paid the regular tuition of $6,000 to the school. Based on this information, what is Pedro's charitable contribution? a.$6,800 b.$0 c.$1,000 d.$800
d. $800 1000-200=800
Edna had an accident while competing in a rodeo. She sustained facial injuries that required cosmetic surgery. While having the surgery done to restore her appearance, she had additional surgery done to reshape her chin, which was not injured in the accident. The surgery to restore her appearance cost $9,000 and the surgery to reshape her chin cost $6,000. How much of Edna's surgical fees will qualify as a deductible medical expense (before application of the 7.5%-of-AGI floor)? a.$0 b.$15,000 c.$6,000 d.$9,000
d. $9000
Corey is the city sales manager for RIBS, a national fast food franchise. Every working day, Corey drives his car as follows: Home to office: 20 Office to RIBS No. 1: 15 RIBS No. 1 to No. 2: 18 RIBS No. 2 to No. 3: 13 RIBS No. 3 to home: 30 Corey renders an adequate accounting to his employer. As a result, Corey's reimburseable mileage is: a.0 miles. b.76 miles. c.66 miles. d.46 miles.
d. 46 miles 15+18+13=46
Which of the following is not allowed as an itemized deduction? a.Interest expense on a $800,000 loan incurred in 2016 to buy a principal residence. b.Cash donation to a church. c.Gambling losses to the extent of gambling winnings. d.A subscription to the Wall Street Journal to help with personal investment decisions.
d. A subscription to the Wall Street journal to help with personal investment decisions
Which of the following factors, if any, is a characteristic of independent contractor status? a.Workplace fringe benefits are not available. b.Services are performed for more than one business. c.Receipt of a Form 1099 reporting payments received. d.All of these choices are characteristic of independent contractor status.
d. All of these choices are characteristics of independent contractor status
In 2021, Boris pays a $3,800 premium for high-deductible medical insurance for himself and his family. In addition, he contributes $3,400 to a Health Savings Account. Which of the following statements is true? a.If Boris is self-employed, he may deduct $3,400 as a deduction for AGI and may include the $3,800 premium when calculating his itemized medical expense deduction. b.If Boris is an employee, he may deduct $7,200 as a deduction for AGI. c.If Boris is an employee, he may include $7,200 when calculating his itemized medical expense deduction. d.If Boris is self-employed, he may deduct $7,200 as a deduction for AGI.
d. If Boris is self-employed, he may deduct $7200 as a deduction for AGI
Tax advantages of being self-employed (rather than being an employee) include: a.The overall limitation (50%) on meals does not apply. b.An office in the home deduction (from AGI) is available. c.The self-employment tax is lower than the Social Security tax. d.Job-related expenses are deductions for AGI.
d. Job-related expenses are deductions for AGI
Luis is the sole shareholder of a regular C corporation, and Eduardo owns a proprietorship. In the current year, both businesses make a profit of $80,000, and each owner withdraws $50,000 from his business. With respect to this information, which of the following statements is incorrect? a.Eduardo must report $80,000 of income on his return. b.Luis's corporation must pay income tax on $80,000. c.Eduardo's proprietorship is not required to pay income tax on $80,000. d.Luis must report $80,000 of income on his return.
d. Luis must report $80,000 of income on his return
Which of the following correctly reflects current rules regarding estimated tax payments for individuals? a.Employees are not subject to the estimated tax payment provisions. b.Married taxpayers may not make joint estimated tax payments unless they file a joint income tax return. c.Any penalty imposed for underpayment is deductible for income tax purposes. d.No quarterly payments are required if the taxpayer's estimated tax is under $1,000.
d. No quarterly payments are required if the taxpayer's estimated tax is under $1000
An individual in a specified service business, such as accounting, with taxable income over the threshold amounts ($214,900 for single or head-of-household taxpayers, or $429,800 if married filing jointly in 2021), will not lose the QBI deduction on such income if: a.Taxable income exceeds the thresholds due to income of a spouse. b.Taxable income exceeds the thresholds because of net capital gain income. c.Taxable income did not exceed the thresholds in the prior three years. d.None of these choices are correct.
d. None of these choices are correct
For which of the following situations, if any, is the automatic mileage available? a.A limousine the owner rents out for special occasions (e.g., weddings, high school proms). b.An auto that belongs to the taxpayer's mother. c.One of seven cars used to deliver pizzas. d.None of these choices are correct.
d. None of these choices are correct
Your friend Scotty informs you that in 2021 he received a tax-free reimbursement of some medical expenses he paid in 2020. Which of the following statements best explains why Scotty is not required to report the reimbursement in gross income? a.Scotty itemized deductions in 2020. b.Scotty did not itemize deductions in 2021. c.Scotty itemized deductions in 2021. d.Scotty did not itemize deductions in 2020.
d. Scotty did not itemize deductions in 2020
A worker may prefer to be treated as an independent contractor (rather than an employee) for which of the following reasons: a.All of the self-employment tax is deductible for income tax purposes. b.A Schedule C does not have to be filed. c.Avoids the overall limitation (50%) as to business meals. d.Work-related expenses of an independent contractor are deductible for AGI.
d. Work-related expenses of an independent contractor are deductible for AGI
When using the automatic mileage method, which of the following expenses, if any, also can be claimed? a.Engine tune-up. b.Interest on automobile loan. c.MACRS depreciation. d.Parking.
d. parking
Aaron is the sole shareholder and CEO of ABC, Inc., an S corporation that is a qualified trade or business. During the current year, ABC has net income of $325,000 after deducting Aaron's $100,000 salary. In addition to his compensation, ABC pays Aaron dividends of $250,000. What is Aaron's qualified business income? a.$-0-. b.$250,000. c.$100,000. d.$325,000.
d.$325000
An employer calculates the amount of income tax withheld from salary or wages based on the information an employee provides on the: a.Form W-2. b.Form W-4. c.Form 941. d.Form W-3.
formW-4
Tom, age 48, is advised by his family physician that he needs back surgery to correct a problem from his last back surgery. Since Tom is in a wheel chair, he needs his wife, Jean, to accompany him on his trip to Rochester, MN, for in-patient treatment at the Mayo Clinic, which specializes in this type of surgery. Tom incurred the following costs in 2021: Round-trip airfare ($350 each): $ 700 Jean's hotel in Rochester for four nights ($95 per night): 380 Jean's meals while in Rochester: 105 Tom's medical treatment: 3,500 Tom's prescription medicine: 600 Compute Tom's allowable medical expenses for the trip (before application of the AGI floor). a.$5,180 b.$4,000 c.$5,285 d.$5,000
lodging is $50 per night 50x4=200 700+200+3500+600= 5000
