Question 1

Nikeya sells land (adjusted basis of $120,000)to her adult son,Shamed,for its appraised value of $95,000.Which of the following statements is correct?

Accepted Answer

A)  Nikeya's recognized loss is $25,000 ($95,000 amount realized - $120,000 adjusted basis). 
B)  Shamed's adjusted basis for the land is $120,000 ($95,000 cost + $25,000 disallowed loss for Nikeya). 
C)  If Shamed subsequently sells the land for $112,000, he has no recognized gain or loss. 
D)  Only a. and b. are correct. 
E)  a., b., and c. are correct. 
A)  Nikeya's recognized loss is $25,000 ($95,000 amount realized - $120,000 adjusted basis). 
B)  Shamed's adjusted basis for the land is $120,000 ($95,000 cost + $25,000 disallowed loss for Nikeya). 
C)  If Shamed subsequently sells the land for $112,000, he has no recognized gain or loss. 
D)  Only a. and b. are correct. 
E)  a., b., and c. are correct.

Question 2

Beulah's personal residence has an adjusted basis of $450,000 and a fair market value of $390,000.Beulah converts the property to rental use on November 1,2012.The vacation home rules that limit the amount of the deduction to the rental income will apply and the adjusted basis for depreciation is $390,000.

Accepted Answer

A) True 
 B)False

Question 3

Bridgett's son,Hubert,is $10,000 in arrears on his residential mortgage payments.Of the $10,000,$7,500 represents interest and $2,500 represents principal.

Accepted Answer

The answer of Bridgett's son,Hubert,is $10,000 in arrears on his...

Question 4

Trade of business expenses are classified as deductions for AGI.Section 212 expenses,barring certain exceptions,are classified as deductions from AGI.What are these exceptions?

Accepted Answer

The normal classification for § 212 expe

Question 5

None of the prepaid rent paid on November 1 by a calendar year cash basis taxpayer for the next 18 months is deductible in the current period.

Accepted Answer

A) True 
 B)False

Question 6

Mattie and Elmer are separated and are in the process of obtaining a divorce.They incur legal fees for their respective attorneys with the expenses being itemized as follows:
   Although there is no requirement that he do so,Elmer pays Mattie's lawyer as a gesture of the positive feelings he still has for her.

Accepted Answer

The answer of Mattie and Elmer are separated and are...

Question 7

The portion of property tax on a vacation home that is attributable to personal use is an itemized deduction.

Accepted Answer

A) True 
 B)False

Question 8

During the year,Martin rented his vacation home for three months and spent one month there.Gross rental income from the property was $5,000.Martin incurred the following expenses: mortgage interest,$3,000; real estate taxes,$1,500; utilities,$800; maintenance,$500; and depreciation,$4,000.Compute Martin's allowable deductions for the vacation home.

Accepted Answer

Since the vacation home is rented for 15

Question 9

If a taxpayer operated an illegal business (not drug trafficking),what expenses can be deducted and what expenses are disallowed?

Accepted Answer

The usual expenses of operatin

Question 10

Briefly explain why interest on money borrowed to buy tax-exempt municipal bonds is disallowed as a deduction.

Accepted Answer

Because the interest income on municipal

Question 11

Depending on the nature of the expenditure,expenses incurred in a trade or business may be deductible for or from AGI.

Accepted Answer

A) True 
 B)False

Question 12

If a residence is used primarily for personal use (rented for fewer than 15 days per year),which of the following is correct?

Accepted Answer

A)  No income is included in AGI. 
B)  No expenses are deductible. 
C)  Expenses must be allocated between rental and personal use. 
D)  Only a. and b. are correct. 
E)  a., b., and c. are correct. 
A)  No income is included in AGI. 
B)  No expenses are deductible. 
C)  Expenses must be allocated between rental and personal use. 
D)  Only a. and b. are correct. 
E)  a., b., and c. are correct.

Question 13

Marge sells land to her adult son,Jason,for its $20,000 appraised value.Her adjusted basis for the land is $25,000.Marge's recognized loss is $0 and Jason's adjusted basis for the land is $25,000 ($20,000 cost + $5,000 disallowed loss of Marge).

Accepted Answer

A) True 
 B)False

Question 14

A vacation home at the beach which is rented for 170 days and used personally for 16 days is classified in the personal/rental use category.

Accepted Answer

A) True 
 B)False

Question 15

Janice is single,had gross income of $38,000,and incurred the following expenses:   Her AGI is:

Accepted Answer

A)  $21,300. 
B)  $28,800. 
C)  $32,800. 
D)  $35,500. 
E)  $37,800. 
A)  $21,300. 
B)  $28,800. 
C)  $32,800. 
D)  $35,500. 
E)  $37,800.

Question 16

Larry,a calendar year cash basis taxpayer,has the following transactions:   Based on this information,Larry has:

Accepted Answer

A)  AGI of $46,500. 
B)  AGI of $51,000. 
C)  AGI of $60,000. 
D)  Deduction for medical expenses of $0. 
E)  None of the above. 
A)  AGI of $46,500. 
B)  AGI of $51,000. 
C)  AGI of $60,000. 
D)  Deduction for medical expenses of $0. 
E)  None of the above.

Question 17

A taxpayer who claims the standard deduction cannot also deduct expenses that are classified as deductions from AGI.

Accepted Answer

A) True 
 B)False

Question 18

Legal fees incurred in connection with a criminal defense are not deductible even if the crime is associated with a trade or business.

Accepted Answer

A) True 
 B)False

Question 19

If an activity involves horses,a profit in at least two of seven consecutive years meets the presumptive rule of § 183.

Accepted Answer

A) True 
 B)False

Question 20

In determining whether an activity should be classified as a business or as a hobby,the satisfaction of the presumption (i.e.,profit in at least 3 out of 5 years)ensures treatment as a business.

Accepted Answer

A) True 
 B)False

Nikeya sells land (adjusted basis of $120,000)to her adult son,Shamed,for its appraised value of $95,000.Which of the following statements is correct?

Bridgett's son,Hubert,is $10,000 in arrears on his residential mortgage payments.Of the $10,000,$7,500 represents interest and $2,500 represents principal.

Trade of business expenses are classified as deductions for AGI.Section 212 expenses,barring certain exceptions,are classified as deductions from AGI.What are these exceptions?

None of the prepaid rent paid on November 1 by a calendar year cash basis taxpayer for the next 18 months is deductible in the current period.

The portion of property tax on a vacation home that is attributable to personal use is an itemized deduction.

If a taxpayer operated an illegal business (not drug trafficking),what expenses can be deducted and what expenses are disallowed?

Briefly explain why interest on money borrowed to buy tax-exempt municipal bonds is disallowed as a deduction.

Depending on the nature of the expenditure,expenses incurred in a trade or business may be deductible for or from AGI.

If a residence is used primarily for personal use (rented for fewer than 15 days per year),which of the following is correct?

Marge sells land to her adult son,Jason,for its $20,000 appraised value.Her adjusted basis for the land is $25,000.Marge's recognized loss is $0 and Jason's adjusted basis for the land is $25,000 ($20,000 cost + $5,000 disallowed loss of Marge).

A vacation home at the beach which is rented for 170 days and used personally for 16 days is classified in the personal/rental use category.

Janice is single,had gross income of $38,000,and incurred the following expenses: Her AGI is:

Larry,a calendar year cash basis taxpayer,has the following transactions: Based on this information,Larry has:

A taxpayer who claims the standard deduction cannot also deduct expenses that are classified as deductions from AGI.

Legal fees incurred in connection with a criminal defense are not deductible even if the crime is associated with a trade or business.

If an activity involves horses,a profit in at least two of seven consecutive years meets the presumptive rule of § 183.

In determining whether an activity should be classified as a business or as a hobby,the satisfaction of the presumption (i.e.,profit in at least 3 out of 5 years)ensures treatment as a business.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Tax Formula and Tax Determination; an Overview of Property Transactions

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, cost Recovery, amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Alternative Minimum Tax

Tax Credits and Payment Procedures

Property Transactions: Determination of Gain or Loss and Basis Considerations

Property Transactions: Nontaxable Exchanges

Property Transactions: Capital Gains and Losses

Property Transactions: Section 1231 and Recapture Provisions

Accounting Periods and Methods

Deferred Compensation

Corporations and Partnerships

Filters

Exam 6: Deductions and Losses: in General

Nikeya sells land (adjusted basis of $120,000)to her adult son,Shamed,for its appraised value of $95,000.Which of the following statements is correct?

Bridgett's son,Hubert,is $10,000 in arrears on his residential mortgage payments.Of the $10,000,$7,500 represents interest and $2,500 represents principal.

Trade of business expenses are classified as deductions for AGI.Section 212 expenses,barring certain exceptions,are classified as deductions from AGI.What are these exceptions?

None of the prepaid rent paid on November 1 by a calendar year cash basis taxpayer for the next 18 months is deductible in the current period.

The portion of property tax on a vacation home that is attributable to personal use is an itemized deduction.

If a taxpayer operated an illegal business (not drug trafficking),what expenses can be deducted and what expenses are disallowed?

Briefly explain why interest on money borrowed to buy tax-exempt municipal bonds is disallowed as a deduction.

Depending on the nature of the expenditure,expenses incurred in a trade or business may be deductible for or from AGI.

If a residence is used primarily for personal use (rented for fewer than 15 days per year),which of the following is correct?

Marge sells land to her adult son,Jason,for its $20,000 appraised value.Her adjusted basis for the land is $25,000.Marge's recognized loss is $0 and Jason's adjusted basis for the land is $25,000 ($20,000 cost + $5,000 disallowed loss of Marge).

A vacation home at the beach which is rented for 170 days and used personally for 16 days is classified in the personal/rental use category.

Janice is single,had gross income of $38,000,and incurred the following expenses: Her AGI is:

Larry,a calendar year cash basis taxpayer,has the following transactions: Based on this information,Larry has:

A taxpayer who claims the standard deduction cannot also deduct expenses that are classified as deductions from AGI.

Legal fees incurred in connection with a criminal defense are not deductible even if the crime is associated with a trade or business.

If an activity involves horses,a profit in at least two of seven consecutive years meets the presumptive rule of § 183.

In determining whether an activity should be classified as a business or as a hobby,the satisfaction of the presumption (i.e.,profit in at least 3 out of 5 years)ensures treatment as a business.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Tax Formula and Tax Determination; an Overview of Property Transactions

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, cost Recovery, amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Alternative Minimum Tax

Tax Credits and Payment Procedures

Property Transactions: Determination of Gain or Loss and Basis Considerations

Property Transactions: Nontaxable Exchanges

Property Transactions: Capital Gains and Losses

Property Transactions: Section 1231 and Recapture Provisions

Accounting Periods and Methods

Deferred Compensation

Corporations and Partnerships

Filters