Question 1

Which of the following is not considered an ordinary expense for a rental activity?

Accepted Answer

A) Property taxes 
B) Advertising 
C) Insurance 
D) All of these are deductible as ordinary expense 
A) Property taxes 
B) Advertising 
C) Insurance 
D) All of these are deductible as ordinary expense

Question 2

Alex,Ellen and Nicolas are equal partners in a local restaurant.The restaurant reports the following items for the current year:   Each partner receives a Schedule K-1 with one-third of the preceding items reported to him/her.How must each individual report these results on his/her Form 1040?

Accepted Answer

A) $100,000 income on Schedule E; $50,000 investment expense on Schedule A 
B) $300,000 income on Schedule E; $150,000 investment expense on Schedule A 
C) $300,000 income on Schedule E; $50,000 investment expense on Schedule A 
D) $257,667 income on Schedule E; $50,000 investment expense on Schedule A 
A) $100,000 income on Schedule E; $50,000 investment expense on Schedule A 
B) $300,000 income on Schedule E; $150,000 investment expense on Schedule A 
C) $300,000 income on Schedule E; $50,000 investment expense on Schedule A 
D) $257,667 income on Schedule E; $50,000 investment expense on Schedule A

Question 3

A property that has been rented for 180 days and used for personal use for 16 days should be categorized as:

Accepted Answer

A) personal/rental 
B) primarily personal 
C) primarily rental 
D) all of these are correct 
A) personal/rental 
B) primarily personal 
C) primarily rental 
D) all of these are correct

Question 4

Jane and Don own a ski chalet in Lake Tahoe,NV and rented it for 12 days for $8,000.The rest of the year,the chalet was used by them and their friends and family.What is the proper tax treatment of the $8,000?

Accepted Answer

A) None of the rental income is included in gross income 
B) The amount should be reported as other income on Form 1040 
C) The amount should be reported on Schedule C 
D) Should be reported on Schedule E 
A) None of the rental income is included in gross income 
B) The amount should be reported as other income on Form 1040 
C) The amount should be reported on Schedule C 
D) Should be reported on Schedule E

Question 5

Which of the following is not considered a flow-through entity?

Accepted Answer

A) Sole proprietorship. 
B) S corporation. 
C) Partnership. 
D) Limited liability company. 
A) Sole proprietorship. 
B) S corporation. 
C) Partnership. 
D) Limited liability company.

Question 6

Nathan owns a tri-plex in Santa Maria,California.He lives in one and rents the other two remaining units.All three units are identical.He incurred the following expenses for the entire building:   How much in rental expenses can Nathan deduct against the rental income on a Schedule E in the current year without considering any passive loss limitations)? Round your answers to the nearest whole dollar)

Accepted Answer

A) $44,200 
B) $14,733 
C) $20,000 
D) $29,467 
A) $44,200 
B) $14,733 
C) $20,000 
D) $29,467

Question 7

A property that has been rented for 120 days and used for personal use for 13 days should be categorized as:

Accepted Answer

A) Primarily personal 
B) Personal/rental 
C) Primarily rental 
D) None of these 
A) Primarily personal 
B) Personal/rental 
C) Primarily rental 
D) None of these

Question 8

Joey and Susan rented their house for 2 weeks and used it for personal use for the remainder of the year.The house is considered personal/rental property.

Accepted Answer

A) True 
 B)False

Question 9

Explain the three categories that a rental activity may fall under if used for both personal and rental purposes.How are the categories determined?

Accepted Answer

Rental property can be categorized as pr

Question 10

Which of the following entityies)isare)considered flow-through entityies)?

Accepted Answer

A) C corporation. 
B) Non-profit corporations. 
C) Sole proprietorship. 
D) Estates. 
A) C corporation. 
B) Non-profit corporations. 
C) Sole proprietorship. 
D) Estates.

Question 11

Which of the following statements is true with regard to the reporting of royalty income?

Accepted Answer

A) Royalty income reported on Schedule E is subject to self-employment tax. 
B) It can be reported on Schedule C but generally on Schedule E. 
C) It must be reported on Schedule E only. 
D) It must be reported on Schedule C only. 
A) Royalty income reported on Schedule E is subject to self-employment tax. 
B) It can be reported on Schedule C but generally on Schedule E. 
C) It must be reported on Schedule E only. 
D) It must be reported on Schedule C only.

Question 12

Which of the following is not considered a capital improvement for a rental activity?

Accepted Answer

A) Repair of a leaky water pipe 
B) Addition of a bathroom 
C) Replacement of the roof 
D) New landscaping 
A) Repair of a leaky water pipe 
B) Addition of a bathroom 
C) Replacement of the roof 
D) New landscaping

Question 13

All rental properties are depreciated using the straight-line method over 39 years.

Accepted Answer

A) True 
 B)False

Question 14

Residential rental properties are depreciated using the straight-line method over 27½ years.

Accepted Answer

A) True 
 B)False

Question 15

Flow-through entities supply each owner at the end of the year with a Schedule E,indicating his/her income and expenses to report.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is true concerning vacation home properties?

Accepted Answer

A) Report all income and expenses for a personal/rental property and the net amount reported may be either net income or net loss. 
B) A property categorized as primarily personal is one rented for zero days. 
C) A property rented for 15 days or more and used for personal use for no more than 14 days is categorized as primarily rental. 
D) A property rented for 15 days or more and used for personal use for more than 14 days is categorized as primarily personal. 
A) Report all income and expenses for a personal/rental property and the net amount reported may be either net income or net loss. 
B) A property categorized as primarily personal is one rented for zero days. 
C) A property rented for 15 days or more and used for personal use for no more than 14 days is categorized as primarily rental. 
D) A property rented for 15 days or more and used for personal use for more than 14 days is categorized as primarily personal.

Question 17

When royalties are paid,at the end of the year the payer sends the recipient a Form ________.

Accepted Answer

A) 1099-MISC 
B) Schedule K-1 
C) Schedule C 
D) 1099-INT 
A) 1099-MISC 
B) Schedule K-1 
C) Schedule C 
D) 1099-INT

Question 18

Katie and Mike own a home in Newport Beach,California.During the year,they rented the house for 80 days for $24,000 and used it for personal use for 30 days.The expenses for the house included $20,000 in mortgage interest,$8,500 in property taxes,$6,000 in utilities,$2,000 in maintenance,and $12,000 in depreciation.What is the deductible loss for the rental of their home without considering the passive loss limitation)? Use the IRS method for allocation of expenses.

Accepted Answer

A) $27,500 net loss. 
B) $0. 
C) $5,000 net income. 
D) $17,414 net loss. 
A) $27,500 net loss. 
B) $0. 
C) $5,000 net income. 
D) $17,414 net loss.

Question 19

Lupe rented her personal residence for 13 days to summer vacationers for $3,800.She lived in the home for the rest of the year.She has AGI of $95,000 excluding the rental income.Related expenses for Lupe's personal residence for the year include these:   What is Lupe's AGI after taking into consideration the rental income and related expenses?

Accepted Answer

A) $115,000 
B) $95,000 
C) $98,098 
D) $98,800 
A) $115,000 
B) $95,000 
C) $98,098 
D) $98,800

Question 20

Robert and Melissa own a home in Big Bear Lake,California.During the year,they rented it for 55 days for $11,000 and used it for 12 days for personal use.The expenses for the house included $12,000 in mortgage interest,$2,000 in property taxes,$1,000 in utilities,$600 in maintenance,and $4,000 in depreciation.What is their income or loss from their cabin without considering the passive loss limitation)? Use the IRS method for allocation of expenses.Round your answer to the nearest whole number.)

Accepted Answer

A) $5,090 net loss. 
B) $11,000 net income. 
C) $2,947 net loss. 
D) $0. 
A) $5,090 net loss. 
B) $11,000 net income. 
C) $2,947 net loss. 
D) $0.

Which of the following is not considered an ordinary expense for a rental activity?

Alex,Ellen and Nicolas are equal partners in a local restaurant.The restaurant reports the following items for the current year: Each partner receives a Schedule K-1 with one-third of the preceding items reported to him/her.How must each individual report these results on his/her Form 1040?

A property that has been rented for 180 days and used for personal use for 16 days should be categorized as:

Jane and Don own a ski chalet in Lake Tahoe,NV and rented it for 12 days for $8,000.The rest of the year,the chalet was used by them and their friends and family.What is the proper tax treatment of the $8,000?

Which of the following is not considered a flow-through entity?

A property that has been rented for 120 days and used for personal use for 13 days should be categorized as:

Joey and Susan rented their house for 2 weeks and used it for personal use for the remainder of the year.The house is considered personal/rental property.

Explain the three categories that a rental activity may fall under if used for both personal and rental purposes.How are the categories determined?

Which of the following entityies)isare)considered flow-through entityies)?

Which of the following statements is true with regard to the reporting of royalty income?

Which of the following is not considered a capital improvement for a rental activity?

All rental properties are depreciated using the straight-line method over 39 years.

Residential rental properties are depreciated using the straight-line method over 27½ years.

Flow-through entities supply each owner at the end of the year with a Schedule E,indicating his/her income and expenses to report.

Which of the following statements is true concerning vacation home properties?

When royalties are paid,at the end of the year the payer sends the recipient a Form ________.

Introduction to Taxation, the Income Tax Formula, and Form 1040ez

Expanded Tax Formula, forms 1040a and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income Line 12 of Form 1040 and Schedule C

Capital Gains and Other Sales of Property Schedule D and Form 4797

Tax Credits Form 1040, lines 46 Through 54 and Lines 66a Through 73

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities

Special Property Transactions

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Corporate Taxation

Filters

Exam 8: Rental Property, royalties, and Income From Flow-Through Entities Line 17, form 1040, and Schedule E

Which of the following is not considered an ordinary expense for a rental activity?

Alex,Ellen and Nicolas are equal partners in a local restaurant.The restaurant reports the following items for the current year: Each partner receives a Schedule K-1 with one-third of the preceding items reported to him/her.How must each individual report these results on his/her Form 1040?

A property that has been rented for 180 days and used for personal use for 16 days should be categorized as:

Jane and Don own a ski chalet in Lake Tahoe,NV and rented it for 12 days for $8,000.The rest of the year,the chalet was used by them and their friends and family.What is the proper tax treatment of the $8,000?

Which of the following is not considered a flow-through entity?

A property that has been rented for 120 days and used for personal use for 13 days should be categorized as:

Joey and Susan rented their house for 2 weeks and used it for personal use for the remainder of the year.The house is considered personal/rental property.

Explain the three categories that a rental activity may fall under if used for both personal and rental purposes.How are the categories determined?

Which of the following entityies)isare)considered flow-through entityies)?

Which of the following statements is true with regard to the reporting of royalty income?

Which of the following is not considered a capital improvement for a rental activity?

All rental properties are depreciated using the straight-line method over 39 years.

Residential rental properties are depreciated using the straight-line method over 27½ years.

Flow-through entities supply each owner at the end of the year with a Schedule E,indicating his/her income and expenses to report.

Which of the following statements is true concerning vacation home properties?

When royalties are paid,at the end of the year the payer sends the recipient a Form ________.

Introduction to Taxation, the Income Tax Formula, and Form 1040ez

Expanded Tax Formula, forms 1040a and 1040, and Basic Concepts

Gross Income: Inclusions and Exclusions

Adjustments for Adjusted Gross Income

Itemized Deductions

Self-Employed Business Income Line 12 of Form 1040 and Schedule C

Capital Gains and Other Sales of Property Schedule D and Form 4797

Tax Credits Form 1040, lines 46 Through 54 and Lines 66a Through 73

Payroll Taxes

Retirement and Other Tax-Deferred Plans and Annuities

Special Property Transactions

At-Riskpassive Activity Loss Rules and the Individual Alternative Minimum Tax

Partnership Taxation

Corporate Taxation

Filters