The percentage of passive losses that may offset non passive income for 2010 is

1. The percentage of passive losses that may offset non passive income for 2010 is:
10%
0%
100%
The percentage varies depending on the level of AGI.
Question 2
1. ***** ***** started a new business as a real estate agent. He formed RJ Company, LLC to conduct his new business on beginning February 1, 2010 and began seeking clients. He wrote his first listing on March 21 and closed his first sale on May 9, 2010. He used his SUV purchased three years ago and used it as his personal automobile. When he began his new business, he used the SUV 100 percent for business. Robert paid $42,000 when he purchased the SUV and on February 1, 2010 the fair market value (FMV. was $28,000). What is the maximum amount of depreciation which Robert may claim on his 2010 tax return on the SUV?
$5,040
$28,000
$5,600
$2,800
Question 3
1. Compute depreciation on the following residential rental income property. Property purchased and placed in service on June 15, 2008. The total purchase price was $285,000 of which $75,000 was allocated to the cost of the underlying land. Compute the depreciation for 2008 and 2009.
2008 - $3,939; 2009 - $8,773
2008 - $3,939; 2009 - $17,546
2008 - $3,637; 2009 - $17,546
2008 - $3,939; 2009 - $7,273
Question 4
1. All of the outstanding stock of a closely held " C" corporation is owned equally by Evelyn Humo and Steve Bufusno. In 2010, the corporation generates taxable income of $20,000 from its active business activities. In addition, it earns $20,000 of interest from investments and incurs a $40,000 loss from a passive activity. How much income does the "C" corporation report for 2010?
None of the above
$20,000 of portfolio income
$40,000 taxable income and $40,000 passive loss.
$10,000 of portfolio income
Question 5
1. If an expenditure is part business-related and part personal:
Only the business-related portion of the expenditure is deductible for tax purposes.
The personal portion of the expenditure may be deductible for tax purposes.
No part of the expenditure is deductible for tax purposes.
The entire expenditure is deductible for tax purposes.
Question 6
1. Fines and penalties paid to the government for the violation of a law are:
Deductible if reasonable in amount
Deductible if ordinary and necessary
Not deductible for tax purposes
Generally deductible for tax purposes as business expenses
Question 7
1. John Mapp dies in 2009 with passive activity property having an adjusted basis of $50,000, suspended losses of $20,000, and a fair market value at the date of Mr. Mapp's death of $77,000. How much suspended loss can be taken on Mr. Mapp's final Form 1040 return?
$0.
$7,000
$77,000
$20,000
Question 8
1. What is the MACRS depreciation on the following assets:
Property Description Purchase Date Cost
Business Equipment Mar. 2010 $85,500 (5 year property);
Office Furniture July, 2010 $3,000 (7-year property);
Office Building Feb., 2010 $185,000;
Disregard any Sec. 179 deduction and land cost. What is the 2010 depreciation deduction for each of the above?
Bus. Equip.= $8,550; Office Furn. = $656; Office Bldg. = $8,300
Bus. Equip. = $17,100; Office Furn. = $428; Office Bldg. = $4,150
Bus. Equip. = $8,550; Office Furn. = $656; Office Bldg. = $8,300
Bus. Equip. = $17,100; Office Furn. = $328; Office Bldg. = $4,150
Question 9
1. Roger Dodger was involved in a collision while driving his auto during 2010. The auto originally cost $17,500 when purchased in 2005. The auto had been appraised just shortly before the accident to be $7,500. Shortly after the accident the auto was traded in on a new car. The allowed trade-in value was $1,300. Roger had AGI in 2010 of $30,000. How much can Roger deduct on his 2010 income tax return for a casualty loss?
$5,000
$3,100
$10,000
$6,200
Question 10
1. Which of the following investment related expenses are deductible for AGI?
Investment custodial fees
Rent and royalty expenses
Investment Counseling fees
Safe deposit box rentals
Question 11
1. Elliott Ward made the following contributions during the year 2010:
Cash to United Way $5,000
Land to Boy Scouts to be used as a Summer camp:
Cost - $20,000; Fair Market Value - $30,000
Painting to a 20 percent charity for permanent Display in foundation's public gallery: Cost - $5,000, Fair Market Value - $7,000
Cash to various needy persons in town - $3,000
Elliott had adjusted gross income of $60,000.
What is his charitable contribution deduction for the year and carryover to future tax year(s)
$25,000-50% deduction; $5,000 of 20% deduction and $2,000 of 20% carryforward deduction.
$35,000- 50% deduction; $7,000 of 20% carryforward deduction.
$30,000 - 50% deduction; $5,000 of 50% carryforward and $7,000 of 20% carryforward.
$5,000 - 50% & $18,000 of 30% , & $7,000 of 20% of AGI deduction. Thus a $30,000 total deduction and a carryover of $12,000 -30% AGI deduction to future tax years.
Question 12
1. For MACRS depreciation purposes, autos and light-duty trucks are depreciated over what period?
Fifteen years
Ten years
Five years
Three years
Question 13
1. ***** ***** uses a dry cleaning machine in her business, and it was completely destroyed by fire. At the time of the fire, the adjusted basis was $20,000 and its fair market value (FMV) was $18,000. How much is Ann's loss?
None of the above
$20,000
$2,000
$18,000
Question 14
1. John and Mary file a joint tax return and both under age 65. Their gross wages are $50,000, interest income of $2,500 and gross rents from a rental property of $4,500.
They have deductible expenses as follows:
Alimony to John's ex-wife of $5,000
Charitable Deductions 2,000
Contribution to a traditional IRA 2,000
Expenses paid on rental property 5,000
Interest and taxes on personal residence 7,000
State income tax paid 1,200
What is their AGI?
$43,000
$45,000
$35,000
$33,000
$28,000
Question 15
1. Which of the following statements is incorrect?
If an individual is a non-active participant in a rental real estate activity, up to $25,000 of losses can be used to offset non passive income.
If an individual rents out a vacation home for more than 14 days and does not use it excessively for personal purposes, losses are allowed to be deducted from AGI.
If a dwelling is classified as a personal residence, rental losses are not deductible.
A vacation home becomes a personal residence when its owner uses it more than the greater of 14 days or 10 percent of the number of rental days.
Question 16
1. Martha Waters has $25,600 of investment interest expense during 2010 and has $7,000 of interest income and $3,800 of dividend income. How much of the investment interest expense will be deductible by Martha in her 2010 income tax return?
None of the above
$3,800
$10,800
$17,600
$25,600
Question 17
1. Which of the following is not a passive activity?
Owning a working interest in oil and gas properties
Owning a limited partnership interest in a real estate limited partnership
Having rental condos
Owning a business and not materially participating
Question 18
1. For the current year, Al Johnson used his personal car for both business and personal purposes. He drove 18,000 miles total during the year: 10,000 miles for business-related purposes and 8,000 miles for personal use.
Following are the total car expenses incurred during the year:
Gas $7,900
Maintenance 900
Repairs & depreciation 900
Car washes 500
Total Expenses $10,200
Based on the above information what is Al's allowable business expense deduction?
$5,100
$5,667
$5,500
$4,676
Question 19
1. Which of the following unreimbursed employee expenses is deductible for adjusted gross income?
None of the above
Meals and entertainment expenses with customers
Travel Expenses
Union Dues
Transportation expenses
Question 20
1. To be deductible for tax purposes, trade or business expenses must be:
All of the above
Related to an activity which is deemed to be a trade or business
Reasonable in amount
Ordinary and necessary
Question 21
1. John and ***** ***** incurred the following medical expenses for 2010: Hospital and Doctor bills $2,800
Prescription Drugs 200
Medical Insurance Premiums 400
In addition they incurred the following medical expenses for John's mother who is totally dependent upon and lives with John and Mary:
Cosmetic Surgery (face lift) $1,400
Doctor bills 600
Prescription Drugs 100
John and Mary have $35,000 AGI for 2010. What is their allowable deduction for medical expenses for 2010?
$2,875
$5,500
$1,475
$4,100
Question 22
1. The "Cohan rule" has to do with:
Cash method of accounting
Substantiation of deductions
Debts of another taxpayer
Tax accounting methods
Question 23
1. Billy Ray owns several parcels of rental real estate, and he actively participates in managing the properties. His total loss from these activities in 2010 is $30,000. Assuming that his AGI for 2010 is $110,000, what is the allowable deduction from these properties in 2010?
$30,000
$20,000
$15,000
$0.
Question 24
1. Which of the following is/are included as an Itemized Deduction in the personal income tax return and will not be treated as a tax preference item for Alternative Minimum Tax (AMT)?
1. A property donation to a qualifying charitable organization
2. Real estate taxes on a taxpayer's second home
3. An expense associated with partnership property in which the taxpayer
is a 40% owner
4. Investment expenses deductible and subject to the 2% of AGI limit
5. State income taxes paid during the income tax year.
#2 only
#1 only
#1 and #2 only
All are correct
Question 25
1. Bill Smith owns and operates an automotive repair shop in Kingsville. All of the following are allowable business expense deductions, except:
1. Business advertising expenses.
2. Interest on home mortgage.
3. Membership dues to the Automotive Repair Association for small
business.
4. Bank service charges on business checking account.
5. Christmas gifts to customers of property of which the value is less than
$25 each
6. Utilities for the shop
7. Rent paid for business location
1, 3, 4, 5, 6, 7
1, 3, 5, 6, and 7
1, 2, 4, 6, and 7
All are deductible business expenses