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All Textbook Solutions for Income Tax Fundamentals 2020

1MCQ Which of the following tax forms are used by individuals in 2019? 1040 A 1040EZ 1040SR 1120 3MCQ 4MCQ Which of the following is a deduction for adjusted gross income in 2019? Personal casualty losses Medical expenses Student loan interest Charitable contributions None of the above 6MCQ 7MCQ 8MCQ Joan, who was divorced in 2019, had filed a joint tax return with her husband in 2018. During 2019, she did not remarry and continued to maintain her home in which her five dependent children lived. In the preparation of her tax return for 2019, Joan should file as: A single individual A qualifying widow(er) Head of household Married, filing separately None of the above 10MCQ 11MCQ Margaret, age 65, and John, age 62, are married with a 23 -year-old daughter who lives in their home. They provide over half of their daughter's support, and their daughter earned $4,100 this year from a part-time job. Their daughter is not a full-time student. The daughter can/cannot be claimed as a dependent because: She cannot be claimed because she is over 19 and not a full-time student. She can be claimed because she is a qualifying child. She can be claimed because she is a qualifying relative. She cannot be claimed because she fails the gross income test.13MCQ Robin and Howie file married filing jointly and have a 13 -year-old daughter. They also provide all the support for Howie's 82 -year-old mother, who lives in a nursing home nearby. The amount of the combined child tax credit and other dependent credit for Robin and Howie is: $0 $1,000 $1,500 $2,000 $2,500 15MCQ 16MCQ Taxpayers who are blind get the benefit of: An additional exemption An additional amount added to their standard deduction An additional amount added to their itemized deductions None of the above Which of the following is not a capital asset to an individual taxpayer? Stocks A 48-foot sailboat Raw land held as an investment Inventory in the taxpayer's business All of the above are capital assets Jayne purchased General Motors stock 6 years ago for $20,000. In the current year, she sells the stock for $35,000. What is Jayne's gain or loss? $15,000 long-term gain $15,000 short-term gain $15,000 ordinary loss $15,000 extraordinary gain No gain or loss is recognized on this transaction.20MCQ Shannon, a single taxpayer, has a long-term capital loss of $7,000 on the sale of bonds in 2019 and no other capital gains or losses. Her taxable income without this transaction is $47,000. What is her taxable income considering this capital loss?a. $40,000 b. $44,000 c. $47,000 d. $55,000 e. Some other amount 22MCQ Access the Internet and go to www.irs.gov and select News in the upper right hand corner (on mobile devices, select Menu in the upper right hand corner and select News). Select IRS Guidance(on mobile devices, hit the plus on more News, then scroll down until you see IRS Guidance) and then select IRS Guidance in Plain English.Which of the following is a written statement issued to a taxpayer that interprets and applies tax laws to the taxpayer's specific set of facts? Private letter ruling Revenue ruling Revenue procedure Notice Regulation 24MCQ List three major purposes the tax system is meant to serve: a.__________________________________________________________ b. __________________________________________________________ c.__________________________________________________________Jason and Mary are married taxpayers in 2019. They are both under age 65 and in good health. For 2019 they have a total of $41,000 in wages and $700 in interest in come. Jason and Mary's deductions for adjusted gross income amount to $5,000 and their itemized deductions equal $18,700. They have two children, ages 32 and 28, that are married and provide support for themselves. What is the amount of Jason and Mary's adjusted gross income?$____________ What is the amount of their itemized deductions or standard deduction? $____________ What is their taxable income? $____________Leslie is a single taxpayer who is under age 65 and in good health. For 2019, she has a salary of $24,000 and itemized deductions of $1,000. Leslie allows her mother to live with her during the winter months (34 months per year), but her mother provides all of her own support otherwise. How much is Leslie's adjusted gross income? $____________ What amount of itemized or standard deduction(s) should she claim? $____________ What is the amount of Leslie's taxable income? $____________In 2019, Lou has a salary of $53,300 from her job. She also has interest income of $1,600 and dividend income of $ 400. Lou is single and has no dependents. During the year, Lou sold silver coins held as an investment for a $7,000 loss. Calculate the following amounts for Lou: Adjusted gross income $ ____________________ Standard deduction $ ____________________ Taxable income $ ____________________Diego, age 28, married Dolores, age 27, in 2019. Their salaries for the year amounted to $47,230 and they had interest income of $ 3,500. Diego and Dolores deductions for adjusted gross income amounted to $2,000, their itemized deductions were $16,000, and they have no dependents. What is the amount of their adjusted gross income? $___________ What is the amount of their itemized deductions or standard deduction? $_________ What is the amount of their taxable income? $_________ What is their tax liability for 2019? $ ___________Ulysses and Penelope are married and file separate returns for 2019. Penelope itemizes her deductions on her return. Ulysses' adjusted gross income was $17,400, his itemized deductions were $2,250. Neither have any dependents. Calculate Ulysses' income tax liability assuming the couple does not live in a community property state. $___________7P 8P 9P 10P Christine is a single 50 -year-old taxpayer with no dependents, Her only income is $ 40,750 of wages. Calculate her taxable income and her tax liability. Please show your work. ______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________12P 13P Determine from the tax table in Appendix A the amount of the income tax for each of the following taxpayers for 2019:15P Melissa and Aaron are married taxpayers with taxable income of $ 105,000. When you calculate their tax liability, are you required to use the tax tables or the tax rate schedules, or does it matter? _______________________________ What is their 2019 tax liability? _______________________________Jessica and Carl were married on July 1,2019. What are their options for filing status for their 2019 taxes? _________________________________________________________________________________________________________________________________________________________________________18P 19P 20P 21P What is the total dollar amount of personal and dependency exemptions which a married couple with two children (ages 11 and 14, both of which are qualified children) and $80,000 of adjusted gross income would deduct in 2019? What is the total child and other dependent credit that could be claimed (before any limitations) _________________________________________________________________________________________________________________________________________________________________________23P 24P 25P The definition of gross income in the tax law is: All items specifically listed as income in the tax law All cash payments received for goods provided and services performed All income from whatever source derived All income from whatever source derived unless the income is earned illegally 2MCQ 3MCQ 4MCQ 5MCQ Which of the following items would be included in the gross income of the recipient? Insurance payments for medical care of a dependent child Insurance payments for loss of the taxpayer's sight Season tickets worth $2,000 given to a son by his father Payments to a student for working at the student union food court Lodging provided to a worker on a remote oil rig Malin is a married taxpayer and has three dependent children. Malin's employer offers health insurance for employees and Malin takes advantage of the benefit for her entire family (her spouse's employer also offers health insurance but they opt out). During the year, Malin paid $ 1,200 toward her family's health insurance premiums through payroll deductions while the employer paid the remaining $ 9,200. Malin's family visited health care professionals numerous times during the year and made total copayments toward medical services of $280. Malin's daughter had knee surgery due to a soccer injury and the insurance company paid the hospital $ 6,700$ directly and reimbursed Malin $400 for her out-of-pocket health care expenses related to the surgery. How much gross income should Malin recognize related to her health insurance? $0 $ 9,200 14,020(9,200+6,7001,200280400) 8,000(9,2001,200) None of the above George works at the Springfield Nuclear Plant as a nuclear technician. The plant is located 15 miles from the town of Springfield. George likes to eat his lunch at the plant's cafeteria because he is required to be available for nuclear emergencies during his shift. Unsurprisingly, there are no other eating establishments located near the plant. George estimates the value of the meals he was provided during the current year as $ 1,300. He estimates the cost for him to have prepared those lunches for himself as about $ 560. The cost of the meals to the power company was $ 470. How much income does George need to recognize from the meals? $ 1,300 $ 560 $ 470 $830 ($1,300-$470) None of the above 9MCQ Which of the following will result in the recognition of gross income? Gail's employer allows her to set aside $ 4,000 from her wages to cover the cost of daycare for Gail's four-year-old daughter. Gail's daycare costs are $ 4,300 for the year. Hannah purchases a new sofa from her employer, Sofas-R-Us, for $ 1,200. The cost of the sofa to the furniture store is $ 1,100 and the sofa normally sells for $ 1,700. Jayden's employer purchases her commuting pass for the subway at a cost of $ 225 per month. Havana is a lawyer. The law firm she works for pays for her subscription to Lawyer's Weekly, a trade magazine for attorneys. None of the above will result in recognition of gross income.11MCQ 12MCQ A 64 -year-old taxpayer retires this year and receives the first payment on an annuity that was purchased several years ago. The taxpayer's investment in the annuity is $97,500, and the annuity pays $1,000 per month for the remainder of the taxpayer's life. Based on IRS mortality tables, the taxpayer is expected to live another 20 years. If the taxpayer receives $4,000 in annuity payments in the current year, the nontaxable portion calculated using the simplified method is: $0 $1,500 $1,400 $4,000 None of the above 14MCQ 15MCQ Harry's wife Lila passes away in January of the current year. Fortunately, Lila had a $1 million life insurance policy. Harry elects to receive all $1 million in the current year and spends $200,000 of it on a luxury around-the-world trip with his new girlfriend. Harry's gross income from the life insurance is: $0 $200,000 $800,000 $1,000,000 Nomi is in the highest individual tax bracket and receives $500 in qualified dividends from Omega Corp. Nomi's tax liability (not including any net investment income tax) with respect to these dividends is: $0 $277.20 $100.00 $75,00 $50.00 18MCQ 19MCQ 20MCQ Kelly receives a $40,000 scholarship to Ivy University. She uses $30,000 on tuition and books, $5,000 for a used car, and $5,000 for rent while at school. Kelly will recognize _____ gross income. $0 $5,000 $10,000 $30,000 $40,000 Hillary gets divorced in 2016 and is required to pay her ex-spouse $200 per month until her son reaches 18 years of age in 7 years and $120 per month thereafter. How much of her 2019 payments are deductible as alimony? $0 $2,400 $1,440 $960 23MCQ 24MCQ 25MCQ 26MCQ 27MCQ 28MCQ During 2019, Carl (a single taxpayer) has a salary of $91,500 and interest income of $11,000. Calculate the maximum contribution Carl is allowed for an educational savings account. $0 $400 $1,000 $2,000 Some other amount 30MCQ Alicia loses her job part way through 2019. Her employer pays her wages of $15,450 up through her date of termination. After that, she received $3,400 of unemployment compensation from the state until she gets a new job for which she is paid wages of $3,000 through year end. Based on this information, Alicia's gross income for 2019 is: $0 $3,000 $6,400 $18,450 $21,850 32MCQ 33MCQ Dana and Larry are married and live in Texas. Dana earns a salary of $45,000 and Larry has $25,000 of rental income from his separate property. If Dana and Larry file separate tax returns, what amount of income must Larry report? $0 $22,500 $25,000 $47,500 None of the above Which of the following conditions need not be satisfied in order for a married taxpayer, residing in a community property state, to be taxed only on his or her separate salary? The husband and wife must live apart for the entire year. A minor child must be living with the spouse. The husband and wife must not file a joint income tax return. The husband and wife must not transfer earned income between themselves. All of the above must be satisfied.Indicate whether each of the items listed below would be included (I) in or excluded (E) from gross income for the 2019 tax year. ______ a. Welfare payments ______ b. Commissions ______ c. Hobby income ______d. Scholarships for room and board ______ e. $ 300 set of golf clubs, an employee award for length of service ______ f. Severance pay ______ g. Ordinary dividend of $ 50 ______ h. Accident insurance proceeds received for personal bodily injury ______ i. Inheritances ______ j. Gifts ______ k. Tips and gratuities Jane is a roofing contractor. Jane's friend needed a new roof but did not have the cash to pay. Jane's friend instead paid with a used truck that Jane could use in her roofing business, The truck had originally cost the friend $17,500 but it was gently used and only worth $6,000. Jane did not actually need the truck and ended up selling it to a used car dealer for $5,200 a few months later. Explain what amount of gross income Jane must recognize as a result of the truck payment and why. _________________________________________________________________________________________________________________________________________________________________________3P 4P 5P 6P 7P 8P Linda and Richard are married and file a joint return for 2019. During the year, Linda who works as an accountant for a national airline, used $2,100 worth of free passes for travel on the airline; Richard used the same amount. Linda and Richard also used $850 worth of employee discount coupons for hotel rooms at the hotel chain that is also owned by the airline. Richard is employed at State University as an accounting clerk. Under a tuition reduction plan, Richard saved $4,000 in tuition fees during 2019. He is studying for a master's degree in business at night while still working full-time. Richard also had $30 worth of personal typing done by his administrative assistant at the University. What is the amount of fringe benefits that should be included in Linda and Richard's gross income on their 2019 tax return? $__________10P 11P 12P 13P 14P Greg died on July 1,2019 , and left Lea, his wife, a $45,000 life insurance policy which she elects to receive at $9,000 per year plus interest for 5 years. In the current year, Lea receives $9,500. How much should Lea include in her gross income? $____________16P 17P How are qualified dividends taxed in 2019? Please give the rates of tax which apply to qualified dividends, and specify when each of these rates applies. _______________________________________________________________________________________________________________________________________________Describe the methods that an individual taxpayer that holds Series I Bonds can use to recognize interest. _______________________________________________________________________________________________________________________________________________20P Vandell is a taxpayer in the 25 percent tax bracket. He invests in Otay Mesa Water District Bonds that pay 4.5 percent interest. What interest on a taxable bond would provide the same after-tax return to Vandell? ______%Karen is a wealthy retired investment advisor who is in the 35 percent tax bracket. She has a choice between investing in a high-quality municipal bond paying 5 percent or a high-quality corporate bond paying 7 percent. What is the after-tax return of each bond and which one should Karen invest in? Explain your answer. _______________________________________________________________________________________________________________________________________________23P 24P 25P 26P Answer the following questions: Under a 2017 divorce agreement, Joan is required to pay her ex-husband, Bill, $ 700 a month until their daughter is 18 years of age. At that time, the required payments are reduced to $ 450 per month. 1. How much of each $ 700 payment may be deducted as alimony by Joan?$____________ 2. How much of each $ 700 payment must be included in Bill's taxable income?$____________ 3. How much would be deductible/included if the divorce agreement were dated 2019? $____________ Under the terms of a property settlement executed during 2019, Jane transferred property worth $ 450,000 to her ex-husband, Tom. The property has a tax basis to Jane of $ 425,000. 1. How much taxable gain must be recognized by Jane at the time of the transfer?$____________ 2. What is the amount of Tom's tax basis in the property he received from Jane?$____________Arlen is required by his 2019 divorce agreement to pay alimony of $2,000 a month and child support of $ 2,000 a month to his ex-wife Jane. What is the tax treatment of these two payments for Arlen? What is the tax treatment of these two payments for Jane? Arlen_______________________________________________________________________________________________________________________________________________ Jane_______________________________________________________________________________________________________________________________________________29P 30P 31P Lydia, a married individual, was unemployed for a few months during 2019, During the year, she received $3,250 in unemployment compensation payments. How much of her unemployment compensation payments must be included in gross income? $____________During the 2019 tax year, Brian, a single taxpayer, received $ 7,400 in Social Security benefits. His adjusted gross income for the year was $14,500 (not including the Social Security benefits) and he received $ 30,000 in tax-exempt interest income and has no for-AGI deductions, Calculate the amount of the Social Security benefits that Brian must include in his gross income for 2019. SIMPIFIED TAXABLE SOCIAL SECURITY WORKSHEET (FOR MOST PEOPLE) 1. Enter the total amount of Social Security income. 2. Enter one-half of line 1 3. Enter the total of taxable income items on Form 1040 except Social Security income. 4. Enter the amount of tax-exempt interest income. 5. Add lines 2,3, and 4 6. Enter all adjustments for AGl except for student loan interest, the domestic production activities deduction, and the tuition and fees deduction. 7. Subtract line 6 from line 5 . If zero or less, stop here, none of the Social Security benefits are taxable. 8. Enter $ 25,0001 $ 32,000 if married filing jointly; 0 if married filing separately and living with spouse at any time during the year) 9. Subtract line 8 from line 7 . If zero or less, enter -0 - Note: If line 9 is zero or less, stop here; none of your benefits are faxable. Otherwise, go on to line 10 10. Enter $ 9,0001 $12,000 if married filing jointly; 0 if married filing separately and living with spouse at any time during the year) 11. Subtract line 10 from line 9. If zero or less, enter -0 -. 12. Enter the smaller of line 9 or line 10 . 13. Enter one-half of line 12 14. Enter the smaller of line 2 or line 13 . 15. Multiply line 11 by 85 (. 85 ). If line 11 is zero, enter -0 -. 16. Add lines 14 and 15 17. Multiply line 1 by 85(.85) 18. Taxable benefits. Enter the smaller of line 16 or line 17 . 1.____________ 2.____________ 3.____________ 4.____________ 5.____________ 6.____________ 7.____________ 8.____________ 9.____________ 10.____________ 11.____________ 12.____________ 13.____________ 14.____________ 15.____________ 16.____________ 17.____________ 18.____________34P 1MCQ 2MCQ 3MCQ Which of the following formulas represents the proper method of calculating cost of goods sold? Beginning inventory + Ending inventory - Purchases Ending inventory - Purchases - Beginning inventory Purchases - Beginning inventory - Ending inventory Beginning inventory + Purchases - Ending inventory None of the above 5MCQ 6MCQ Heather drives her minivan 953 miles for business purposes in 2019. She elects to use the standard mileage rate for her auto expense deduction. Her deduction will be $510 $515 $519 $553 $953 8MCQ 9MCQ Under the high-low method, the federal per diem amount is The same in every city in the U.S. Different for every city in the U.S. The same for most cities but higher in certain locations An average of the highest and lowest costs for that city The boundary for expenses incurred in a city (never higher than the high amount but never lower than the low amount)11MCQ 12MCQ 13MCQ 14MCQ 15MCQ 16MCQ 17MCQ 18MCQ 19MCQ 20MCQ 21MCQ 22MCQ 23MCQ Stewie, a single taxpayer, operates an activity as a hobby. Brian, a different taxpayer, operates a similar activity as a bona fide business. Stewie's gross income from his activity is $5,000 and his expenses are $6,000. Brian's gross income and expenses are coincidentally the same as Stewie. Neither Stewie nor Brian itemize, but both have other forms of taxable income. What is the impact on taxable income for Stewie and Brian from these activities? Stewie will report $0 income and Brian will report a $1,000 loss. Stewie will report $5,000 income and $0 deduction and Brian will report a $1,000 loss. Stewie and Brian will report $0 taxable income. Stewie and Brian will report a $1,000 loss. Stewie will report a $1,000 loss and Brian will report $5,000 income.2P Lawrence owns a small candy store that sells one type of candy. His beginning inventory of candy was made up of 10,000 boxes costing $1.50 per box ($15,000) and he made the following purchases of candy during the year: March 1 10,000 boxes at $1.60 $16,000 August 15 20,000 boxes at $1.70 34,000 November 20 10,000 boxes at $1.80 18,000 At the end of the year, Lawrence's inventory consisted of 15,000 boxes of candy Calculate Lawrence's ending inventory and cost of goods sold using the FIFO inventory valuation method. Ending inventory$_______________ Cost of goods sold$_______________ Calculate Lawrence's ending inventory and cost of goods sold using the LIFO inventory valuation method. Ending inventory$_______________ Cost of goods sold$_______________Business with gross receipts of $25 million or less may treat inventory as nonincidental materials and supplies. Find Regulation Section 1.162-3 and read paragraphs (a)(1) and (a)(2) to help answer the following: Frank owns an auto repair shop that serves a particular model of auto and so he tends to purchase parts in bulk. Frank is eligible to treat inventory as non-incidental materials and elects to do so. In December of 2019 he purchases 24 oil filters. He uses one to repair an auto in January 2020, and then about 2 per month and ends 2020 with 14 filters. Explain how Frank will treat his oil filter inventory.Teresa is a civil engineer who uses her automobile for business. Teresa drove her automobile a total of 11,965 miles during 2019, of which 80 percent was business mileage. The actual cost of gasoline, oil, depreciation, repairs, and insurance for the year was $6,440. Teresa is eligible to use the actual or standard method. How much is Teresa's transportation deduction based on the standard mileage method? $______________ How much is Teresa's transportation deduction based on the actual cost method? $______________ Which method should Teresa use to calculate her transportation deduction? __________________________________________________________________________ Why? _____________________________________________________________________ __________________________________________________________________________7P Martha is a self-employed tax accountant who drives her car to visit clients on a regular basis. She drives her car 4,000 miles for business and 10,000 for commuting and other personal use. Assuming Martha uses the standard mileage method, how much is her auto expense for the year? Where in her tax return should Martha claim this deduction? _________________________________________________ _______________________________________________________________________________ _______________________________________________________________________________9P Go to the U.S. General Services Administration (GSA) website. For the month of September 30,2019 , what is the per diem rate for each of the following towns: Flagstaff, AZ Palm Springs, CA Denver, CO 11P 12P Marty is a sales consultant. Marty incurs the following expenses related to the entertainment of his clients in the current year: Dues to a country club $4,500 (The country club was used for business 25 days of the total 75 days that it was used.) Business meals at the country club not associated with golf or tennis 1,200 Dues to a tennis club 1,000 (The club was used 75 percent for directly related business.) Tennis fees (personal use) 260 Business meals at various restaurants 1,844 How much is Marty's deduction for meals and entertainment expenses for the current year? $__________ For each item listed above that you believe is not allowed as a deduction, explain the reason it is not allowed. _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________14P 15P Cooper and Brandy are married and file a joint income tax return with two separate Schedule Cs. Cooper is an independent security specialist who spent $395 on uniforms during the year. His laundry expenses for the uniforms were $175 for this year, plus $65 for altering them. Brandy works as a drill press operator and wears jeans and a work shirt on the job, which cost $175 this year. Her laundry costs were $50 for the work clothes. Brandy is also required by state regulators to wear safety glasses and safety shoes when working, which cost a total of $115. How much is Cooper's total deduction on his Schedule C for special clothing and uniforms? $_____________ How much is Brandy's total deduction on her Schedule C for special clothing and uniforms? $_______________17P 18P 19P 20P Cindy operates a computerized engineering drawing business from her home. Cindy maintains a home office and properly allocates the following expenses to her office: Depreciation $1,500 Utilities 500 Real estate taxes 325 Mortgage interest (100 percent deductible) 500 Assume that Cindy earns income of $4,400 from her business for the year before deducting home office expenses. She has no other expenses associated with the business. Calculate Cindy's deduction for home office expenses. $__________ Assume that Cindy earns income of $2,600 from her business during the year before deducting home office expenses. Calculate Cindy's deduction for home office expenses. $__________22P 23P 24P Lew is a practicing CPA who decides to raise bonsai as a business. Lew engages in the activity and has the following revenue and expenses: Sales $ 5,000 Depreciation on greenhouse 10,000 Fertilizer, soil, pots 1,500 What are the factors that the IRS will consider when evaluating whether the activity is a business or a hobby? ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ If the activity is deemed to be a regular business, what is the amount of Lew's loss from the activity? $_____________ If the activity is deemed to be a hobby, what is the amount of Lew's expenses (if any) from the activity that may be deducted? $_____________All of the following assets are capital assets, except A personal automobile IBM stock A child's bicycle Personal furniture Used car inventory held by a car dealer Which of the following is a capital asset? Account receivable Copyright created by the taxpayer Copyright (held by the writer) Business inventory A taxpayer's residence Yasmeen purchases stock on January 30,2018 . If she wishes to achieve a long-term holding period, what is the first date that she can sell the stock as a long-term gain? January 20,2019 January 31,2019 February 1,2019 July 31,2018 July 30,2018 Vijay sells land and receives $5,000 cash, a motorcycle worth $1,600, and two tickets to the Super Bowl with a total face value (cost) of $800 but worth $1,200. In addition, the buyer assumes the mortgage on the land of $12,000. What is Vijay's amount received in this transaction? $5,000 $7,800 $8,200 $19,800 $20,200 5MCQ In 2019, what is the top tax rate for individual long-term capital gains and the top tax rate for long-term capital gains of collectible items assuming that the Medicare tax does not apply. 10; 20 20; 28 15; 25 25; 28 In November 2019, Ben and Betty (married, filing jointly) have a long-term capital gain of $54,000 on the sale of stock. They have no other capital gains and losses for the year. Their ordinary income for the year after the standard deduction is $72,500 making their total taxable income for the year $126,500($72,500+$54,000). In 2019 married taxpayers pay 0 percent on long-term gains up to $78,750. What will be their 2019 total tax liability assuming a tax of $8,315 on the $72,500 of ordinary income? $8,322 $15,717 $15,478 $19,712 8MCQ In 2019, Tim, a single taxpayer, has ordinary income of $29,000. In addition, he has $2,000 in short-term capital gains, long-term capital losses of $10,000, and long-term capital gains of $4,000. What is Tim's AGI for 2019? $26,000 $27,000 $29,000 $32,000 10MCQ 11MCQ 12MCQ Kevin purchased a house 20 years ago for $100,000 and he has always lived in the house. Three years ago Kevin married Karen, and she has lived in the house since their marriage. If they sell Kevin's house in December 2019 for $425,000, what is their taxable gain on a joint tax return? $0 $75,000 $125,000 $250,000 Gene, a single taxpayer, purchased a house 18 months ago for $350,000. If Gene sells his house due to unforeseen circumstances for $550,000 after living in it for a full 18 months, what is his taxable gain? $0 $12,500 $50,000 $200,000 15MCQ John owns a second home in Palm Springs, CA. During the year, he rented the house for $5,000 for 56 days and used the house for 14 days during the summer. The house remained vacant during the remainder of the year. The expenses for the home included $5,000 in mortgage interest, $850 in property taxes, $900 for utilities and maintenance, and $3,500 of depreciation. What is John's deductible rental loss, before considering the passive loss limitations? $200 $875 $2,500 $3,200 $0 Helen, a single taxpayer, has modified adjusted gross income (before passive losses) of $126,000. During the tax year, Helen's rental house generated a loss of $15,000. Assuming Helen is actively involved in the management of the property, what is the amount of Helen's passive loss deduction from the rental house? $0 $3,000 $10,000 $12,000 $15,000 18MCQ 19MCQ 20MCQ 21MCQ 22MCQ 23MCQ 24MCQ Jim has a net operating loss in 2019. If he does not make any special elections, what is the first year to which Jim carries the net operating loss? 2015 2016 2017 2018 2020 26MCQ 27MCQ In 2019, Tracy generates a $10,000 loss from an otherwise qualified business activity. Fortunately, she also works as an employee and has taxable income of $40,000. Tracy's 2019 QBI deduction is $0 $2,000 $8,000 $6,000 1P 2P 4P 5P In 2019, Michael has net short-term capital losses of $1,500, a net long-term capital loss of $27,000, and other ordinary taxable income of $45,000. Calculate the amount of Michael's deduction for capital losses for 2019. $________________ Calculate the amount and nature of his capital loss carryforward. $________________ For how long may Michael carry forward the unused loss?__________7P 8P 9P 10P Walter, a single taxpayer, purchased a limited partnership interest in a tax shelter in 1993 He also acquired a rental house in 2019, which he actively manages. During 2019, Walter's share of the partnership's losses was $30,000, and his rental house generated $20,000 in losses. Walter's modified adjusted gross income before passive losses is $130,000. Calculate the amount of Walter's allowable loss for rental house activities for 2019. $_________________ Calculate the amount of Walter's allowable loss for the partnership activities for 2019. $_________________ What may be done with the unused losses, if anything? _______________________________________________________________________Tyler, a single taxpayer, generates a net operating loss of $12,000 in 2017 and elects to forego any carryback. He also generates a net operating loss of $6,000 in 2018. Finally, in 2019, Tyler's business turns a corner and he generates taxable income of $17,000. How much of Tyler's 2017 NOL is carried forward to 2020? How much of Tyler's 2018 NOL is carried forward to 2020?Julie, a single taxpayer, has completed her 2019 Schedule C and her net loss is $ 40,000. Her only other income is wages of $30,000. Julie takes the standard deduction of $12,200 in 2019. Calculate Julie's taxable income or loss. $_____________ Calculate the business and nonbusiness portions of her taxable income or loss. Business $_____________ Nonbusiness$_____________ Determine Julie's 2019 NOL. $_____________15P 1MCQ 2MCQ 3MCQ Which of the following is true about the self-employed health insurance deduction? The deduction can be claimed when a subsidized employer health insurance plan is also available. The deduction can be claimed if the taxpayer has an overall business loss from self-employment. Long-term care premiums may not be deducted within specified dollar limitations based on age. The self-employed health insurance deduction is a for AGI deduction. Dental insurance is not included as deductible self-employed health insurance.Lyndon, age24, has a nonworking spouse and earns wages of $36,000 for 2019. He also received rental income of $5,000 and dividend income of $900 for the year. What is the maximum amount Lyndon can deduct for contributions to his and his wife's individual retirement accounts for the 2019 tax year? $11,000 $5,500 $6,000 $12,000 None of the above 6MCQ 7MCQ 8MCQ 9MCQ 10MCQ 11MCQ 12MCQ 13MCQ 14MCQ Eliza is a kindergarten teacher for Alexander Hamilton Elementary School. Eliza decorates her classroom with new artwork, posters, bulletin boards, etc. In 2019, she spends $470 on materials and supplies for her classroom. The school reimburses her $100 (the annual reimbursement limit). Eliza can deduct _________ for AGI and ______________ from AGI. $0 for and $0 from AGI $370 for and $0 from AGI $250 for and $120 from AGI $250 for and $0 from AGI $0 for and $370 from AGI 16MCQ 17MCQ 18MCQ 19MCQ 20MCQ 21MCQ 22MCQ 23MCQ 24MCQ 25MCQ 26MCQ 27MCQ 28MCQ 29MCQ 30MCQ Which of the following would typically be deductible as a casualty loss in 2019? Long-term damage to a home from termites An automobile accident during the daily commute A theft of a big screen television Dropping your smartphone in the pool None of the above Which of the following is not a possible limitation on the deduction of a personal casualty loss? The lesser of the fair market value of the property or the adjusted basis at the time of the loss A100 floor for each casualty event A10 percent of AGI floor for all casualty losses during the year A personal casualty not associated with a federally declared disaster All of the above are possible limitations on a personal casualty loss 33MCQ 34MCQ Evan participates in an HSA carrying family coverage for himself, his spouse, and two children. In 2019 , Evan has $100 per month deducted from his paycheck and contributed to the HSA. In addition, Evan makes a one-time contribution of $2,000 on April 15,2020 when he files his tax return. Evan also receives a 2019 Form 1099 -SA that reports distributions to Evan of $3,200 which Evan used for medical expenses. Compute the effect of the HSA transactions on Evan's adjusted gross income.2P Karen, 28 years old and a single taxpayer, has a salary of $33,000 and rental income of $33,000 for the 2019 calendar tax year. Karen is covered by a pension through her employer. What is the maximum amount that Karen may deduct for contributions to her IRA for 2019? $__________________________ If Karen is a calendar year taxpayer and files her tax return on August 15, what is the last date on which she can make her contribution to the IRA and deduct it for 2019? $__________________________Phil and Linda are 25 -year-old newlyweds and file a joint tax return. Linda is covered by a retirement plan at work, but Phil is not. Assuming Phil's wages were $27,000 and Linda's wages were $18,500 for 2019 and they had no other income, what is the maximum amount of their deductible contributions to an IRA for 2019? Phil $____________ Linda $____________ Assuming Phil's wages were $55,000 and Linda's wages were $70,000 for 2019 and they had no other income, what is the maximum amount of their deductible contributions to an IRA for 2019? Phil $____________ Linda $____________5P 6P 7P Bob is a single, 40 -year-old doctor earning $190,000 a year and is not covered by a pension plan at work. What is the maximum deductible contribution into a Traditional IRA in 2019? _____________9P During 2019 , Jerry is a self-employed therapist, and his net earned income is $160,000 from his practice. Jerry's SEP Plan, a defined contribution plan, states that he will contribute the maximum amount allowable. Calculate Jerry's contribution. $_____________11P 12P 13P 14P Janet needs an elevator seat attached to her stairs since she has a medical condition that makes her unable to climb the stairs in her house. The $10,000 spent on the elevator seat does not increase the value of her house according to a local appraiser. How much of the capital asset is deductible in Janet's tax return as a medical expense? _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________Lyndon's employer withheld $10,100 in state income taxes from Lyndon's wages in 2019. Lyndon obtained a refund of $1,700 this year for overpayment of state income taxes for 2018 . State income taxes were an itemized deduction on his 2018 return. His 2019 liability for state income tax is $8,700. Indicate the amount of Lyndon's deduction for state income taxes on his federal tax return assuming he elects to deduct state income taxes for 2019. $_______________Mike sells his home to Jane on April 2,2019 . Jane pays the property taxes covering the full calendar year in October, which amount to $2,500. How much may Mike and Jane each deduct for property taxes in 2019? Mike's deduction $________________ Jane's deduction $________________20P 21P 22P Ken paid the following amounts for interest during 2019: Qualified interest on home mortgage$5,322 Auto loan interest 850 Pointson the mortgage for acquisition of his 400 personal residence Service charges on his checking account40 Mastercard interest 300 Calculate Ken's itemized deduction for interest on the following portion of Schedule A.24P 25P At the end of 2019, Mark owes $250,000 on the mortgage related to the 2016 purchase of his residence. When his daughter went to college in the fall of 2019, he borrowed $20,000 through a home equity loan on his house to help pay for her education. The interest expense on the main mortgage is $15,000, and the interest expense on the home equity loan is $1,500. How much of the interest is deductible as an itemized deduction and why? _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________27P 28P 29P 30P On January 3,2019, Carey discovers his diamond bracelet has been stolen. The bracelet had a fair market value and adjusted basis of $7,500. Assuming Carey had no insurance coverage on the bracelet and his adjusted gross income for 2019 is $45,000, calculate the amount of his theft loss deduction. $_____________________32P 33P E Corporation is a subchapter S corporation owned by three individuals with calendar year-ends. The corporation sells a sports drink as its principal product and has similar sales each month. What options does E Corporation have in choosing a tax year? E Corporation may choose any month end as its tax year. Because the owners of E Corporation have tax years ending in December, E Corporation must also choose a December year-end. E Corporation may choose an October, November, or December tax year-end. E Corporation may choose a tax year ending in September, October, or November, but only if the corporation also makes an annual cash deposit and adjusts the amount every year depending on the income deferred.Income and loss from which of the following entities is passed through and taxed on the individual's personal tax returns? S corporation Partnership Sole proprietor All of the above Which of the following entities is likely to have the greatest flexibility in choosing a year-end other than a calendar year-end? Sole proprietor General partnership Corporation S corporation Which of the following is an acceptable method of accounting under the tax law? The accrual method The hybrid method The cash method All of the above are acceptable None of the above Which of the following entities is required to report on the accrual basis? An accounting firm operating as a Personal Service Corporation. A manufacturing business with $30 million of gross receipts operating as a regular C corporation. A corporation engaged in tropical fruit farming in Southern California. A partnership with gross receipts of $13 million and all of the partners are individuals with a December year-end.6MCQ B Corporation, a calendar year-end, accrual basis taxpayer, is owned 75 percent by Bonnie, a cash basis taxpayer. On December 31,2019, the corporation accrues interest of $4,000 on a loan from Bonnie and also accrues a $15,000 bonus to Bonnie. The bonus is paid to Bonnie on February 1,2020; the interest is not paid until 2021 . How much can B Corporation deduct on its 2019 tax return for these two expenses? $0 $4,000 $15,000 $19,000 $12,000 8MCQ 9MCQ 10MCQ 11MCQ 12MCQ For 2019, Roberta is a self-employed truck driver with earnings of $47,000 from her business. During the year, Roberta received $2,500 in interest income and dividends of $500. She also sold investment property and recognized a $1,500 gain. What is the amount of Roberta's self-employment tax (Social Security and Medicare taxes) liability for $2019? $7,277 $6,641 $6,358 $6,885 $7,191 14MCQ 15MCQ Which of the following employees would not be exempt from Social Security and Medicare taxes on wages paid for household work? The taxpayer's 16 -year-old daughter The taxpayer's wife The taxpayer's 20 -year-old sister The 14 -year-old babysitter from down the street 17MCQ 18MCQ 19MCQ Christine and Doug are married. In 2019, Christine earns a salary of $250,000 and Doug earns a salary of $50,000. They have no other income and work for the same employers for all of 2019. How much 0.9 percent Medicare tax for high-income taxpayers will Christine and Doug have to pay with their 2019 income tax return? $450 $900 $2,700 None 1P 2P Geraldine is an accrual basis taxpayer who has the following transactions during the current calendar tax year: Accrued business income (except rent)$220,000 Accrued business expenses (except rent) 170,000 Rental income on a building lease for the next 6 months, received on December 121,000 Prepaid rent expense for 6 months, paid on December 1 9,000 Calculate Geraldine's net income from her business for the current year. Income: Other than rental $___________ Rental $___________ Expenses: Other than rental $___________ Rental $___________ Net income $___________4P 5P 7P 8P Refer to the previous problem 8. If Stan's parents elected to report Stan's income on his parents' return, what would the tax on Stan's income be?10P

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