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Exam 6: Individual for Agi Deductions

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Question 1

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A loss from a passive activity is fully deductible as long as the taxpayer has sufficient tax basis in the activity.

A) True
B) False

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Question 2

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Ryan,age 48,received an $8,000 distribution from his traditional IRA to pay for medical expenses.Ryan has made only deductible contributions to the IRA and his marginal tax rate is 32 percent.What amount of taxes and early distribution penalties will Ryan be required to pay on the distribution?

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$2,560 tax; $0 penalty. The full distrib...

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Question 3

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The profit motive distinguishes "business" activities from "personal" activities.

Lisa,age 45,needed some cash so she received a $50,000 distribution from her Roth IRA.At the time of the distribution,the balance in the Roth IRA was $200,000.Lisa established the Roth IRA 8 years ago.Through a rollover and annual contributions,she has contributed $80,000 to her account.What amount of the distribution is taxable and subject to early distribution penalty?

Han is a self-employed carpenter and his wife,Christine,works full-time as a grade school teacher.Han paid $525 for carpentry tools and supplies,and Christine paid $3,600 as her share of health insurance premiums (not with pre-tax dollars) for Han and herself in a qualified plan provided by the school district.Which of the following is a true statement?

Which of the following statements regarding the home office expense deduction is correct?

Qualifying distributions from traditional IRAs are nontaxable while qualifying distributions from Roth IRAs are fully taxable as ordinary income.

This year,in 2018,Tiffanie files as a single taxpayer.Tiffanie received $62,700 of salary and paid $3,200 of qualified educational interest.This year,she paid moving expenses of $2,200 and received $9,800 of alimony (she got divorced in 2015).What is Tiffanie's AGI?

Passive losses that exceed passive income are deferred until the taxpayer generates passive income to offset these passive losses.

Tyson (48 years old) owns a traditional IRA with a current balance of $50,000.The balance consists of $30,000 of deductible contributions and $20,000 of account earnings.Tyson's marginal tax rate is 25%.Convinced that his marginal tax rate will increase in the future,Tyson receives a distribution of the entire $50,000 balance of his traditional IRA.He retains $12,500 to pay tax on the distribution and he contributes $37,500 to a Roth IRA.What amount of income tax and penalty must Tyson pay on this series of transactions?

Which of the following is a true statement?

Which of the following statements regarding traditional IRAs is true?

Tatia,age 38,has made deductible contributions to her traditional IRA over the past few years.When her account balance was $30,000,she received a distribution of the entire $30,000 balance of her traditional IRA.She retained $5,000 of the distribution to help her pay the taxes due on the distribution and she immediately contributed the remaining $25,000 to a Roth IRA.What amount of tax and early distribution penalty is she required to pay on the $30,000 distribution from the traditional IRA if her marginal tax rate is 24 percent?

Excess business losses are carried back and then forward as net operating losses.

Taxpayers renting a home would generally report the rental income and expenses on Schedule E.

Describe the three main loss limitations that taxpayers must overcome before deducting losses allocated to them from a specific activity.

Taxpayers contributing to and receiving distributions from a Roth IRA generally earn a before-tax rate of return on their contributions equal to their after-tax rate of return.

Harvey rents his second home.During 2018,Harvey reported a net loss of $35,000 from the rental.If Harvey is an active participant in the rental and his AGI is $80,000,how much of the loss can he deduct against ordinary income in 2018?

In certain circumstances,a taxpayer could rent her personal residence at a profit and not pay any tax on the income.

A SEP IRA is an example of a self-employed retirement account.