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Exam 6: Individual for Agi Deductions

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Question 41

Multiple Choice

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Harriet owns a second home that she rents to others.During the year,she used the second home for 10 personal days and for 200 rental days.Which of the following statements regarding the manner in which she should account for her income and/or expenses associated with the home is incorrect?

A) Harriet's deductible expenses are not limited to the amount of gross rental income from the property.
B) Harriet will be allowed to deduct all of the mortgage interest on the loan secured by the property.
C) Harriet is required to include all of the rental receipts in gross income.
D) Harriet is required to allocate all expenses associated with the home to rental use or personal use.

E) B) and C)
F) A) and B)

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Question 42

Multiple Choice

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Max,a single taxpayer,has a $270,000 loss from his sole proprietorship.How much of this loss is not deductible after considering the excess business loss rules?

A) $270,000.
B) $250,000.
C) $20,000.
D) $0.
E) All of the choices are correct

F) All of the above
G) B) and E)

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Question 43

Multiple Choice

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Sue invested $5,000 in the ABC Limited Partnership and received a 10 percent interest in the partnership.The partnership had $20,000 of debt she is not responsible to repay because she is a limited partner.Sue is allocated a 10 percent share of the debt resulting in a tax basis of $7,000 and an at-risk amount of $5,000.During the year,ABC LP generated a ($70,000) loss.How much of Sue's loss is disallowed due to her tax basis or at-risk amount?

Which of the following is a true statement?

Scott is a self-employed plumber and his wife,Emily,is a full-time employee for the University.Emily has health insurance from a qualified plan provided by the University,but Scott has chosen to purchase his own health insurance rather than participate in Emily's plan.Besides paying $5,400 for his health insurance premiums,Scott also pays the following expenses associated with his plumbing business:   $\begin{array}{l}\begin{array}{lll}\text {Plumbing tools and supplies}\\\text {Rent on Scott'splumbing shop}\\\text {Transportation between Scott's shop and various job sites}\\\text {Plumber's uniform}\\\text {Plumbing truck rental}\\\text {Self-employment tax ( 1 / 2 is employer share)}\\\end{array}\begin{array}{lll}\$ 1,300 \\6,250 \\500 \\50 \\7,200 \\400\end{array}\end{array}$ What is the amount of deductions for AGI that Scott can claim this year (2018)?

Which of the following statements regarding limitations on the deductibility of home office expenses of employees is correct?

Which of the following statements regarding Roth IRAs distributions is true?

Careen owns a condominium near Newport Beach in California.This year,she incurs the following expenses in connection with her condo:   $\begin{array}{l}\begin{array}{lll}\text { Insurance } \\\text { Mortgage interest } \\\text { Property taxes } \\\text { Repairs ard maintenance } \\\text { Utilities } \\\text { Depreciation }\end{array}\begin{array}{lll}\$1,500 \\8,500 \\4,000 \\950 \\1,900 \\5,500\end{array}\end{array}$ During the year,Careen rented the condo for 90 days,receiving $20,000 of gross income.She personally used the condo for 50 days.Assuming Careen uses the IRS method of allocating expenses to rental use of the property.What is Careen's net rental income for the year (Assume there are 365 days in the year)?

Mason paid $4,100 of interest on a loan that paid tuition for him to attend a private university this year.How much of this payment can Mason deduct as interest expense on an educational loan if he files single and reports modified AGI of $90,000?

Expenses of a vacation home allocated to rental use are deductible for AGI.

Kenneth lived in his home for the entire year except when he rented his home (near a very nice ski resort) to a married couple for 14 days in December.The couple paid Kenneth $14,000 in rent for the two weeks.Kenneth incurred $1,000 in expenses relating to the home for the 14 days.Which of the following statements accurately describes the manner in which Kenneth should report his rental receipts and expenses for tax purposes?

Which of the following statements regarding IRAs is false?

Taxpayers who participate in an employer-sponsored retirement plan are not allowed to deduct contributions to individual retirement accounts (IRAs).

For married taxpayers filing separate,excess business losses are defined as aggregate business deductions over the sum of aggregate business gross income or gain of the taxpayer plus $250,000.

Taxpayers with home offices must allocate indirect expenses of the home between personal use and home office use.Only expenses allocated to the home office use are deductible.

Brady owns a second home that he rents to others.During the year,he used the second home for 50 days for personal use and for 100 days for rental use.Brady collected $20,000 of rental receipts during the year.Brady allocated $7,000 of interest expense and property taxes,$10,000 of other expenses,and $4,000 of depreciation expense to the rental use.What is Brady's net income from the property and what type and amount of expenses will he carry forward to next year,if any?

Kristen rented out her home for 10 days during the year for $5,000.She used the home for personal purposes for the other 355 days.She allocated the following home expenses to the rental use of the home:   $\begin{array}{lr}\text {Insurance }&\$50 \\\text {Mortgage interest }&100 \\\text {Property taxes }&30 \\\text { Repairs and maintenance }&150 \\\text {Utilities }&40 \\\text { Depreciation }&600\end{array}$ Kristen's AGI is $120,000 before considering the effect of the rental activity.What is Kristen's AGI after considering the tax effect of the rental use of her home?

Braxton owns a second home that he rents to others.During the year,he used the second home 50 days for personal use and 100 days for rental use.After allocating the home-related expenses between personal use and rental use,which of the following statements regarding the sequence of deductibility of the expenses allocated to the rental use is correct (assume taxpayer has no expenses to obtain tenants) ?

The phrase "Ordinary and necessary" means that an expense must be appropriate in and helpful for generating a profit.

All business expense deductions are claimed as "below the line" deductions.