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ACCOUNTING 3090 INCOME TAX I Assignment 2 MCQs-Tina, Terri, and Tricia operate Capstone Fashions an exclusive boutique

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Question;1. Tina, Terri, and Tricia operate Capstone Fashions an;exclusive boutique. Based on advice from Tina?s sister, a CPA, the three form a;partnership. Tina owns 50% and Terri and Tricia each own 25%. For the year;Capstone fashions reports the following;Sales revenues;$ 600,000;Business expenses;(320,000);Investment expenses;(2,000);Short-term capital gains;6,000;Long-term capital losses;(14,000);Taxable income;$ 270,000;For tax purposes, what amount will Capstone Fashions report;to Tina as her ordinary income from the partnership?;a.;$135,000;b.;$136,000;c.;$138,500;d.;$139,000;e.;$140,000;2. The legislative grace concept dictates that business;expenses are grouped into certain categories that include;I.;Personal expenses.;II.;Trade or business expenses.;III.;Expenses for the production of income.;a.;Statements I and II are correct.;b.;Statements I and III are correct.;c.;Statements I, II, and III are correct.;d.;Statements II and III are correct.;3. Louise, a schoolteacher in Duluth, Minnesota, owns a;rental house in Scottsdale, Arizona. She travels to Arizona during spring break;to inspect her property and discuss property improvements with the tenant and;property manager. Louise?s brother, Brian, lives in Scottsdale. She stays at;his house during her week in Arizona and borrows his car to travel across town;for her one day of meetings. Her trip accomplishes several objectives: a visit;with her brother, a trip away from Minnesota?s winter weather, and a review of;her investment property. The expenses of traveling to Scottsdale;I.;have a dominant business purpose.;II.;are deductible as expenses for the production of income.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;4. Leslie owns 2 rental properties. She hires her 21 year;old son, who is a junior at State College, to obtain tenants, negotiate leases;make arrangements for repairs, and pay expenses related to the properties.;I.;Leslie?s sale of the properties at a gain will result in a;capital gain.;II.;Leslie?s sale of the properties at a loss results in a;current-year loss deduction of no more than $3,000.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;5. In the current year, Paul acquires a car for $16,000. He;uses the car in his advertising business and for personal purposes. His records;indicate the car is used 75% for business and that the total operating;expenses, including depreciation, are $4,700. Paul expects to use the car for 5;years in his business. What amount can Paul deduct as the operating costs of;the car?;a.;$ - 0 -;b.;$ 3,525;c.;$ 2,400;d.;$ 4,700;e.;$12,000;6. Which of the following is a currently deductible trade;or business expense.;a.;$5,000 trustee fees paid to a bank to manage tax-exempt;securities.;b.;$10,000 fee paid to a marketing firm for a market analysis;for a new business.;c.;$25,000 fee paid to a TV station to advertise a new;product.;d.;$120,000 to acquire a new printing press.;e.;All of the above are currently deductible expenses.;7. Which of the following is notdeductible?;a.;Expenses related to earning dividends on a portfolio of;?blue chip? stocks.;b.;Expenses related to interest income from municipal bonds.;c.;Legal expenses related to rental real estate property.;d.;Medical expenses of the taxpayer?s dependent child.;8. Which of the following production of income expenses;would be deductible;I.;Interest expense to acquire City of Indianapolis bonds.;II.;Interest expense to acquire IBM Corporate bonds.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;9. Sandra pays the following expenses for her dependent;daughter while the daughter was ill during the current year;Real estate taxes on daughter?s house;$3,000;Principal on daughter?s home mortgage;1,000;Interest on the daughter?s home mortgage;8,000;Interest on daughter?s car;800;Daughter?s medical expenses;6,000;How much of the above expenditures may Sandra use in;computing her itemized deductions?;a.;$ - 0 -;b.;$ 6,000;c.;$ 7,800;d.;$14,800;e.;$18,800;10. Sally and Paul own a cabin near Stowe, Vermont. During;the current year the cabin is rented for 31 days for $1,800. Sally and Paul;used the cabin a total of 12 days during the year. After making the appropriate;allocation of expenses between personal and rental use, the following rental;loss was determined;Rental income;$1,800;Property taxes;(150);Mortgage interest;(950);Repairs and maintenance;(400);Utilities;(300);Depreciation;(200);Rental loss;$ (200);How should Sally and Paul report the rental income and;expenses for the current year?;a.;Include the $1,800 in gross income, but no deductions are;allowed.;b.;Report the $200 loss for AGI.;c.;Only expenses up to the amount of $1,800 rental income may;be deducted in the current year.;d.;Report the interest ($950) and taxes ($150) as itemized;deductions and the other expenses for AGI.;e.;No reporting for the rental activity should be reported.;11. Marlene is a single taxpayer with an adjusted gross;income of $140,000. In addition to her personal residence, Marlene owns a ski;cabin in Vail. She uses the cabin for 40 days during the current year and rents;it out to unrelated parties for 80 days, receiving rent of $10,000. Marlene?s;costs before any allocation related to the cabin are as follows;Mortgage interest and property taxes;$9,000;Utilities, maintenance, and repairs;4,500;Depreciation;6,000;Based on the above information, what is her allowable;depreciation deduction?;a.;$ - 0 -;b.;$1,000;c.;$3,000;d.;$4,000;e.;$6,000;12. Helena is a technical sales consultant for Interactive;Systems Corporation (ISC) based in Tacoma. While on business in Boise, she;entertains several clients at a cost of $800. When she returns to Tacoma;Helena gives ISC receipts and other information to account for the;entertainment expense. ISC reimburses Helena $800. How much can Helena and ISC;deduct?;Helena ISC;a.;$- 0 - $- 0 -;b.;$- 0 - $400;c.;$- 0 - $800;d.;$400 $- 0 -;e.;$800 $400;13. Donna is an audit supervisor with the IRS and she uses;her car in the following manner.;Personal residence to her office at the IRS.;8 miles;IRS office to X Corp to supervise new audit activities.;10 miles;X Corp to Y Corp to supervise ongoing audit activities;5 miles;From Y Corp. to personal residence;7 miles;What amount of Donna?s mileage for this day is qualified;business mileage?;a.;10 miles.;b.;15 miles.;c.;17 miles.;d.;22 miles.;e.;30 miles.;14. Walker, an employee of Lakeview Corporation, drives his;automobile 18,000 business miles during 2014, 1,500 miles per month. He pays;tolls of $145 while traveling on business. What amount can Walker deduct as;unreimbursed transportation expenses before considering any limitations on;itemized deductions?;a.;$ 10,080 for AGI.;b.;$ 10,225 for AGI.;c.;$ 10,080 from AGI.;d.;$ 10,225 from AGI.;15. Julie travels to Mobile to meet with a client. While in;Mobile, she spends 4 days meeting with the client and one-day sightseeing. Her;husband Harry goes with her and spends all 5 days sightseeing and playing golf.;The cost of the trip is as follows;Airfare;$ 540 for each person.;Lodging at hotel;$ 150/day (Single Occupancy Rate = $125).;Meals;$ 75/day for each person.;Incidental expenses;$ 20/day for Julie. $15/day for Harry.;If Julie is self-employed, what is the amount of the;deduction she may claim for the trip?;a.;$ 730;b.;$1,270;c.;$1,370;d.;$1,420;e.;$1,520;16. Jason travels to Miami to meet with a client. While in;Miami, he spends 2 days meeting with his client and 3 days sightseeing. Mary;his wife, goes with him and spends all 5 days sightseeing and shopping. The;cost of the trip is as follows;Airfare;$540 for each person.;Lodging at hotel;$150 per day (same rate for single and double rooms).;Meals;$ 75 per day for each person.;Incidental expenses;$ 20 per day for Jason. Mary kept no records.;If Jason is self-employed, what is the amount of the;deduction he may claim for the trip?;a.;$ - 0 -;b.;$ 415;c.;$ 490;d.;$ 955;e.;$1,765;17. Juliana operates a wholesale grocery business. To show;her appreciation to her 10 best customers, she sends a box of fancy chocolate;(costing $55 each) to each of them. How much of the cost of the chocolates can;Juliana deduct as a business gift?;a.;$- 0 -;b.;$125;c.;$250;d.;$275;e.;$550;18. Which of the following information is not required for;substantiation of business entertainment expenditures?;a.;Time and place of event.;b.;Specific business purpose of the event.;c.;Receipt to provide evidence of amount of expenditure.;d.;Identity of, and business relationship to, those persons;attending the event.;e.;All of the above information is required to substantiate;business entertainment.;19. Aaron is a full-time student at Henderson State;University majoring in accounting. He works 12 to 20 hours per week at a local;CPA firm inputting data for spreadsheets to prepare monthly financial;statements for the firm?s clients. Aaron?s tuition, fees, books, and supplies;related to his education are $3,000 for the current year.;I.;The educational costs are deductible from AGI because they;prepare him for a new trade or business.;II.;The education costs are deductible because it is part of a;program that will qualify Aaron to enter a new profession.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;20. Garcia is a self-employed chiropractor and a cash basis;taxpayer. During the most recent tax year, he provides patient services;totaling $800,000. Of that total amount, he estimates $20,000 will never be;collected. How much can Garcia deduct as a bad debt expense in the current tax;year?;a.;$ - 0 -;b.;$ 6,000;c.;$10,000;d.;$14,000;e.;$20,000;21. Norman loaned $5,000 to his friend Alan in 2005. They;drew up a formal loan agreement that called for a reasonable rate of interest.;Alan used the loan proceeds to pay expenses during his last year in college.;Norman was recently informed that his friend Alan was struck by lightning and;died. Norman will never be able to collect the proceeds of this loan because;Alan died with no assets. What tax benefit, if any, will Norman will be able to;claim in 2014, the year that the loan became worthless.;a.;$5,000 tax credit.;b.;$5,000 ordinary loss.;c.;$5,000 short-term capital loss.;d.;This is a personal non-deductible loss.;22. Which of the following taxes paid by the Jacob Company;can be deducted during 2014?;I.;Federal taxes withheld from employees.;II.;Jacob?s share of employee?s Social Security taxes.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;23. Which of the following legal expenses paid by the Kerr;Corporation can be deducted in the current year?;I.;Legal fees to resolve a tax dispute with the Internal;Revenue Service.;II.;Legal fees to purchase land that will be used to expand;its warehouse.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;24. In which of the following circumstances will the income;of a child be taxed at the marginal;tax rate of the child?s parent?;I.;Martin, age 6, earns $14,000 this year by acting in;television commercials.;II.;Allen, age 15, has $4,000 of interest income on bonds that;he inherited from his grandfather last year.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;25. Which of the following expenses are not deductible for AGI?;a.;Alimony paid.;b.;Contributions to an IRA.;c.;Moving expenses.;d.;Interest on qualified student loans.;e.;Interest expense related to an investment.;26. Aaron is a 34-year-old head of household and a;self-employed taxpayer. He contributed the maximum amount to his IRA account;during the current year, and his net earnings from his business totaled;$29,000. How much can Aaron deduct for AGI this year?;a.;$ - 0 -;b.;$3,200;c.;$3,800;d.;$4,000;e.;$5,500;27. Charles is a 54-year-old head of household and a;self-employed taxpayer. He contributed the maximum amount to his IRA account;during the current year, and his net earnings from his business totaled;$29,000. How much can Charles deduct for AGI this year?;a.;$ - 0 -;b.;$3,200;c.;$4,000;d.;$5,000;e.;$6,500;28. Max and Michele, both 42, are married with salaries of;$45,000 and $44,000, respectively. Their combined AGI is $100,000. Michele is;an active participant in her company?s qualified pension plan while Max is not.;Determine the maximum combined IRA contribution and deduction amounts?;Maximum Maximum;Contribution Deduction;a.;$ 5,500 $ 5,500;b.;$ 11,000 $ 11,000;c.;$ 11,000 $ 5,500;d.;$ 11,000 $ 9,900;e.;$ 11,000 $ 11,000;29. David purchased investment realty in 1991 for $20,000.;During the current year he contributes it to the American Heart Association to;use as the site for its new local headquarters. The realty has a value of;$52,000 on the contribution date, and David?s AGI is $100,000. David?s maximum;current year contribution deduction is;a.;$ - 0 -;b.;$ 20,000;c.;$ 30,000;d.;$ 50,000;e.;$ 52,000;30. Dan and Kay, 27 and 28 years old, respectively, are;married and file a joint return. During the current year, Dan had a salary of;$30,000 and Kay had a salary of $36,000. Both Dan and Kay are covered by an;employer-sponsored pension plan. Their adjusted gross income for the year is;$87,000. Determine the maximum IRA contribution and deduction amounts.;Maximum Maximum;Contribution Deduction;a.;$ 11,000 $ 11,000;b.;$ 11,000 $ - 0 -;c.;$ 11,000 $ 5,500;d.;$ 5,500 $ -0-;e.;$ 8,250 $ 8,250;31. Certain interest expense can be carried forward if not;deductible in the current year. Which of the following interest can be carried;forward and deducted in a future year?;a.;Credit card interest.;b.;Personal car loan interest.;c.;Interest on a loan to buy common stock.;d.;Home equity loan interest.;32. Which of the following is (are) correct concerning the;time test for deducting moving expenses?;I.;Self-employed individuals must work in the new location;for 78 weeks during a 2-year period.;II.;A transfer of the employee by the employer waives the time;requirement.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;33. Kenneth owns all of the stock of Kearney Corporation.;Kenneth is also the President of Kearney and works full-time running the;corporation. During the current year, Kearney has a loss of $40,000 from its;operations.;I.;If Kearney is an S Corporation, the corporation may;carryback the loss 2 years (and obtain a refund of taxes paid) with any;remaining loss carried forward 20 years.;II.;If Kearney is a regular corporation, Kenneth may deduct;the loss for AGI on his personal tax return because the corporation is a flow;through entity.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;34. Joe, Tom, and Eric are partners in New Communications;Partnership. Joe owns a 50% interest, Tom owns a 35% interest, and Eric owns a;15% interest. During the current year (the first year of operation for the;enterprise), the business has a loss. Although the partnership is established;as a general partnership, Joe functions as the manager and performs all of the;day-to-day duties of a chief operating officer. Tom and Eric are merely;investors who receive monthly reports about the business. At the close of the;current tax year, each partner will receive a share of the partnership loss.;Which of the partners will be able to deduct his (their) share of the;partnership loss?;I.;Joe;II.;Tom;III.;Eric;a.;Tom;b.;Joe, Tom, and Eric;c.;Joe;d.;Joe and Tom;e.;Tom and Eric;35. During 2014, Marci worked two ?jobs.? She performed;financial consulting activities for 1,000 hours and real estate development and;rental activities for 1,200 hours. Her real estate activities produced a loss;of $35,000. Her financial consulting generated a net business income of;$40,000. How much of the loss can Marci deduct against her financial consulting;income?;a.;$ - 0 -;b.;$17,500;c.;$25,000;d.;$35,000;e.;$40,000;36. Karen and Ross equally own rental real estate. The;rental property generated a loss of $20,000. Karen is also employed as a;part-time Tupperware salesperson and full time as a real estate agent. For her;share of the loss to be fully deductible, she must;I.;Not have an adjusted gross income in excess of $100,000.;II.;Spend more than 750 hours, in total, in real property;trades or businesses.;III.;Spend more than 100 hours managing the rental activity;and spend more time then Ross.;IV.;She must spend more than 50% of her time in real property;trades or businesses and must own more than 5% of the real estate agency.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Statements I and II are correct.;d.;Statements II, III, and IV are correct.;e.;Statements I, II, III, and IV are correct.;37. Thomas is a 30% owner of 3 rental houses. He spends 625;hours a year managing the properties. In addition, he owns a 20% interest in a;real estate business to which he devotes 1,800 hours a year. The rental units;generate a total loss of $22,000, and Thomas? adjusted gross income in the;current year, before considering the rental properties, is $120,000. How much;of the loss can Thomas deduct?;a.;$ - 0 -;b.;$ 4,500;c.;$ 6,600;d.;$15,000;e.;$22,000;38. A passive activity;I.;includes an interest in a limited partnership held by a;limited partner investor.;II.;includes a working interest in an oil and gas deposit.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;39. A passive activity;I.;includes any trade or business in which a taxpayer does;not materially participate.;II.;includes rentals of apartment buildings, rental houses;etc., where no significant personal services are involved.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;40. Which of the following must be classified as ?portfolio;income??;I.;Dividend income from an investment in Wilmington Corp.;common stock.;II.;Royalty income from the ownership of the mineral rights on;land. The taxpayer does not share the expenses with the extraction company.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;41. Which of the following must be classified as ?portfolio;income??;I.;Interest income on CDs from First National Bank.;II.;Loss realized from the sale of one-half of his stock;shares in Lockleed Corp. Lockleed is qualified small business stock.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;42. A taxpayer had the following for the current year;Active;Portfolio;Passive;Income;Income;Income;Income;$75,000;$22,000;$ 55,000;Deductions;(45,000);(16,000);(110,000);Income(Loss);$30,000;$ 6,000;$(55,000);I.;If the taxpayer is a closely held corporation, taxable;income from the three activities is a loss of $19,000.;II.;If the taxpayer is an individual and the passive income is;not related to a rental real estate activity, taxable income is $36,000.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;43. Cisco owns a passive activity that has a basis of;$44,000 and a suspended loss of $18,000. Cisco?s taxable income from active and;portfolio income is $55,000. If Cisco?s sells the passive activity for $56,000;how will he report the transaction on his tax return?;I.;Cisco will report an ordinary loss of $18,000.;II.;Cisco will report a capital gain of $12,000.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;44. Karl has the following income (loss) during the current;year;Net business income;$45,500;Dividends and interest;12,000;Actively managed rental property;(34,000);What is Karl?s adjusted gross income for this year?;a.;$23,500;b.;$31,400;c.;$32,500;d.;$45,500;e.;$57,500;45. Nora is the owner of an apartment complex. She actively;participates in the management of the building. During the current year, it;generates a taxable loss of $33,000. Nora?s other sources of income are salary;of $104,000 and interest of $16,000. What is Nora?s allowable loss from the;apartment in the current year?;a.;$ - 0 -;b.;$15,000;c.;$16,000;d.;$25,000;e.;$33,000;46. Tim owns 3 passive investments. During the current year;he has the following income and loss from each activity;Activity 1;$(7,000);Activity 2;(3,000);Activity 3;4,000;What is the amount of suspended loss allocated to Activity;2?;a.;$ - 0 -;b.;$1,800;c.;$3,000;d.;$4,200;e.;$6,000;47. Ling owns 3 passive investments. During the last two;years, she has the following income and loss from each activity;2013;2014;Activity 1;$(14,000);$(6,000);Activity 2;(6,000);(1,000);Activity 3;8,000;12,000;At the end of 2014 what is the amount of suspended loss;allocated to Activity 2 (rounded)?;a.;$1,695;b.;$1,815;c.;$5,185;d.;$5,305;e.;$7,000;48. ?Active participation? and ?real estate professional?;are both exceptions to the general rule for passive activity losses with rental;real estate.;I.;One of the tests that an individual must meet to qualify;as a real estate professional is that the taxpayer spends more than 50% of;his/her time in real property trades or businesses.;II.;A taxpayer with an AGI of $190,000 qualifying under the;real estate professional exception may deduct an unlimited amount of rental;real estate losses.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;49. Sarah owns a passive activity that has a suspended loss;of $18,000. The activity has a fair market value of $35,000 and her adjusted;basis in the activity is $20,000.;I.;If Sarah sells the activity, she is allowed to deduct the;$18,000 suspended loss.;II.;If Sarah gifts the activity, she is only allowed to deduct;$15,000 of the suspended loss.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;50. During the current year, Tim has a short-term capital;loss of $9,000 and a long-term capital gain of $1,500. Due to these;transactions Tim reports;a.;A capital loss deduction of $3,000 and a loss carryforward;of $4,500.;b.;A capital loss deduction of $3,000 and a loss carryforward;of $6,000.;c.;A capital loss deduction of $9,000.;d.;A capital loss deduction of $3,000 and a loss carryforward;of $7,500.;e.;A capital loss deduction of $7,500;51. Edith, a single taxpayer, owns 2,000 shares of;qualifying small business stock that she purchased for $225,000. During the;current year, she sells 800 of the shares for $32,000. If this is the only;stock Edith sells during the year, what can she deduct as an ordinary and;capital loss?;Ordinary loss Capital loss;a.;$58,000 $ - 0 -;b.;$50,000 $ 3,000;c.;$50,000 $ 8,000;d.;$ - 0 - $ 3,000;e.;$ - 0 - $58,000;52. The wash sale provisions apply to which of the;following?;I.;Jim bought 500 additional shares of Alfa Gamma stock for;$4,000 on December 2, 2012. Jim owned 2,500 shares after that purchase. On;December 26, 2012, Jim realizes a loss of $1,500 on the sale of 250 shares of;Alfa Gamma stock.;II.;Calvin realizes a $8,000 loss on the December 29, 2012;sale of Sloan corporate bonds. Each bond has a face value of $1,000. He;replaces the Sloan corporate bonds with the same number of Jackson corporate;bonds, each with a face value of $1,000 on January 16, 2013. The Jackson bonds;have a different interest rate and maturity date then the Sloan bonds but;have the same bond rating (AAA).;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;53. To be a qualifying relative,an individual must;meet certain tests. These tests include;I.;the joint return test.;II.;the gross income test.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;54. Allen and Louise are both 49 years of age and file a;joint return. They provide all of the support for their son, Dylan, who is 20;years old and is at home until he gets called into the army. His income at;part-time jobs is $4,000. Their daughter, Phyllis, is a 23-year-old full-time;student at State University. She lived at school 9 months and provided two;thirds of her own support with a summer job. How many personal and dependency;exemptions can Allen and Louise claim on their income tax return?;a.;1;b.;2;c.;3;d.;4;55. For purposes of the relationship test for dependents;which of the following does not qualify as a relative?;a.;Mother.;b.;Nephew.;c.;Cousin.;d.;Grandfather.;e.;Stepbrother.;56. Thomas has adjusted gross income of $228,000, total;itemized deductions of $39,000 and correctly claims 2 personal and 2 dependency;exemptions. Which filing status should he use?;a.;Single.;b.;Head of household.;c.;Married filing a joint return.;d.;Married filing separately.;57. Fred?s wife died in 2013. He has not remarried and;maintains a home for himself and his dependent daughter. What is Fred?s filing;status for 2014?;a.;Single.;b.;Head of household.;c.;Married, filing separately.;d.;Surviving spouse.;58. Which of the following qualify for the medical expense;deduction?;I.;Insulin.;II.;Medicare insurance premiums.;a.;Only statement I is correct.;b.;Only statement II is correct.;c.;Both statements are correct.;d.;Neither statement is correct.;59. Anita receives a state income tax refund of $550 in May;2014. When she filed her 2013 federal income tax return, she used the standard;deduction amount. Although the all-inclusive income concept would require Anita;to report the $550 in her federal gross income for 2014, she may exclude it.;What tax concept explains why the exclusion is permitted in this case?;a.;Wherewithal to pay.;b.;Tax benefit rule.;c.;Ability to pay.;d.;Arm?s-length transaction.;e.;Administrative convenience.;60. Gerald purchases a new home on June 30, 2013. During;January 2014, he receives his real estate tax statement for calendar year 2013;showing $1,800 payable. Gerald pays the $1,800 on March 1, 2014. The seller of;the residence had credited Gerald with half of the 2013 taxes on the closing;statement. What is the amount of real estate taxes that Gerald may claim as an;itemized deduction in 2014?;a.;$ - 0 -;b.;$ 450;c.;$ 900;d.;$1,800;e.;$2,700;61. Wayne purchases a new home during the year, borrowing;$725,000 from Century National Bank to finance the purchase. He also pays;$7,250 in points and $4,500 in loan origination fees. During the year he pays;interest of $71,000 on the loan. What is Wayne?s allowable interest deduction?;a.;$ - 0 -;b.;$ 7,250;c.;$71,000;d.;$78,250;e.;$82,750

 

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