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Chapter 06 Individual Deductions

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Question;Chapter 06;Individual Deductions;True / False Questions;1. The;profit motive distinguishes "business" activities from;personal" activities.;True False;2. All;business expense deductions are claimed above the line.;True False;3. All;investment expenses are itemized deductions.;True False;4. Rental or;royalty expenses are deductible "for" AGI.;True False;5. To be;deductible, business expenses must be directly related to a business activity.;True False;6. The;phrase "ordinary and necessary" means that an expense must be;appropriate and helpful for generating a profit.;True False;7. All;reasonable moving expenses are deductible if the move is a minimum of 35 miles;in distance.;True False;8. To deduct;a moving expense, the taxpayer must be employed or self employed for a specific;amount of time after the move.;True False;9. Self;employed taxpayers can deduct the cost of health insurance as long as they do;not actually participate in their spouses' employer-provided health plan.;True False;10. Self;employed taxpayers can choose between claiming a deduction or a credit for the;employer portion of self employment taxes paid.;True False;11. An;individual who forfeits a penalty for prematurely withdrawing a certificate of;deposit (CD) is allowed to net the penalty against the interest income from the;CD.;True False;12. Qualified;education expenses for purposes of the deduction of interest on educational;loans are expenses paid for the education of the taxpayer, the taxpayer's;spouse, or a taxpayer's dependent to attend a post-secondary institution of;higher education.;True False;13. The;definition of qualifying expenses is more restrictive for the qualified;educational expense deduction than it is for the education loan interest;expense deduction.;True False;14. The;medical expense deduction is designed to provide relief for doctors and medical;practitioners.;True False;15. Deductible;medical expenses include payments to medical care providers such as doctors;dentists, and nurses and medical care facilities such as hospitals.;True False;16. Taxpayers;traveling for the primary purpose of receiving essential and deductible medical;care may deduct the cost of travel.;True False;17. The;deduction for medical expenses is limited to the amount of unreimbursed;qualifying medical expenses paid during the year reduced by five percent of the;taxpayer's AGI.;True False;18. The;itemized deduction for taxes includes all types of state, local, and foreign;taxes.;True False;19. In 2013;taxpayers may elect to deduct state and local sales taxes instead of deducting;state and local income taxes.;True False;20. Taxpayers;are allowed to deduct mortgage interest on up to $1,000,000 of acquisition debt;for their qualified residence and on up to $500,000 of home-equity debt.;True False;21. The;deduction for investment interest in excess of the net investment income;carries forward to the subsequent year.;True False;22. To qualify;as a charitable deduction the donation must be made by cash or by check.;True False;23. In general;taxpayers are allowed to deduct the fair market value of capital gain property;on the date of the donation to a qualified charitable organization.;True False;24. The;deduction for charitable contributions is limited to ten percent of the taxpayer's;AGI whereas casualty losses on personal assets are only deductible to the;extent the losses exceed ten percent of the taxpayer's AGI.;True False;25. Unreimbursed;employee business expenses, investment expenses, hobby expenses, and certain other;expenses are classified as miscellaneous itemized deductions and are deductible;only to the extent that their sum exceeds 2% of the taxpayer's AGI.;True False;26. Taxpayers;are allowed to deduct all ordinary and necessary expenses incurred in connection;with determining their tax obligations imposed by federal authorities.;True False;27. Bunching;itemized deductions is one form of tax evasion.;True False;28. Taxpayers;generally deduct the lesser of their standard deduction or their itemized;deductions.;True False;29. Taxpayers;filing single and taxpayers filing married separate have the same basic;standard deduction amount.;True False;30. An;individual who is eligible to be claimed as a dependent on another's return and;has $1,000 of earned income may claim a standard deduction of $1,350.;True False;31. In 2014;personal and dependency exemptions are $6,200 for single taxpayers.;True False;Multiple Choice Questions;32. Congress;allows self-employed taxpayers to deduct the cost of health insurance above the;line (for AGI) because;A. employers;are allowed to deduct social security (FICA) taxes as a business expense.;B. self-employed;taxpayers need an alternate mechanism for reducing the cost of health care.;C. this;deduction provides a measure of equity between employees and the self-employed.;D. health;insurance premiums cannot be deducted otherwise.;E. None of;these;33. Which of;the following is a true statement?;A. Congress;allows self-employed taxpayers to deduct the employer portion of their;self-employment tax.;B. To deduct;expenses associated with any profit motivated activity taxpayers must maintain;a high level of involvement or effort in the activity throughout the year.;C. Business;activities never require a relatively high level of involvement or effort from;the taxpayer.;D. All;business expenses are deducted for AGI.;E. All of;these are true.;34. Which of;the following is a true statement?;A. Unreimbursed;employee business expenses are deductible as miscellaneous itemized deductions.;B. With one;exception, investment expenses are deductible as itemized deductions.;C. Business;deductions are one of the most common deductions for AGI but they are not;readily visible on the front of Form 1040.;D. The;distinction between business and investment activities is critical for;determining whether a deduction is claimed above the line (for AGI) or below;the line (itemized).;E. All of;these are true;35. Which of;the following is a true statement?;A. All;business expenses are deducted for AGI.;B. Investment;expenses are typically deducted for AGI.;C. Tax;preparation fees are deducted for AGI.;D. Rental;and royalty expenses are deducted for AGI.;E. All of;these;36. Which of;the following is a true statement?;A. Individuals;qualify for the moving expense deduction only if they change employers.;B. To;satisfy the distance test, the distance from the taxpayer's old residence to;the new place of work must be at least 50 miles more than the distance from the;old residence to the old place of work.;C. To;satisfy the business test, the taxpayer must be employed full-time for 45 of;the first 52 weeks after the move.;D. The;moving expense deduction is restricted to expenses associated with moving;personal possessions to the new residence.;E. All of;these are true.;37. Which of;the following is a true statement?;A. The;deduction for interest on educational loans is subject to a phase-out;limitation.;B. The;deduction for moving expenses is subject to a phase-out limitation.;C. Self-employed;taxpayers are allowed to deduct health care premiums even if the taxpayer is;eligible to participate in an employer-provided health plan.;D. Taxpayers;are not allowed to receive a moving allowance from their employers.;E. All of;these are false.;38. Which of;the following is a true statement?;A. For;purposes of the deduction for educational interest, an educational loan must be;used to pay tuition to any type of school.;B. The;maximum deduction for educational interest is $5,000 for married taxpayers;filing jointly.;C. Self-employed;taxpayers are not allowed to deduct health care premiums if the taxpayer is;eligible to participate in their spouse's employer-provided health plan.;D. Self-employment;taxes paid by self-employed taxpayers are deductible as business expenses.;E. All of;these are true.;39. Which of;the following is a true statement?;A. For;purposes of the deduction for educational interest, expenses do not include;expenses for room, board and travel.;B. For;purposes of the deduction for educational interest, qualified education;expenses are those paid for the education of the taxpayer, the taxpayer's;spouse, or a taxpayer's dependent.;C. The;maximum deduction for interest expense on qualified education loans is $6,000.;D. A penalty;paid for prematurely withdrawing a certificate of deposit or similar deposit is;deductible as an investment expense.;E. All of;these are false.;40. This year;Jong paid $3,000 of interest on a qualified education loan. Jong files married;joint and reports modified AGI of $142,000. What is Jong's deduction for;interest expense on an educational loan?;A. $2,500;B. $3,000;C. $1,500;D. $1,000;E. None of;these.;41. 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?;A. $4,100;B. $4,000;C. $2,667;D. $2,000;E. None of;these.;42. This year;Riley files single and reports AGI of $71,000. Riley paid $1,200 of interest on;a qualified education loan. What amounts can Riley deduct for qualifying;education interest?;A. The;deduction for qualifying education interest is $1,200.;B. The;deduction for qualifying education interest is $1,000.;C. The;deduction for qualifying education interest is $720.;D. The;deduction for qualifying education interest is $200.;E. None of;these.;43. Max paid;$5,000 of tuition for him to attend a private university this year. How much of;this payment can Mason deduct as a qualifying education expense if he files;single and reports modified AGI of $60,000 (assume the 2013 rules apply for;purposes of the qualified education expense deduction)?;A. $5,000;B. $4,000;C. $2,000;D. $0;E. None of;these.;44. 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 for Han and herself in a;qualified plan provided by the school district (not through an exchange). Which;of the following is a true statement?;A. The tools;and supplies are deductible for AGI while the health insurance is an itemized;deduction.;B. Both;expenditures are deductible for AGI.;C. The tools;and supplies are an itemized deduction but the health insurance is deductible;for AGI.;D. Both;expenditures are itemized deductions.;E. Neither;of the expenditures is deductible.;45. Bruce is;employed as an executive and his wife, Marie, is a self-employed realtor.;Besides Bruce's salary, Bruce and Marie own a warehouse that they rent to a;local business for storage. This year they paid $1,250 for electric service in;the warehouse. Marie also paid self-employment tax of $6,200 and Bruce had;$7,000 of Social Security taxes withheld from his pay. Marie paid $45 fee to;rent a safe deposit box to store records associated with her realty operation.;Which of the following is a true statement?;A. One-half;of the social security tax is deductible for AGI.;B. Only the;electric bill is deductible for AGI.;C. The;self-employment tax is not deductible.;D. The safe;deposit fee and the electric bill are deductible for AGI.;E. None of these;is true.;46. Casey;currently commutes 35 miles to work in the city. He is considering a new;assignment in the suburbs on the other side of the city that would increase his;commute considerably. He would like to accept the assignment, but he thinks it;might require that he move to the other side of the city. Which of the;following is a true statement?;A. Casey can;deduct moving expenses if the distance between his current residence and his;new assignment is at least 50 miles.;B. If;Casey's move qualifies for the moving expense deduction, he can deduct the cost;of meals while en route to his new residence.;C. To;qualify for a moving expense deduction the new commute from Casey's current;residence would need to be a minimum of 85 miles.;D. If;Casey's move qualifies for the moving expense deduction, he can deduct half the;cost of meals while en route to his new residence.;E. All of;these are false.;47. Jill;currently lives in the suburbs and commutes 25 miles to her office in downtown;Freeport. She is considering quitting her current job to look for new;employment in the downtown area. Which of the following statements best;describes how Jill can satisfy the distance test for deducting moving expenses;if she accepts a new job in downtown Freeport?;A. Jill must;move at least 25 miles further away from downtown Freeport.;B. Jill must;move 25 miles east from downtown Freeport.;C. Jill must;move 50 miles further away from downtown Freeport.;D. Jill need;not move her residence because she is starting a new job.;E. Jill;cannot satisfy the distance test if she accepts a job in downtown Freeport.;48. Which of;the following expenses can be deducted as moving expenses?;1. The cost of a trip to purchase a new residence;2. The cost of moving personal belongings;3. Lodging (one night) while en route;4. The cost of gasoline when traveling to the new residence;5. One-half of the cost of meals while en route to the new;residence;A. Numbers;1, 2, and 4 only.;B. Numbers 1;through 3 only.;C. Numbers 2;through 4 only.;D. Numbers 2;through 5 only.;E. All of;these are deductible as moving expenses.;49. Brice is a;single, self-employed electrician who earns $60,000 per year in self-employment;income. Brice paid the following expenses this year. Which of the expenses are;deductible for AGI?;1. The cost of health insurance (not purchased through an;exchange);2. The employer portion of self-employment tax paid;3. Penalty on early withdrawal of funds from a certificate;of deposit;A. Numbers 1;and 2 only.;B. Numbers 1;and 3 only.;C. Numbers 2;and 3 only.;D. None of;these is deductible for AGI.;E. All of;these are deductible for AGI;50. Hector is;a married self-employed taxpayer, and this year he paid $3,000 for his health;insurance premiums (not through an exchange). Under which of the following;alternative conditions can Hector deduct the cost of the premiums for AGI?;A. Hector;chose not to participate in the employer-sponsored plan of his spouse.;B. Hector's;spouse participates in an employer-sponsored plan but Hector is not eligible to;participate in this plan.;C. Neither;Hector nor his spouse participates in an employer-sponsored plan although both;are eligible to participate in a plan.;D. Hector;can deduct the health insurance premiums regardless of the insurance status of;his spouse.;E. None of;these - health insurance premiums can only be deducted as an itemized;deduction.;51. Lewis is;an unmarried law student at State University, a qualified educational;institution. Last year Lewis borrowed $30,000 and used the proceeds to pay his;university tuition. This year Lewis paid $1,500 of interest on the loan. Which;of the following is a true statement if Lewis reports $40,000 of salary and no;other items of income or expense?;A. Lewis can;deduct all the interest on his student loan for AGI.;B. Lewis can;deduct all the interest on his student loan as an itemized deduction.;C. Lewis can;only deduct $1,000 of the interest on his student loan for AGI.;D. Lewis can;only deduct $1,000 of the interest on his student loan as an itemized;deduction.;E. All of;these are false.;52. Grace is a;single medical student at State University, a qualified educational;institution. This year Grace paid university tuition of $12,000. Grace works;part-time at the University library, and this year she reports $15,000 of;salary and no other items of income or expense. Which of the following is a;true statement?;A. Grace can;deduct all of her tuition for AGI as a business expense.;B. Grace can;deduct all of her tuition as a miscellaneous itemized deduction.;C. Grace can;only deduct half of her tuition for AGI as a business expense.;D. Grace can;only deduct half of her tuition as a miscellaneous itemized deduction.;E. All of;these are false.;53. This fall;Manfred enrolled in the law school at State University (a qualified educational;institution) and paid $6,200 in tuition. Until his enrollment Manfred worked as;a stock broker and this year he reports $70,000 in wages. If Manfred files;single and reports no other items of income or expense how much of the tuition;can he deduct as a business expense?;A. Manfred;can deduct half of his tuition for AGI.;B. Manfred;can deduct half of his tuition as a miscellaneous itemized deduction.;C. Manfred;can deduct $6,200 for AGI.;D. Manfred;can deduct $6,200 as a miscellaneous itemized deduction.;E. None -;the tuition is not deductible as a business expense.;54. This fall;Millie finally repaid her student loan. She originally borrowed the money to;pay tuition several years ago when she attended at State University (a;qualified educational institution). This year Millie paid a total of $2,400 of;interest on the loan. If Millie files single and reports $70,000 of income and;no other items of income or expense how much of the interest can she deduct?;A. Millie;can deduct $2,400 for AGI.;B. Millie;can deduct $1,600 for AGI.;C. Millie;can deduct $2,400 as an itemized deduction.;D. Millie;can deduct $800 for AGI.;E. None -;the tuition is not deductible.;55. This fall;Marsha and Jeff paid $5,000 for their son Josh's tuition and fees at State;University (a qualified education institution). They also paid $1,000 for;Josh's books. How much of these two payments can Marsha and Jeff deduct this;year, assuming Josh is their dependent, their modified AGI is $135,000, and the;2013 rules apply for purposes of the qualified education expense deduction?;A. Marsha;and Jeff can deduct $5,000 for AGI.;B. Marsha;and Jeff can deduct $4,000 for AGI.;C. Marsha;and Jeff can deduct $2,500 for AGI.;D. Marsha;and Jeff can deduct $2,000 for AGI.;E. None -;the tuition is not deductible.;56. This fall;Josh paid $5,000 for his tuition and fees at State University (a qualified;education institution). Assume that Josh is Marsha and Jeff's son and that;Marsha and Jeff claim Josh as a dependent. Marsha and Jeff's modified AGI is;$100,000. How much of Josh's $5,000 tuition and fees payments can Marsha and;Jeff deduct this year (assume the 2013 rules apply for purposes of the;qualified education expense deduction)?;A. Marsha;and Jeff can deduct $5,000 for AGI.;B. Marsha;and Jeff can deduct $4,000 for AGI.;C. Marsha;and Jeff can deduct $2,500 for AGI.;D. Marsha;and Jeff can deduct $2,000 for AGI.;E. None -;the tuition is not deductible by Marsha and Jeff.;57. Ned is a;head of household with a dependent son, Todd, who is a full-time student. This;year Ned made the following expenditures related to Todd's support;What amount can Ned include in his itemized deductions?;A. $1,700;included in Ned's miscellaneous itemized deductions;B. $2,050;included in Ned's miscellaneous itemized deductions;C. $950;included in Ned's miscellaneous itemized deductions;D. $600;included in Ned's medical expenses;E. None of;these.;58. Which of;the following is a true statement?;A. A;taxpayer can deduct medical expenses incurred for members of his family who are;dependents.;B. A;taxpayer can deduct medical expenses incurred for a qualified relative even if;the relative does not meet the gross income test.;C. A;divorced taxpayer can deduct medical expenses incurred for a child even if the;child is claimed as a dependent by the former spouse.;D. Deductible;medical expenses include long-term care services for disabled spouses and;dependents.;E. All of;these are true.;59. Which of;the following costs are deductible as an itemized medical expense?;A. The cost;of prescription medicine and over-the-counter drugs.;B. Medical;expenses incurred to prevent disease.;C. The cost;of elective cosmetic surgery.;D. Medical;expenses reimbursed by health insurance.;E. None of;these costs is deductible.;60. Which of;the following costs are NOT deductible as an itemized medical expense?;A. The cost;of eyeglasses.;B. Payments;to a hospital.;C. Transportation;for medical purposes.;D. The cost;of insurance for long-term care services.;E. All of;these are deductible as medical expenses.;61. Opal fell;on the ice and injured her hip this winter. As a result she paid $3,000 for a;visit to the hospital emergency room and $750 for follow-up visits with her;doctor. While she recuperated, Opal paid $500 for prescription medicine and;$600 to a therapist for rehabilitation. Insurance reimbursed Opal $1,200 for;these expenses. What is the amount of Opal's qualifying medical expense?;A. $3,000;B. $3,750;C. $3,650;D. $4,850;E. All of;these;62. Which of;the following taxes will not qualify as an itemized deduction?;A. personal;property taxes assessed on the value of specific property.;B. state;local, and foreign income taxes.;C. real;estate taxes on a residence.;D. gasoline;taxes on personal travel.;E. None of;these qualifies as an itemized deduction.;63. This year;Amanda paid $749 in Federal gift taxes on a gratuitous transfer to her nephew.;Amanda lives in Texas and does not pay any state or local income taxes. Which;of the following is a true statement?;A. Amanda;cannot deduct Federal gift taxes.;B. Amanda;can deduct Federal gift taxes for AGI.;C. Amanda;can deduct Federal gift taxes paid as an itemized deduction.;D. Amanda;must include Federal gift taxes with other miscellaneous itemized deductions.;E. None of;these is true.;64. This year;Norma paid $1,200 of real estate taxes on her personal residence. Norma's other;itemized deductions (state income taxes) only amount to $3,100. Which of the;following is a true statement if Norma files single with one personal;exemption?;A. Norma can;deduct 4,300 for AGI.;B. Norma can;deduct $1,200 even if her standard deduction is $6,200.;C. Norma;should deduct $4,300 even if her standard deduction is $6,200.;D. Norma can;deduct $3,100 even if her standard deduction is $6,200.;E. Norma;should claim the standard deduction.;65. Madeoff;donated stock (capital gain property) to a public charity. He purchased the;stock 3 years ago for $100,000, and on the date of the gift, it had a fair;market value of $200,000. What is his maximum charitable contribution deduction;for the year if his AGI is $500,000 (before considering the itemized deduction;phase-out)?;A. $100,000;B. $200,000;C. $150,000;D. $250,000;E. None of;these;66. Carly;donated inventory (ordinary income property) to a church. She purchased the;inventory last month for $100,000, and on the date of the gift, it had a fair;market value of $92,000. What is her maximum charitable contribution deduction;for the year if her AGI is $200,000?;A. $100,000;B. $92,000;C. $60,000;D. $46,000;if the church sells the inventory;E. None of;these;67. Simone;donated a landscape painting (tangible capital gain property) to a library, a;public charity. She purchased the painting five years ago for $50,000, and on;the date of the gift, it had a fair market value of $200,000. What is her;maximum charitable contribution deduction for the year if her AGI is $300,000;(before considering the itemized deduction phase-out)?;A. $100,000;B. $200,000;C. $90,000;if the library uses the painting for its charitable purpose;D. $150,000;E. None of;these;68. Larry;recorded the following donations this year;$500 cash to a family in need;$2,400 to a church;$500 cash to a political campaign;To the Salvation Army household items that originally cost;$1,200 but are worth $300.;What is Larry's maximum allowable charitable contribution if;his AGI is $60,000?;A. $2,900;B. $1,000;C. $2,700;D. $4,600;E. None of;these;69. Which of;the following is a true statement?;A. the;deduction of cash contributions to public charities is limited to 30 percent of;AGI.;B. the;deduction of capital gain property to private nonoperating foundations is;limited to 50 percent of AGI.;C. the;deduction of capital gain property to public charities is limited to 20 percent;of AGI.;D. the;deduction of cash contributions to private nonoperating foundations is limited;to 30 percent of AGI.;E. None of;these is true.;70. When;taxpayers donate cash and capital gain property to a public charity, the AGI;percentage limitation is applied in the following order;A. a 30;percent of AGI limitation is applied to the aggregate donation.;B. a 50;percent of AGI limitation is applied to the cash donation and a 20 percent of;AGI limitation is applied to the fair market value of the capital gain;donation.;C. a 30;percent of AGI limitation is applied to the cash donation and a 20 percent of;AGI limitation is applied to the fair market value of the capital gain;donation.;D. a 50;percent of AGI limitation is applied to the cash donation and the fair market;value of the capital gain donation is subject to the lesser of a 30 percent of;AGI limitation or a 50 percent of AGI limitation after subtracting the cash;contributions.;E. donations;to public charities are not subject to AGI limitations.;71. Which of;the following is a true statement?;A. Taxpayers;may only deduct interest on up to $1,500,000 of acquisition indebtedness.;B. Taxpayers;may deduct interest on up to $1,000,000 of home-equity debt.;C. The;deduction for investment interest expense is not subject to limitation.;D. Interest;on home-equity debt up to $100,000 is deductible, even if the loan proceeds are;used to buy a new car.;E. None of;these is true.;72. Margaret;Lindley paid $15,000 of interest on her $300,000 acquisition debt for her home;(fair market value of $500,000), $4,000 of interest on her $30,000 home-equity;loan, $1,000 of credit card interest, and $3,000 of margin interest for the purchase;of stock. Assume that Margaret Lindley has $10,000 of interest income this year;and no investment expenses. How much of the interest expense may she deduct;this year?;A. $23,000.;B. $22,000.;C. $19,000.;D. $18,000.;E. None of;these.;73. Which of;the following is a true statement?;A. A;casualty loss can only occur from storm damage.;B. Personal;casualty losses can only be deducted to the extent that aggregate casualty;losses exceed 10 percent of AGI.;C. Individual;casualty losses are only deductible if each individual loss exceeds $5,000.;D. Uninsured;thefts of personal assets are not included with casualty losses.;E. All of;these are true.;74. Jim was in;an auto accident this year. Jim paid $2,450 to repair his car after the;accident and his insurance only reimbursed him $400. Jim bought his car several;years ago for $1,500. What is the amount of casualty loss from this accident;before Jim applies any casualty loss floor limitations?;A. $2,450;B. $2,050;C. $1,500;D. $1,100;E. None of;these is correct.;75. Which of;the following is a true statement?;A. Employees;cannot claim business expense deductions.;B. Employees;can claim business expense deductions for AGI.;C. Employees;can claim business expense deductions as miscellaneous itemized deductions not;subject to the 2 percent of AGI limitation.;D. Employees;can claim business expense deductions as miscellaneous itemized deductions;subject to the 2 percent of AGI limitation.;E. None of;these is true.;76. Which of;the following is a true statement?;A. Traveling;from a personal residence to a place of business is deducted for AGI as a;moving expense.;B. Traveling;from a personal residence to a place of business is a miscellaneous itemized;deduction subject to the 2 percent of AGI limitation.;C. The;standard mileage rate can be used to calculate the deduction for traveling from;a personal residence to a place of business.;D. Traveling;from a personal residence to a place of business is deductible if reimbursed by;an employer.;E. Traveling;from a personal residence to a place of business is nondeductible.;77. Which of;the following is a true statement?;A. Fees for;investment advice are included in miscellaneous itemized deductions subject to;the 2 percent of AGI limitation.;B. Unreimbursed;employee business expenses are included in miscellaneous itemized deductions;subject to the 2 percent of AGI limitation.;C. Fees for;tax preparation are included in miscellaneous itemized deductions subject to;the 2 percent of AGI limitation.;D. Reimbursed;employee business expenses are included in miscellaneous itemized deductions;subject to the 2 percent of AGI limitation unless the employer's reimbursement;plan qualifies as an accountable plan.;E. All of;these are true.;78. Fred's;employer dispatched him on a business trip from the Dallas headquarters to New;York this year. During the trip Fred incurred the following expenses;What is the amount of Fred's deduction before the;application of any AGI limitations?;A. $2,870;B. $2,570;C. $2,050;D. $1,300;E. $0 - the;expenses cannot be deducted unless Fred is reimbursed.;79. Which of;the following is a true statement?;A. Expenses;associated with a "hobby" are never deductible.;B. The;deductibility of an activity's expenses in excess of revenues depends upon;whether the activity is primarily profit-motivated or a hobby as determined by;facts and circumstances.;C. Taxpayers;engaged in a "hobby" are always presumed to be motivated by profit.;D. The;regulations do not provide any guidance for determining whether an activity is;profit motivated.;E. All of;these are true.;80. Glenn is;an accountant who races stock cars as a hobby. This year Glenn was paid a;salary of $80,000 from his employer and won $2,000 in various races. What is;the effect of the racing activities on Glenn's taxable income if Glenn has also;incurred $4,200 of hobby expenses this year? Assume that Glenn itemizes his;deductions but has no other miscellaneous itemized deductions.;A. increase;in taxable income of $2,000;B. increase;in taxable income of $1,640;C. no change;in taxable income;D. decrease;in taxable income of $560;E. decrease;in taxable income of $2,200;81. Grace is;employed as the manager of a sandwich shop. This year she earned a salary of;$45,000 and incurred the following expenses associated with her employment;What amount of miscellaneous itemized deductions can Grace;include with her other allowable itemized deductions?;A. $150;B. $1,050;C. $550;D. $200 if;Grace was reimbursed $50 for her cooking class;E. None of;these.;82. Which of;the following is a miscellaneous itemized deduction that is not subject to the;2 percent of AGI floor?;A. gambling;losses to the extent of gambling winnings;B. fees for;investment advice;C. employee;business expenses;D. tax;preparation fees;E. All of;these are subject to the 2 percent of AGI floor limit.;83. Which of;the following itemized deductions is not subject to the itemized deduction;phase-out?;A. gambling;losses;B. mortgage;interest;C. state;income tax;D. charitable;contributions;E. All of;these are subject to the itemized deduction phase-out.;84. Frieda is;67 years old and deaf. If Frieda files as a head of household, what amount of;standard deduction can she claim in 2014?;A. $10,650;B. $9,100;C. $10,300;D. $12,200;E. $1,550.;85. Andres and;Lakeisha are married and file joint. Andres is 72 years old and in good health.;Lakeisha is 62 years old and blind. What amount of standard deduction can;Andres and Lakeisha claim this year?;A. $14,800;B. $13,600;C. $9,100;D. $12,400;E. None of;these.;86. Which of;the following is a true statement?;A. The;standard deduction is increased for taxpayers who are blind or deaf at year;end.;B. A married;couple is only entitled to one addition to their standard deduction even if;both spouses are both over age 65.;C. Bunching;itemized deductions is an illegal method of tax avoidance.;D. Before;any applicable phase-out, the deduction for personal and dependency exemptions;is $3,950 times the number of exemptions.;E. All of;these are true.;87. Which of;the following is a true statement?;A. Personal;exemptions, but not dependency exemptions, are subject to phase-out.;B. A married;filing joint taxpayer with AGI of $500,000 would not be able to deduct personal;and dependency exemptions.;C. At most;only 80% of exemptions are subject to phase-out.;D. Itemized;deductions, but not exemptions, are subject to phase-out.;E. None of;these is true.;Essay Questions;88. 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;What is the amount of deductions for AGI that Scott can;claim this year (2013)?;89. Consta

 

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