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ACC 3090 Assignment II MCQs - Income Tax

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Question;ACCOUNTING;3090;INCOME;TAX I;Assignment;2;MULTIPLE;CHOICE;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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