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For the year ended December 31, current year, David, a married taxpayer filing a joint return

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Question;1.For the year ended December 31, current year, David, a married taxpayer filing a joint return, reported the following:Investment income from interest $24,000Investment expenses other than interest 4,000Interest expense on funds borrowed in 2005 to purchase investment property 70,000What is the maximum amount that David can deduct in the current year as investment interest expense?$7,000$20,000$21,000$24,0005 pointsQuestion 2Charlie took a $7,000 distribution from his educational savings account and used $6,500 to pay for qualified higher education expenses. On the date of the distribution, his educational savings account had a $28,000 balance including the $21,000 he had contributed. How much of the $7,000 distribution is tax free?$0$7,000$6,500$6,8755 pointsQuestion 3The expenses associated with the rental of a residence used for both personal and rental purposes are subject to three possible tax treatments. Which of the following is not included as one of the three?If a residence is rented for fewer than 15 days during the year the rental period is disregarded and the residence is regarded as a personal residence for tax purposes.If the residence is rented for 15 days or more and is used for personal purposes for not more than 14 days or 10 percent of the days rented, whichever is greater, the residence is treated as rental property.If the residence is rented for 15 days or more and is used for personal purposes for not more than 14 days or 10 percent of the days rented, whichever is greater, the residence is treated as a personal residence for tax purposes.If the residence is rented for 15 days or more and is used for personal purposes for more than 14 days or 10 percent of the days rented, whichever is greater, allocable rental expenses are allowed only to the extent of rental income.Question 4To be deductible, the cost of uniforms must be:A required condition of employment and not be suitable for everyday useA required condition of employment yet can be suitable for everyday wearRequired by the employer and written in their dress codeVoted on by the employees of the organization and later incorporated into the employee hand book5 pointsQuestion 5In most cases, a taxpayer reports rental income and the related expenses on Schedule E.TrueFalse5 pointsQuestion 6The American Opportunity creditIs 50 percent of the first $1,200 of tuition and fees paid and 100 percent of the next $1,200Is available for 2 years of post-secondary educationIs fully refundable even if the credit exceeds the tax liabilityIs available for qualifying expenses paid on behalf of the taxpayer and his or her spouse, in addition to those paid for dependents5 pointsQuestion 7American Opportunity and lifetime learning credits:Can be added to the amount of any tax-free scholarships received to increase the amount of the creditCan be taken for room and board as well as tuitionCan be used for tuition and feesCan only be taken if the taxpayer is married filing a separate return5 pointsQuestion 8Ashton paid the following interest expense during the current tax year:Qualified home mortgage interest $11,000Credit card interest 1,000Personal bank loan interest 3,000What is the amount of Ashton's interest deduction for the current tax year?$3,000$11,000$12,300$15,0005 pointsQuestion 9In some cases, a taxpayer may deduct an otherwise allowable contribution to an IRA, even though the contribution is made after the close of the tax year.TrueFalse5 pointsQuestion 10Which of the following is not an itemized deduction on Schedule A?Alimony paidCasualty lossesMedical expensesPersonal property tax5 pointsQuestion 11Mortgage interest on a taxpayer's personal residence is deductible on Schedule A.TrueFalse5 pointsQuestion 12For the current tax year, Sally, who is divorced, reported the following items of income:Interest income $ 600Wages 4,000Earnings from self-employment 3,000She maintains a household for herself and her 1-year-old son who qualifies as her dependent. What is the maximum earned income credit available to her for the current year, using the tables?$1,029$1,369$2,389$3,16913. Donald and Jamie rent out their residence in Dallas to friends for 10 days while they vacation in Europe. They collect $1,500 of rental income. How is the rental income treated on their tax return? Explain14.Wilson and Joan, both in their 30's, file a joint income tax return for 2013. Wilson's wages are $25,000 and Joan's wages are $33,000 for the year. Their total adjusted gross income is $58,000, and Joan is covered by a qualified pension plan at work but Wilson is not.

 

Paper#52578 | Written in 18-Jul-2015

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