Which of the following statements regarding limitations on the deductibility of home office expenses of self-employed taxpayers is correct?

A. Deductible home office expenses are miscellaneous itemized deductions subject to the 2 percent of AGI floor.

B. Deductible home office expenses are miscellaneous itemized deductions not subject to the 2 percent floor.

C. Deductible home office expenses are for AGI deductions limited to gross income from the business minus non home office related expenses.

D. Deductible home office expenses are for AGI deductions and may be deducted without limitation.

Answer: C

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

A. Deductible home office expenses of employees are miscellaneous itemized deductions subject to the 2 percent of AGI floor.

B. Deductible home office expenses of employees are miscellaneous itemized deductions not subject to the 2 percent floor.

C. Deductible home office expenses of employees are for AGI deductions limited to gross income from the business.

D. Deductible home office expenses of employees are for AGI deductions not limited to gross income from the business.

Answer: A

Jamison is self-employed and he works out of an office in his home. After allocating the home-related expenses between the business office and the rest of the home, which of the following statements regarding the sequence of deductibility of the expenses allocated to the home office business use is correct?

A. Depreciation expense, other expenses, property taxes and interest expense

B. Other expenses, depreciation expense, property taxes and interest expense

C. Property taxes and interest expense, depreciation expense, other expenses

D. Other expenses, property taxes and interest expense, depreciation expense

E. None of these statements is correct.

Answer: E

Ilene rents her second home. During 2015, Ilene reported a net loss of $15,000 from the rental. If Ilene is an active participant in the rental and her AGI is $140,000, how much of the loss can she deduct against ordinary income in 2015?

A. $15,000

B. $10,000

C. $5,000

D. $0

Answer: C

Harvey rents his second home. During 2015, Harvey reported a net loss of $35,000 from the rental. If Harvey is an active participant in the rental and his AGI is $80,000, how much of the loss can he deduct against ordinary income in 2015?

A. $35,000

B. $25,000

C. $5,000

D. $0

Answer: B

When a taxpayer experiences a net loss from a nonresidence (rental property)

A. The taxpayer will not be allowed to deduct the loss under any circumstance if the taxpayer does not have passive income from other sources.

B. The loss is fully deductible against the taxpayer's ordinary income no matter the circumstances.

C. If the taxpayer is not an active participant in the rental, the taxpayer may be allowed to deduct the loss even if the taxpayer does not have any sources of passive income.

D. If the taxpayer is not allowed to deduct the loss due to the passive activity limitations, the loss is suspended and carried forward until the taxpayer generates passive income or until the taxpayer sells the property.

Answer: D