Tax Chapter 6
Showing posts with label Tax Chapter 6. Show all posts
Showing posts with label Tax Chapter 6. Show all posts

Gross income includes:

Gross income includes:


A. all income from whatever source derived unless excluded by law

B. excluded income

C. deferred income

D. all realized income

E. all of these choices are correct.


Answer: A

Campbell, a single taxpayer, has $95,000 of profits from her general store, which she operates as a sole proprietorship. She has no employees, $40,000 of qualified property, and $50,000 of taxable income before the deduction for qualified business income. How much is Campbell's deduction for qualified business income?

Campbell, a single taxpayer, has $95,000 of profits from her general store, which she operates as a sole proprietorship. She has no employees, $40,000 of qualified property, and $50,000 of taxable income before the deduction for qualified business income. How much is Campbell's deduction for qualified business income?


A) $95,000.

B) $19,000.

C) $10,000.

D) $8,000.

E) $0.


Answer: C

Campbell, a single taxpayer, has $400,000 of profits from her general store, which she operates as a sole proprietorship. She has no employees, $40,000 of qualified property, and $500,000 of taxable income before the deduction for qualified business income. How much is Campbell's deduction for qualified business income?

Campbell, a single taxpayer, has $400,000 of profits from her general store, which she operates as a sole proprietorship. She has no employees, $40,000 of qualified property, and $500,000 of taxable income before the deduction for qualified business income. How much is Campbell's deduction for qualified business income?


A) $100,000.

B) $80,000.

C) $20,000.

D) $1,000.

E) $0.


Answer: D

Campbell, a single taxpayer, has $400,000 of profits from her general store, which she operates as a sole proprietorship. She has $100,000 of employee wages, $40,000 of qualified property, and $500,000 of taxable income before the deduction for qualified business income. How much is Campbell's deduction for qualified business income?

Campbell, a single taxpayer, has $400,000 of profits from her general store, which she operates as a sole proprietorship. She has $100,000 of employee wages, $40,000 of qualified property, and $500,000 of taxable income before the deduction for qualified business income. How much is Campbell's deduction for qualified business income?


A) $100,000.

B) $80,000.

C) $50,000.

D) $26,000.

E) $0.


Answer: C

Andres and Lakeisha are married and file jointly. 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 in 2019?

Andres and Lakeisha are married and file jointly. 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 in 2019?


A) $27,000.

B) $27,700.

C) $25,850.

D) $25,700.

E) None of the choices are correct.


Answer: A

Which of the following is a deductible miscellaneous itemized deduction?

Which of the following is a deductible miscellaneous itemized deduction?


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 choices are correct.


Answer: A

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.

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.


Answer: A

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?

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 the choices are correct.


Answer: D

When taxpayers donate cash and capital gain property to a public charity, the AGI percentage limitation is applied in the following order:

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 60 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 60 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.


Answer: D

Larry recorded the following donations this year:

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 the choices are correct.


Answer: C

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?

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?


A) $100,000.

B) $200,000.

C) $90,000 if the library uses the painting in its charitable purpose.

D) $150,000.

E) None of the choices are correct.


Answer: C

This year Norma, a single taxpayer, paid $11,200 of real estate taxes on her personal residence and $9,500 of state income taxes. Which of the following is true?

This year Norma, a single taxpayer, paid $11,200 of real estate taxes on her personal residence and $9,500 of state income taxes. Which of the following is true?


A) Norma can deduct $11,200 of real estate taxes as an itemized deduction.

B) Norma can deduct $9,500 of state income taxes as a for AGI deduction.

C) Norma can deduct $10,000 of taxes as an itemized deduction.

D) Even if Norma has no other itemized deductions, she should claim the standard deduction.

E) None of the choices are correct.


Answer: C

Madeoff donated stock (capital gain property) to a public charity. He purchased the stock three 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 related to this stock if his AGI is $500,000?

Madeoff donated stock (capital gain property) to a public charity. He purchased the stock three 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 related to this stock if his AGI is $500,000?


A) $100,000.

B) $200,000.

C) $150,000.

D) $250,000.

E) None of the choices are correct.


Answer: C

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 related to this inventory if her AGI is $200,000?

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 related to this inventory 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 the choices are correct.


Answer: B

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?

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 choices are correct.


Answer: C

Which of the following taxes will not qualify as an itemized deduction?

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 the choices qualify as itemized deductions.


Answer: D

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?

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 the choices are true.


Answer: A

Which of the following costs are deductible as an itemized medical expense?

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 are deductible.


Answer: B

Which of the following costs is NOT deductible as an itemized medical expense?

Which of the following costs is 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 choices are deductible as medical expenses.


Answer: E

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