Chapter 7 Homework Notes

Question 1

Non business Loss Limits

Answer 1

Deducted against capital gains, but is limited to 3000 on ordinary income

Question 2

Bad Debt Loss on receivables

Answer 2

Limited to the basis. Only the excess debt is bad debt

Question 3

Gain on 1244 stock

Answer 3

Treated as a capital gain

Question 4

Loss on 1244 stock

Answer 4

Limited to 50000, 100000 for a joint couple against ordinary income. Any excess is treated as a capital loss and limited by the 3000 against ordinary income, but not against capital gains

Question 5

Miscellaneous Itemized Deductions

Answer 5

You minus out two percent of AGI and deduct the excess as misc itemized deductions

Question 6

Domestic Production Activities Deduction

Answer 6

9% of the lesser of QPAI or adjusted income, It is limited to 50% of the W-2 paid by the taxpayer during the current year

Question 7

Ch 8

Answer 7

yup

Question 8

MACRS 1/2 year convention

Answer 8

is incorporated into the tables. if you sell it before the depreciation term is up then you must multiply your cost recovery by .5

Question 9

Mid-Quarter Convention

Answer 9

If 40% of ALL property placed in service during the year, excluding real estate is put in service in the 4th quarter then you use the mid quarter convention

Question 10

Non Residential Property with the mid month convention

Answer 10

the table is all inclusive. you don’t have to calculate it for every month. whatever month it was put in service, just use the table rate for the whole year

Question 11

Limit on special vehicles over a rating of 6000-14000 lbs

Answer 11

25000 on the 179 deduction

Question 12

Items included as moving expenses

Answer 12

moving household goods and personal effects
traveling from the former residence to the new place of residence
mileage for personal autos, .23 per mile

Question 13

Tuition for AGI

Answer 13

limited to 4000 depending on your income range. Books, lodging, and meals and other fees are not included

Question 14

Meals from AGI

Answer 14

limited to 50%, unless the job is regulated by the government then you deduct 80% of the meals

Question 15

Automatic mileage method

Answer 15

multiplies mileage by .555

Question 16

Standard education deduction

Answer 16

250 for all teachers

Question 17

Traditional IRA contribution by the person

Answer 17

5000

Question 18

simplified employee pension plan contribution limit by the individual

Answer 18

lesser of 5000 or 100% of earned income, this does not include the employers contributions

Question 19

when reimbursed you must find the % that relates to meals and entertainment

Answer 19

yup

Question 20

Losses are not subject to the 2% rule

Answer 20

true

Question 21

a. DFOR. p. 9-14
b. DFROM. p. 9-38
c. DFROM. p. 9-26
d. Not deductible. p. 9-7
e. Not deductible. p. 9-41
f. DFROM. p. 9-38
g. Not deductible. p. 9-30
h. DFOR. pp. 9-4 and 9-5
i. DFROM. p. 9-26
j. Not deductible. pp. 9-15 and 9-16

a. Moving expense of an employee ______ ______ ______
b. Tax return preparation fee incurred
by an employed plumber ______ ______ ______
c. Safety glasses purchased by an
employed pipefitter ______ ______ ______
d. Dues to auto club (e.g., AAA) for
taxpayer who uses the automatic
mileage method ______ ______ ______
e. Nursing refresher course for
taxpayer who retired from nursing
five years ago ______ ______ ______
f. Gambling loss not in excess of
gambling gain by a self-employed
architect ______ ______ ______
g. Contribution to Roth IRA by a selfemployed
attorney
h. Business travel expenses by a
statutory employee ______ ______ ______
i. Job hunting expense by an
elementary school teacher seeking a
position as an elementary school
principal ______ ______ ______
j. Cost of bar exam review course
taken by a recent law school
graduate

Answer 21

true

Question 22

medical expenses

Answer 22

anything in excess of the 7.5% of AGI rule

Question 23

tuition as a medical expense

Answer 23

can be if the school is a special shcool

Question 24

transportation is deductible as a medical expense when

Answer 24

it is to and from point of treatment

Question 25

Lodging as a medical expense

Answer 25

you can deduct a max of 50 per night per person and as the long as the lodging is for medical use primarily

Question 26

medical insurance premiums paid by a self employed tax payer are deductible as medical expenses(for AGI)

Answer 26

true

Question 27

limit on long term care plan

Answer 27

4370 for 70 yr old and 350 for age 40

Question 28

medial expenses are deducted in the year paid

Answer 28

true

Question 29

acquisition interest limit

Answer 29

500000 per person

Question 30

home equity interest

Answer 30

interest is deductible on the portion that doesnt exceed the lesser
FMV of the residence
or
50000 per person