ITAX Flashcards
1
Q
In the current year, an unmarried individual with modified adjusted gross income of $25,000 paid $1,000 interest on qualified education loan entered into on July I. How may the individual treat the interest for income tax purposes?
A
As a $1,000 deduction to arrive at AGI for the year.
2
Q
On August I, 2013, Graham purchased and placed into service an office building costing $264,000 including $30,000 for the land. If Graham is calendar-year taxpayer, what is Graham’s MACRS deduction for the office building for 2013?
A
$2,250
3
Q
Martin filed a timely return on April 15. Martin inadvertently omitted income that amounted to of his gross income stated on the return. The statute of limitations for Martin’s return would end after how many years?
A
5 years
4
Q
Viking Corp. manufactures action figures for children. During 2013, Viking purchased $2,300,000 of used production machinery to be used in its business. For 2013, Viking’s taxable income before any Sec. 179 expense deduction was $140,000. What is the maximum amount of Sec. 179 expense election Viking will be allowed to deduct for 2013 and the maximum amount of Sec. 179 expense election that can carry over to 2014?
A
Expense of $140,000 and carryover of $60,000.
5
Q
In evaluating the hierarchy of authority in tax law, which of the following carries the greatest authoritative value for tax planning of transactions?
a. Tax court decisions.
b. IRS agents’ reports.
c. IRS regulations.
d. Internal Revenue Code.
A
Internal Revenue Code.
6
Q
Rock Crab, Inc. purchases the following assets during the year:
Computer 3,000
Computer desk 1,000
Office furniture 4,000
Delivery van 25,000
What should be reported as the cost basis for MACRS five-year property?
A
$28,000
7
Q
Martinsen inadvertently omits $500 Martinsen, a calendar-year individual, files a year I tax return on March 31, year 2. Martinsen reports $20,000 of gross income. interest income. The IRS may assess additional tax up until which of the following dates?
a. March 31, year 8.
b. March 31, year 5.
c. April 15, year 5.
d. April 15, year 8.
A
April 15, year 5
8
Q
During the current year Alfred Allen sustained serious injury in the course of his employment. As aresult of this injury, Allen received the following amounts during the same year:
Workers’ compensation $2,400
Reimbursement from employer’s
accident and health plan for
medical expenses paid by Allen 1,800
Damages for personal physical
injuries 8,000
How much of the above amounts should Allen include in his gross income for the current year?
A
$0
9
Q
Nichols, an unmarried individual, had an adjusted gross income of $125,000 in 2013 before any IRA deduction, taxable social security benefits, or passive activity losses. Nichols incurred a loss of $30,000 in 2013 from rental real estate in which he actively participated. What amount of loss attributable to this rental real estate can be used in 2013 as an offset against income from nonpassive sources?
A
$12,500
10
Q
Under the uniform capitalization rules applicable to taxpayers with property acquired for resale, which of the following costs should be capitalized with respect to inventory if no exceptions have been met?
a. Repackaging costs and Off-site storage costs
b. Repackaging costs
c. Off-site storage costs
d. Neither
A
Repackaging costs and Off-site storage costs
11
Q
Richard Putney, who lived in Idaho for 5 years, moved to Texas in 2013 to accept a new position. His employer reimbursed him in full for all direct moving costs, but did not pay for any part of the following indirect moving expenses incurred by Putney.
Househunting trips to Texas $800
Temporary housing in Texas $900
How much of the indirect expenses can be deducted by Putney as moving expenses?
A
$0
12
Q
An employee who has had social security tax withheld in an amount greater than the maximum for particular year, may claim
A
The excess as a credit against income tax, if that excess resulted from correct withholding by two or more employers.
13
Q
During 2013 Adler had the following cash receipts:
Wages $18,000
Interest income from investments in municipal 400
Unemployment compensation 1,500
What is the total amount that must be included in gross income on Adler’s 2013 income tax return?
A
$19,500
14
Q
When determining his federal income tax, Curt had the following
Personal exemption $3,800
Itemized deduction for personal
property taxes $2,500
Charitable contribution of capital
gain property $1,500
Net long-term capital gain $1,000
Excess of MACRS depreciation
on personal peoperty over
depreciation computed using the 150%
declining-balance method 600
Tax-exempt interest from City of Chicago
general obligation bonds 400
What is the total amount of adjustments to taxable income for purposes of computing Curt’s alternative minimum tax for 2013?
A
$6,900
15
Q
In 2013, Roe Corp, purchased and placed in service a used machine to be used in its manufacturing operations. This machine cost $2,200,000. What portion of the cost may Roe elect to treat as an expense rather than as a capital expenditure?
A
$300,000
16
Q
Robbe, a cash-basis single taxpayer, reported $50,000 of adjusted gross income last year and claimed itemized deductions of $7,250, consisting solely of $7,250 of state income taxes paid last year. Robbers itemized deduction amount, Which exceeded the standard deduction available to single taxpayers for last year by $1,150, was fully deductible and it was not subject to any limitations or phaseouts. In the current year, Robbe received a $1,500 state tax refund relating to the prior year. What is the proper treatment of the state tax refund?
A
Include $1,150 in income in the current year.
17
Q
Under the cash method of reporting, an individual should report gross income
A
For the year in which income is either actually or constructively received either in cash or in property.
18
Q
Smith paid the following unreimbursed medical expenses:
Dentist and eye doctor fees $5,000
Contact lenses 500
Facial cosmetic surgery to improve
Smith’s personal appearance (surgery
is unrelated to personal injury or
congenital deformity) 10,000
Premium on disability insurance policy
to pay him if he is injured and unable
to work 2,000
What is the total amount of Smith’s tax-deductible medical expenses before the adjusted gross income limitation?
A
$5,500
19
Q
Gilda Bach is a cash-basis self-employed consultant. For the year 2013, she determined that her net income from self-employment was $80,000. In reviewing her bocks you determine that the following items were included as business expenses in arriving at the net income of $80,000:
Salary drawn by Gilda Bach $20,000
Estimated federal income
taxes paid 6,000
Malpractice insurance
premiums 4,000
Cost of attending professional
seminar 1,000
Based upon the above information, what should Gilda Bach report as her self-employment income for 2013?
A
$106,000
20
Q
In 2013, Joe Buron, single taxpayer, had $80,000 in taxable income before personal exemptions. Buron had no tax preferences, and his itemized deductions were as follows:
Real property taxes $4,000
Home mortgage interest
on loan to purchase residence 6,000
Miscellaneous deductions in
excess of 2% of adjusted gross
income 2,000
What amount must Buron report as alternative minimum taxable income before the AMT exemption for 2013?
A
$86,000
21
Q
Which one of the following statements concerning the American Opportunity Credit (modified Hope scholarship credit) is correct?
A
The credit is available for the first four years of a postsecondary education pagram
22
Q
A husband and wife can file a joint return even if
A
The spouses have different accounting methods.
23
Q
Barkley owns a vacation cabin that was rented to unrelated parties for 10 days during the year for $2,500. The cabin was used personally by Barkley for three months and left vacant for the rest of the year. Expenses for the cabin were as follows.
Real estate taxes $1,000
Maintenance and utilities $2,000
How much rental income (loss) is included in Barkley’s adjusted gross income?
A
$0
24
Q
Gail and Jeff Payne are married and filed joint return for 2013. During 2013 they paid the following doctors’ bills for
Gail’s mother, who received over half of her support from Gail and Jeff, but who does not live in the Payne household,
and who earned $3,500 in 2013 for babysitting. $700
Their unmarried 26-year old son, who earned
$4,000 in 2013, but was fully supported by his
parents. He is not a full-time student. $500
Disregarding the adjusted gross income percentage test, how much of these doctors’ bills may be included on the Paynes’ joint return in 2013 as qualifying medical expenses?
A
$1,200
25
The credit for prior year alternative minimum tax liability may be carried
Forward indefinitely.
26
Which of the following is subject to the Uniform Capitalization Rules of Code Sec. 263A?
a. Editorial costs incurred by a freelance writer.
b. Warehousing costs incurred by a manufacturing company with $12 million in annual gross receipts.
c. Mine development and exploration costs.
d. Research and experimental expenditures.
Warehousing costs incurred by a manufacturing company with $12 million in annual gross receipts.
27
Nicole Sandler, public school teacher with adjusted gross income of $20,000, paid the following items in 2013 for which she received no reimbursement:
Initiation fee for membership in
teachers' union $300
Dues to teachers' union 250
Voluntary unemployment benefit
fund contributions to union-
established fund 85
How much can Nicole claim in 2013 as allowable miscellaneous deductions on Schedule A of Form 1040?
$150
28
Nelson Harris had adjusted gross income in 2013 of $60,000. During the year his personal summer home was completely destroyed by hurricane. Pertinent data with respect to the home follows:
Cost basis $39,000
Value before casualty 45,000
Value after casualty 3,000
Harris was partially insured for his loss and in 2013 he received $15,000 insurance settlement. What is Harris' allowable casualty loss deduction for 2013?
$17,900
29
In 2013, Gail Judd received the following dividends from
Benefit Life Insurance Co., on Gail's
life insurance policy (Total dividends
received have not yet exceeded
cumulative premiums paid) $100
Safe National Bank, on bank's common
stock 300
Roe Mfg. Corp., a Delaware corporation,
on preferred stock 500
What amount of dividend income should Gail report in her 2013 income tax return?
$800
30
Sackett Corporation had a beginning inventory of 10,000 units, which were purchased in the prior year as follows:
Units Unit price
September 4,000 $2.00
October 4,000 $2.10
December 2,000 $2.30
In the current year, Sackett purchases an additional 12,000 units (7,000 in June at $2.50 and 5,000 in November at $2.70) and sells 16,000 units. method, Using the FIFO method, what is Sackett's ending inventory?
$16,000 (5,000 @ $2.70 and 1,000 @ $2.50)
31
Moseley, a cash method taxpayer, billed Dolphi $1,000 for medical services. Dolphi paid Moseley $500 cash and did some landscaping for Moseley's office in full settlement of the bill. Dolphi does comparable landscaping for $350. What amount should Moseley include in gross income as a result of this transaction?
$850
32
Rockford Corp., a calendar-year taxpayer, purchased used furniture and fixtures for use in its business and placed the paper-ty in service on December I, 2013. The furniture and fixtures cost $112,000 and represented Rockford's only acquisition of depreciable property during the year. Rockford did not make any special elections with regard to depreciation and did not elect to expense any part of the cost of the property under Sec. 179. What is the amount of Rockford Corp.'s depreciation deduction for the furniture and fixtures under the Modified Accelerated Cost Recover,' System (MACRS) for 2013?
$ 4,000
33
Alex and Myra Burg, married and filing joint income tax returns, derive their entire income from the operation of their retail candy shop. Their 2013 adjusted gross income was $50,000. The Burgs itemized their deductions on Schedule A for 2013. The following unreimbursed cash expenditures were among those made by the aurgs during 2013:
Repair and maintenance of motorized
wheelchair for physically handicapped
dependent child $ 300
Tuition, meals, and lodging at special
school for physically handicapped
dependent child in the institution primarily
for the availability of medical care, with
meals and lodging furnished as necessary
incidents to that care 4,000
Without regard to the adjusted gross income percentage threshold, what amount may the aurgs claim in their 2013 return as qualifying medical expenses?
$4,300
34
Jerry and Ann Parsell paid the following expenses during 2013:
Interest on automobile loan $1,500
Interest on bank loan (loan
proceeds were used to purchase
municipal bonds) 5,000
Interest on home mortgage for
period January I to June 29, 2013 1,800
Penalty payment for prepayment of
home mortgage on June 29, 2013 1,200
What is the maximum amount that the Parsells can utilize as interest expense in calculating itemized deductions for 2013?
$3,000
35
The Rites are married, file a joint income tax return, and qualify to itemize their deductions in the current year. Their adjusted gass income for the year was $55,000, and during the year they paid the following taxes:
Real estate tax on personal residence $2,000
Ad valorem tax on personal automobile 500
Current year state and city income taxes
withheld from paycheck 1,000
What total amount of the expense should the Rites claim as an itemized deduction on their current year joint income tax return?
$3,500
36
During 2012 Ray received interest income as follows:
On US Treasury certificates $5,000
On refund of 2010 federal income tax 500
The total amount of interest subject to tax in Ray's 2012 tax return is
$5,500
37
Which of the following is miscellaneous itemized deduction subject to the 2% of adjusted gross income floor?
a. Gambling losses up to the amount of gambling winnings.
b. Medical expenses.
c. Real estate tax.
d. Employee business expenses.
Employee business expenses.
38
Mosh, a sole proprietor, uses the cash method of accounting. At the beginning of the current year, accounts receivable were $25,000. During the year, Mosh collected $100,000 from customers. At the end of the year, accounts receivable were $15,000. What was Mash's gross taxable income for the current year?
$100,000
39
An S corporation engaged in manufacturing has a year-end of June 30. Revenue consistently has been more than $10 million under both cash and accrual basis of accounting. The stockholders would like to change the tax status of the corporation to a C corporation using the cash basis with the same year-end. Which of the following statements is correct if it changes to a C corporation?
a. The year-end will be June 30, using the cash basis of accounting.
b. The year-end will be June 30, using the accrual basis of accounting.
c. The year-end will be December 31, using the accrual basis of accounting.
d. The year-end will be December 31, using the cash basis of accounting.
The year-end will be June 30, using the accrual basis of accounting.
40
Which one of the following statements concerning Roth IRAs is correct?
a. A distribution from a Roth IRA is treated as first made from contributions (return of capital).
b. An individual cannot make contributions to a Roth IRA and a traditional IRA during the same tax year.
c. The maximum contribution to a Roth IRA $5,000, for 2013.
d. A contribution to Roth IRA must be made by the due date for filing the individual's tax return for the year (including extensions).
A distribution from a Roth IRA is treated as first made from contributions (return of capital).
41
During 2013, Jay charged $5,000 on his credit card for his dependent daughter's medical expenses. Payment to the credit card company had not been made by the time Jay filed his income tax return for 2013. However, in 2013, Jay paid a physician $3,200 for the medical expenses of his wife, Who died in 2012. Disregarding the adjusted gass income peaentage threshold, what amount could Jay claim in his 2013 income tax return for medical expenses?
$8,200
42
Terry, a taxpayer, purchased stock for $12,000. Later, Terry sold the stock to a relative for $8,000, when the stock's fair market value was still $12,000. What amount is the relative's gain or loss resulting from the purchase of the stock from Terry?
$0
43
Frank Lanier is resident of state that imposes tax on income. The following information pertaining to Lanier's state income taxes is available:
Taxes withheld in 2013 $3,500
Refund received in 2013 of 2012 tax 400
Deficiency assessed and paid in 2013 for 2011:
Tax 600
Interest 100
What amount should Lanier utilize as state and local income taxes in calculating itemized deductions for his 2013 federal tax return?
$4,100
44
Julie, who is single, had the following items of income and deduction included on her 2013 Form 1040 income tax return:
Salary $40,000
Net capital loss deduction 3,000
Itemized deduction (all attributable
to personal casualty loss when
tornado destroyed her vacation home) 45,000
Personal exemption 3,900
What is the amount of Julie's net operating loss for 2013?
$ 5,000
45
On February I, 2012, Howe learned that he was bequeathed 500 shares of common stock under his father's will. Howe's father had paid $2,500 for the stock in 2007. Fair market value of the stock on February 1, 2012, the date of his father's death, was $4,000 and had increased to $5,500 six months later. The executor of the estate elected the alternate valuation date for estate tax purposes. Howe sold the stock for $5,000 on June 1, 2012, the date that the executor distributed the stock to him. How much income should Howe include in his 2012 individual income tax return for the inheritance of the 500 shares of stock that he received from his father's estate?
$0
46
A general business credit in excess of the limitation amount is carried
Back I year and forward 20 years.
47
Which of the following disqualifies an individual from the earned income credit?
a. The taxpayer has a filing status of married filing separately.
b. The taxpayer's qualifying child is a 17-year-old grandchild.
c. The taxpayer has earned income of $5,000.
d. The taxpayer's five-year-old child lived in the taxpayer's home for only eight months.
The taxpayer has a filing status of married filing separately.
48
Nara, an accrual-basis taxpayer, owns a building which was rented to Mott under a 10-year lease expiring August 31, 2017. On January 2, 2013, Mott paid $30,000 as consideration for canceling the lease. On November I, 2013, Nara leased the building to Pine under a 5-year lease. Pine paid Nara $10,000 rent for the 2 months of November and December, and an additional $5,000 for the last month's rent. What amount of rental income should Nara report in its 2013 income tax return?
$45,000
49
A claim for refund of erroneously paid income taxes, filed by an individual before the statute of limitations expires, must be submitted on Form
1040X
50
A taxpayer's spouse dies in August of the current year. Which of the following is the taxpayer's filing status for the current year?
a. Qualified widow(er).
b. Head of household.
c. Married filing jointly.
d. Single
Married filing jointly.
51
Charitable contributions subject to the limit that are not fully deductible in the year made may be
Carried forward 5 years.
52
On January I, 2013, James Davis was awarded a postdoctorate fellowship grant of $30,000 by a tax-exempt educational organization. Davis is not a candidate for a degree and was awarded the grant to continue his research. The grant was awarded for the period March 1, 2013 through May 31, 2014. On March 1, 2013, Davis elected to receive the full amount of the grant. What amount should be included in his gross income for 2013?
$30,000
53
A 33-year-old taxpayer withdrew $30,000 (pretax) from traditional IRA. The tax payer has a 33% effective tax rate and a 35% marginal tax rate. What is the total tax liability associated with the withdrawal?
$13,500
54
Rachel Maz, a self-employed taxpayer, reported the following information for 2013:
Income: Deductions: Dividends from investments $ 300
Net short-term capital gain on sale of investment 1,400
Net loss from business (10,000)
Personal exemption (3,900)
Standard deduction (6,100)
What is the amount of Rachel's net operating loss for 2013 that can be carried back to Rachel's 2011 taxable year?
$10,000
55
A couple filed a joint return in prior tax years. During the current tax year, one spouse died. What is the filing status available to the surviving spouse for the first subsequent tax year?
Single.
56
What is the maximum amount of adjusted gross income that taxpayer may have for 2013 and still qualify to roll over the balance from traditional individual retirement account (IRA) into a Roth IRA?
A rollover to Roth IRA is not subject to an adjusted gross income limitation.
57
Dart, a C corporation, distributes software over the Internet and has had average revenues in excess of $20 million dollars per year for the past three years. To purchase software, customers key-in their credit card number to a secure Web site and receive a password that allows the customer to immediately download the software. As a result, Dart doesn't record accounts receivable or inventory on its books. Which of the following statements is correct?
a. Dart may utilize the cash basis method of accounting until it incurs an additional $10 million to develop additional software.
b. Dart may use either the cash or accrual method of accounting as long as Dart elects a calendar year-end.
c. Dart may utilize any method of accounting Dart chooses as long as Dart consistently applies the method it chooses.
d. Dart must use the accrual method of accounting.
Dart must use the accrual method of accounting.
58
A calendar-year individual is eligible to contribute to a deductible IRA. The taxpayer obtained a six-month extension to file until October 15 but did not file the return until November 1. What is the latest date that an IRA contribution can be made in order to qualify as a deduction on the prior year's return?
April 15.
59
For the year 2013 Fred and Wilma Todd reported the following items of income:
Fred Wilma
Salaray $40,000 $ 200
Interest income 1,000 8,800
Cash prize won on TV
game show $41,000 $9,000
Neither Fred nor Wilma is a participant in a qualified retirement plan and both established traditional individual retirement accounts during the year. Assuming a joint and Wilma are under age 50, what is the maximum amount of deduction that they will be allowed for return will be filed for 2013 and that Fred individual retirement accounts?
$11,000
60
Which of the following should be included when determining adjusted gross income?
a. Alimony received.
b. Compensation for injuries or sickness.
c. Tuition scholarship.
d. Rental value of parsonages.
Alimony received
61
Which one of the following statements concerning the lifetime learning credit is correct?
a. The credit is 20% of the first $5,000 of qualified tuition and related expenses per year.
b. The credit may be claimed for an unlimited number of years.
c. Tuition incurred for graduate courses does not qualify for the credit.
d. The credit is claimed on a per student basis.
The credit may be claimed for an unlimited number of years.
62
Poole, 45 years old and unmarried, is in the 15% tax bracket. He had 2013 adjusted gross income of $30,000. The following information applies to Poole:
Medical expenses $9,150
Standard deduction 6,100
Personal exemption 3,900
Poole wishes to minimize his income tax. What is Poole's 2013 total income tax?
$2,993
63
How is the depreciation deduction for nonresidential real property, placed in service in 2013, determined for regular tax purposes using MACRS?
Straight-line method over 39 years.
64
A C corporation must use the accrual method of accounting in which of the following circumstances?
a. The business had average sales for the past three years of less than $1 million.
b. The business is a service company and has over $1 million in sales.
c. The business has more than $10 million in average sales.
d. The business is a personal service business with over $15 million in sales.
The business has more than $10 million in average sales.
65
In 2013, Jeff Sippy won $6,000 in a state lottery. Also in 2013, Jeff spent $1,400 for the purchase of lottery tickets. Jeff elected to take the standard deduction on his 2013 income tax return. The amount of lottery winnings that should be included in Jeff's 2013 taxable income is
$6,000
66
Which one of the following types of deductions is included in the category of unreimbursed expenses that is deductible only if the aggregate amount of such expenses exceeds 2% of the taxpayer's adjusted gross income?
a. Medical expenses.
b. Tax return preparation fees.
c. Interest expense.
d. Employee moving expenses.
Tax return preparaton fees
67
In the current year Jensen had the following items:
Salary. $50,000
Inheritance 25,000
Alimony from ex-spouse 12,000
Child support from ex-spouse 9,000
Capital loss on investment stock sale (6,000)
What is Jensen's AGI for the current year?
$59,000
68
Which of the following is not included in determining the total support of dependent?
a. Birthday presents given to the dependent.
b. Tuition payments paid on behalf of the dependent.
c. Clothing purchased for the dependent.
d. Life insurance premiums paid on behalf of the dependent.
Life insurance premiums paid on behalf of the dependent.
69
Stockley, a candidate for an undergraduate college degree, received $20,000 scholarship from the university in 2013. Stockley had the following expenses to his attendance in 2013:
Tuition and fees $12,000
Room and board 6,000
Books and supplies 500
Spring break in Cancun 1,500
What amount of the scholarship should Stockley include as taxable income in 2013?
$ 7,500
70
Jon and Kim Moseley, married and filing a joint income tax return, derive their entire income from the operation of their gun shop. The Moseleys itemized their deductions on Schedule A for 2013. The following unreimbursed cash expenditure was among those made by the Moseleys during 2013:
Repair of glass vase accidentally broken by dog
(vase cost $550 in 2009; fair value $650 before
accident and $150 after accident) $70
Without regard to the $100 "floor" and the adjusted gross income percentage threshold, what amount should the Moseleys deduct for the casualty loss in their itemized deductions on Schedule A for 2013?
$0
71
Parker, whose spouse died during the preceding year, has not remarried. What is Parker's most advantageous filing status?
Qualifying widow(er) with dependent child.
72
How may income taxes paid by an individual to foreign country be treated?
As a credit against federal income taxes due.
73
Lane, a single taxpayer, received $160,000 in salary, $15,000 in income from an S corporation in which Lane does not materially participate, and a $35,000 passive loss from a real estate rental activity in which Lane materially participated. Lane's modified adjusted gross income was $165,000. What amount of the real estate rental activity loss was deductible?
$15,000
74
David Waldman, a calendar-year taxpayer, was employed and resided in Philadelphia. On February 1, 2013, Waldman was permanently transferred to Dallas by his employer. Waldman worked for 20 weeks before being laid off for other than willful misconduct. In 2013 Waldman incurred and paid the following unreimbursed expenses in connection with his move:
Cost of moving household furnishings
and personal effects $ 1,500
Lodging expenses While moving 500
Penalty for breaking the lease on his
Philadelphia apartment 600
What amount can Waldman deduct in 2013 for moving expenses?
$2,000
75
Which one of the following is not included in determining the total support of dependent?
a. Tax-exempt income received by the dependent and used for support.
b. Birthday presents given to the dependent.
c. Social security benefits received by the dependent and used for support.
d. Federal and state income taxes paid from the dependent's own income.
Federal and state income taxes paid from the dependent's own income.
76
Willard, a single taxpayer, had $60,000 in adjusted gross income for 2013. During 2013 he contributed $25,000 to his church. He had a $15,000 charitable contribution carryover from his 2012 church contributions. What was the maximum amount of properly substantiated charitable contributions that Willard could claim as an itemized deduction for 2013?
$30,000
77
Mr. and Mrs. Donald Curry's real property tax year is on a calendar-year basis, with payments due annually on August 1. The realty taxes on their home amounted to $1,200 in 2013, but the Currys did not pay any portion of that amount since they sold the house on April 1, 2013, four months before payment was due. However, realty taxes were prorated on the closing statement. Assuming that they owned no other real property during the year, how much can the Curry's deduct on Schedule A of Form 1040 for real estate taxes in 2013?
$ 296
78
Jon received $500 in 2013 for jury duty. In exchange for regular compensation from his employer during the period of jury service, Jon was required to remit the entire $500 to his employer in 2013. In Jon's 2013 income tax return the entire $500 jury duty fee should be
Deducted from gross income in arriving at adjusted gass income.
79
Porter was unemployed for part of the year. Porter received $35,000 of wages, $4,000 from a state unemployment compensation plan, and $2,000 from his former employer's company-paid supplemental unemployment benefit plan. What is the amount of Porter's gross income?
$41,000
80
In 2012, Gail Jones received the following dividends from
Benefit Life Insurance Co., on Gail's life insurance
policy (Total dividends received have not yet
exceeded accumulated premiums paid) $300
Safe National Bank, on bank's common stock 300
Mfg. Corp., a Delaware corporation, on preferred stock $600
What amount of dividend income should Gail report in her 2012 income tax return?
$900
81
For the year ended December 31, 2013, Elmer Shaw earned $3,000 interest at Prestige Savings Bank, on a time savings account scheduled to mature in 2016. In March 2014, before filing his 2013 income tax return, Shaw incurred an interest forfeiture penalty of $1,500 for premature withdrawal of the funds from his account. Shaw should treat this $1,500 forfeiture penalty as a
Deduction from gross income in arriving at 2014 adjusted gass income.
82
Albert and Lois Stoner, age 64 and 64, respectively, filed a joint tax return for 2013. They provided all of the support for their blind 19-year-old son, who has no gross income. Their 22-year-old daughter, a full-time student until her graduation on June 14, 2013, earned $8,000, Which was of her total support during 2013. Her parents provided the remaining support. The Stoners also provided the total support of Lois' father, who is a citizen and life-long resident of Peru. How many exemptions can the Stoners claim on their 2013 income tax return?
4
83
Quail, Inc. manufactures consumer products and sells them to distributors. Quail advertises its products to increase sales and enhance the value of its trade name. What is the appropriate tax treatment of the advertising costs?
Deduct the costs currently as ordinary and necessary business expenses.
84
Ed and Ann Ross were divorced in January 2013. In accordance with the divorce decree, Ed transferred the title in their home to Ann in 2013. The home, which had a fair market value of $150,000, was subject to a $50,000 mortgage that had 20 more years to run. Monthly mortgage payments amount to $1,000. Under the terms of settlement, Ed is obligated to make the mortgage payments on the home for the full remaining 20-year term of the indebtedness, regardless of how long Ann lives. Ed made 12 mortgage payments in 2013. What amount is taxable as alimony in Ann's 2013 return?
$0
85
During 2013 Robert Moore, who is 50 years old and unmarried, maintained his home in which he and his widower father, age 75, resided. His father had $4,100 interest income from a savings account and also received $9,700 from Social Security during 2013. Robert provided of his father's total support for 2013. What is Robert's filing status for 2013, and how many exemptions should he claim on his tax return?
Single and 1 exemption.
86
Leslie Monahan, corporate executive, incurred business-related unreimbursed expenses in 2013 as follows:
Entertainment $1,200
Travel 600
Professional society dues 500
Assuming that Monahan does not itemize deductions, how much of these expenses should she deduct on her 2013 tax return?
$0
87
Iris Jones, a widow, had adjusted gross income of $35,000 in 2013. In order for her to be gainfully employed, she incurred and paid the following expenses for her 5-year-old son Jason during 2013:
Period Payee Amount per month
January-June Day-care center $150
January-December Babysitter 100
September-December First grade school 200
What amount of her employment-related expenses are eligible for the child care tax credit for 2013?
$2,100
88
On April 15, 2014, a married couple filed their joint 2013 calendar-year return showing gross income of $120,000. Their return had been prepared by a professional tax preparer who mistakenly omitted $45,000 of income, Which the preparer in good faith considered to be nontaxable. No information with regard to this omitted income was disclosed on the return or attached statements. By what date must the Internal Revenue Service assert a notice of deficiency before the statute of limitations expires?
April 15, 2020.
89
Frank Zimmerman became a partner in Monahan Associates on January I, 2013, with a 10% interest in Monahan's profits, losses, and capital. Monahan Associates manufactures sports equipment. Zimmerman does not materially participate in the partnership business. For the year ended December 31, 2013, Monahan had an operating loss of $150,000. In addition, Monahan earned interest of $12,000 on a temporary investment. Monahan has kept the principal temporarily invested while awaiting delivery of equipment that is presently on order. The principal will be used to pay for this equipment. Zimmerman's passive loss for 2013 is
$15,000
90
The rule limiting the deductibility of passive activity losses and credits applies to
Personal service corporations
91
In 2013, Brun Corp. properly accrued $10,000 for an income item on the basis of a reasonable estimate. In 2014, Brun determined that the exact amount was $12,000. Which of the following statements is correct?
a. The $2,000 difference is includible in Brun's 2014 income tax return.
b. Brun is required to file an amended return to report the additional $2,000 of income.
c. No further inclusion of income is required as the difference is less than 25% of the original amount reported and the estimate had been made in good faith.
d. Brun is required to notify the IRS within 30 days of the determination of the exact amount of the item.
The $2,000 difference is includible in Brun's 2014 income tax return.
92
Which one of the following statements concerning the deduction for interest on qualified education loans is correct?
a. The educational expenses must relate to a period when the student was enrolled on a full-time basis.
b. The deduction is subject to reduction if adjusted gross income exceeds specified levels.
c. Qualified education expenses do not include room and board.
d. The deduction is available to a married taxpayer filing separately.
The deduction is subject to reduction if adjusted gross income exceeds specified levels.
93
Tana's divorce decree requires Tana to make the following transfers to Tana's former spouse during the current year:
Alimony payments of $3,000
Child support of $2,000
Property division of stock with basis of $4,000 and fair market value of $6,500
What is the amount of Tana's alimony deduction?
$ 3,000
94
Roger Burrows, age 19, is full-time student at Marshall College and candidate for bachelor's degree.
State scholarship covering tuition for 10 months $ 3,600
Loan from college financial aid office 5,500
Cash support from parents 8,000
Cash dividends on qualified investments 700
Cash prize awarded in contest 5,000
$22,800
What is Burrows' gross income for 2013?
$5,700
95
An accrual-basis taxpayer should report gross income
When "all events" have occurred that fix the taxpayer's right to receive the item of income, and the amount can be determined with reasonable accuracy.
96
Cassidy, an individual, reported the following items of income and expense during the current year:
Salary. $50,000
Alimony paid to former spouse 10,000
Inheritance from a grandparent 25,000
Proceeds of a lawsuit for personal physical injuries 50,000
What is the amount of Cassidy's adjusted gayss income?
$ 40,000
97
Kant, cash-basis individual, owns and operates an office building. Kant received the following payments during the current year:
Current rents $30,000
Advance rents for the next year 10,000
Security deposits held in a segregated account 5,000
Lease cancellation payments 15,000
What amount is included in gross income?
$55,000
98
Cobrin, a sole proprietor with no employees, has a Keogh profit-sharing plan to which he may contribute 15% of his annual earned income. For this purpose, "earned income" is defined as net self-employment earnings reduced by the
Deductible Keogh contribution and one-half of the self-employment tax.
99
During 2013 Mary Culbert paid the following expenses:
Prescription drugs $470
Aspirin and over-the-counter cold capsules 130
Hospitals and doctors (net of insurance
reimbursements under plan paid for by
her employer) 700
Premiums for a policy to reimburse her
for lost income due to illness 350
What is the total amount of deductible medical expenses (before application of any limitation rules that would enter into the calculation of itemized deductions) on Culbert's 2013 tax return?
$1,170
100
Paul Bristol, cash-basis taxpayer, owns an apartment building. The following information was available for 2013:
An analysis of the 2013 bank deposit slips showed recurring monthly rents received totaling $50,000.
On March I, 2013, the tenant in apartment 28 paid Bristol $2,000 to cancel the lease expiring on December 31, 2014.
The lease of the tenant in apartment 3A expired on December 31, 2013, and the tenant left improvements valued at $1,000. The improvements were not in lieu of any rent required to have been paid.
In computing net rental income for 2013, aristol should report gross rents of
$52,000
101
Which one of the following statements concerning traditional IRAs for individuals under the age of 50 is not correct for 2013?
a. A taxpayer who is partially or totally prevented from making deductible IRA contributions can make nondeductible IRA contributions.
b. If neither the taxpayer nor the taxpayer's spouse is an active participant in an employer-sponsored retirement plan or Keogh plan, there is no phaseout of IRA deductions.
c. A taxpayer whose AGI is not above the applicable phaseout range can make $500 deductible contribution regardless of the proportional phaseout rule.
d. Total IRA contributions are subject to the $5,500 or 100% of compensation limit.
A taxpayer whose AGI is not above the applicable phaseout range can make $500 deductible contribution regardless of the proportional phaseout rule.
102
An individual received $50,000 during the current year pursuant to a divorce decree. A check for $25,000 was identified as annual alimony, checks totaling $10,000 as annual child support, and a check for $15,000 as a property settlement. What amount should be included in the individual's gross income?
$25,000
103
Wilson, CPA, uses a commercial tax software package to prepare clients' individual income tax returns. upon reviewing a client's computer-generated year 1 itemized deductions, Wilson discovers that the schedule's deductible investment interest expense is less than the amount paid by the taxpayer and the amount that Wilson entered into the computer. After analyzing the entire tax return, Wilson determines that the computer-generated investment interest expense deduction is correct. Why is the computer-generated investment interest expense deduction correct?
I. The client's investment interest expense exceeds net investment income.
II. The client's qualified residence interest expense reduces the deductible amount of investment interest expense.
I only
104
Jon Stenger, a cash-basis taxpayer and age 28, had adjusted gross income of $35,000 for 2013. During the year he incurred and paid the following medical expenses:
Drugs and medicines prescribed by doctors $ 300
Health insurance premiums 1,500
Doctors' fees 2,250
Eyeglasses 75
$4,125
If Stenger were to itemize his deductions, what would be his allowable net Stenger received $500 in 2013 as reimbursement for portion of the doctors' fees. medical expense deduction?
$125
105
Taylor, an unmarried taxpayer, had $90,000 in adjusted gross income for year 13. During year 13, Taylor donated land to a church and made no other contributions. Taylor purchased the land in year 1 as an investment for $14,000. The land's fair market value was $25,000 on the day of the donation. What is the maximum amount of charitable contribution that Taylor may deduct as an itemized deduction for the land donation for year 13?
$25,000
106
If an individual taxpayer's passive losses and credits relating to rental real estate activities cannot be used in the current year, then they may be carried
Forward indefinitely or until the property is disposed of in a taxable transaction
107
Bud Ace, a self-employed carpenter, reports his income on the cash basis. During the current year he completed a job for a customer and sent him a bill for $3,000. The customer was not satisfied with the work and indicated that he would only pay $1,500. Ace agreed to reduce the bill to $2,000 but before payment was made the customer died. Ace could not collect from the customer's estate and should treat this loss as
A nondeductible loss as no income was reported.
108
Hall, a divorced person and custodian of her 12-year-old child, filed her 2013 federal income tax return as head of a household. Hall earned a salary of $75,000 in 2013. Hall was not covered by any type of retirement plan, but contributed $5,500 to an IRA in 2013. Hall's $5,500 contribution to an IRA should be treated as
A deduction from income in arriving at adjusted gass income.
109
Seymour Thomas named his wife, Penelope, the beneficiary of a $100,000 (face amount) insurance policy on his life. The policy provided that upon his death, the proceeds would be paid to Penelope with interest over her present life expectancy, which was calculated at 25 years. Seymour died during 2014 and Penelope received a payment of $5,200 from the insurance company. What amount should she include in her gass income for 2014?
$1,200
110
Which of the following itemized deductions are deductible when computing the alternative minimum tax (AMT) for individuals?
a. Home equity mortgage interest when the loan proceeds were used to purchase an auto.
b. Medical expenses amounting to 10% of adjusted gross income.
c. Home equity mortgage interest when the loan proceeds were used to add an additional room to the house.
d. State income taxes.
Home equity mortgage interest when the loan proceeds were used to add an additional room to the house.
111
Harold Brodsky is an electrician employed by contracting firm. His adjusted gross income is $25,000. During the current year he incurred and paid the following expenses:
Use of personal auto for company business
(reimbursed by employer for $200) $300
Specialized work clothes 550
Union dues 600
Cost of income tax preparation 150
Preparation of will 100
If Brodsky were to itemize his personal deductions, what amount should he claim as deduction for miscellaneous itemized deductions?
$900
112
Which one of the following statements is correct with regard to the child tax credit?
a. To qualify for the credit, a dependent child must be less than 14 years old.
b. The credit is $500 per qualifying child for tax years beginning in 2013.
c. The credit is not subject to income phaseout.
d. A qualifying child must be the taxpayer's dependent.
A qualifying child must be the taxpayer's dependent.
113
Ryan Landerhclm, an employee of Wendler Corporation, died on June 30, 2013. During July, Wendler Corporatiion made employee death payments (which do not represent the proceeds of life insurance) of $20,000 to his widow, and $20,000 to his 15-year-cld son. What amounts should be included in gross income by the widow and son in their respective tax returns for 2013?
$20,000 for the widow, $20,000 for the son.
114
Cathy qualified to itemize deductions on her calendar year 2013 tax return. Cathy's 2013 adjusted gass income was $25,000 and she made a $1,500 cash donation directly to a needy family. Also during 2013, Cathy donated stock, valued at $5,000, to her church. Cathy had purchased the stock ten months earlier for $2,000. What was the maximum amount of charitable contribution allowable as an itemized deduction on Cathy's 2013 income tax return?
$2,000
115
During the current year Jay Walker was hit by reckless driver and sustained serious injuries. Walker sued the driver and received the following payments during the year:
Damages for personal physical injury $ 80,000
Punitive damages 100,000
The amount to be included in Walker's gayss income for the current year should be
$100,000
116
David Hetnar is covered by a $90,000 group-term life insurance policy of which his wife is the beneficiary. Hetnar's employer pays the entire cost of the policy, for which the uniform annual premium is $1 per $1,000 of coverage. How much of this premium is taxable to Hetnar?
$40
117
Jim Planter, who reached age 65 on January I, 2014, filed a joint return for 2013 with his wife, Rita, age 50. Mary, their 23-year-old daughter, was a full-time student at a college until her graduation on June 2, 2013. The daughter had $6,500 of income and provided 25% of her own support during 2013. In addition, during 2013 the Planters were the sole support of Rita's niece, age 28, who had no income. How many exemptions should the Planters claim on their 2013 tax return?
4
118
A CPA's adjusted gross income (AGI) for the preceding twelve-month tax year exceeds $150,000. Which of the following methods is(are) available to the CPA to compute the required annual payment of estimated tax for the current year in order to make timely estimated tax payments and avoid the underpayment of estimated tax penalty?
I. The annualization method.
II. The seasonal method.
I only
119
Ryan and Christine Holm, filing a joint tax return for 2013, had a tax liability of $5,000 based on their tax table income and three exemptions. Ryan and Christine had earned income of $15,000 and $5,000, respectively, during 2013. In order for Christine to be gainfully employed, the Holms incurred the following employment- related expenses for their 5-year old son, Toby, in 2013:
Payee Amount
Alpine Day Care Center $ 900
Mulford Home Cleaning Service 700
Cindy Holm, babysitter (Ryan's mother) 1,100
Assuming that the Holms do not claim any other credits against their tax, what is the amount of the child care tax credit they should report on their tax return for 2013?
$640
120
The alternate minimum tax (AMT) is computed as the
Excess of the tentative AMT over the regular tax.
121
U Co. had cash purchases and payments on account during the current year totaling $455,000. U's beginning and ending accounts payable balances for the year were $64,000 and $50,000, respectively. What amount represents U's accrual-basis purchases for the year?
$441,000
122
DAC Foundation awarded Kent $75,000 in recognition of lifelong literary achievement. Kent was not required to render future services as condition to receive the $75,000. What condition(s) must have been met for the award to be excluded from Kent's gross income?
I. Kent was selected for the award by DAC without any action on Kent's part.
II. Pursuant to Kent's designation, DAC paid the amount of the award either to governmental unit or to charitable organization.
Both I and II
123
Dr. Berger, physician, reports on the cash basis. The following items pertain to Dr. Berger's medical practice in 2013:
Cash received from patients in 2013 $200,000
Cash received in 2013 from third-party
reimbursers for services provided by
Dr. Berger in 2012 30,000
Salaries paid to employees in 2013 20,000
Year-end 2013 bonuses paid to employees in 2014 1,000
Other expenses paid in 2013 24,000
What is Dr. Berger's net income for 2013 from his medical practice?
$186,000
124
During 2013, Anita Simms was entirely supported by her three sons, Dudley, Carlton, and Isidore, who provided support for her in the following percentages:
Dudley 8%
Carlton 45%
Isidore 47%
Which of the brothers is entitled to claim his mother as dependent, assuming multiple support agreement exists?
Carlton and Isidore
125
Jones, a divorced person and custodian of her 10-year-old child, filed her 2013 federal income tax return as head of a household. She submitted the following information to the CPA who prepared her 2013 return:
The divorce agreement, executed in 2009, provides for Jones to receive $5,000 per month, of which $2,000 is designated as child support. After the child reaches age 18, the monthly payments are to be reduced to $3,000 and are to continue until remarriage or death. However, for the year 2013, Jones received a total of only $12,000 from her former husband. Jones paid an attorney $4,000 in 2013 in a suit to collect the alimony owed.
What amount should be included in Jones's 2013 return as alimony income?
$0
126
During 2013 Mr. and Mrs. Zimmer paid the following taxes:
Property taxes on residence $1,900
Special assessment for installation
of sewer system in their town 500
State personal property tax on
their automobile 700
Property taxes on land held for
long-term appreciation 400
What amount can the Zimmers deduct as taxes in calculating itemized deductions for 2013?
$3,000
127
Christopher Ryan, a calendar-year taxpayer, was employed and resided in Illinois. On January 15, 2013, employer. Ryan worked full time for the entire year. In 2013, Ryan incurred and paid the following unreimbursed expenses in relocating:
Lodging and travel expenses while moving $1,000
Meals while en route to Florida 200
Cost of insuring household goods and personal
effects during move 150
Cost of shipping motorcycle to new home 300
Cost of moving household furnishings and
personal effects 2,000
What amount was deductible as moving expenses on Ryan's 2013 tax return?
$1,000 2,000 @ $3,450 $3,150 $3,000 $3,650 No tes: mum pted la natio This answer is correct. The requirement is to determine the amount of moving expense that Ryan can deduct for 2013. Direct moving expenses are deductible if closely related to the start of work at a new location and a distance test (i.e., distance from new job to former residence is at least SO miles further than distance from old job to former residence) and a time test (i.e., employed at least 39 weeks cut of 12 months following move) are met. Since both tests are met, Ryan's unreimbursed lodging and travel expenses ($1,000), cost of insuring household goods and personal effects during move ($150), cost of shipping motorcycle ($300), and cost of moving household furnishings and personal effects ($2,000) are deductible. Indirect moving expenses such as pre-move house hunting, temporary living expenses, and meals while moving are not deductible. Directions Next PM 3/13/2014 previous
$3,450
128
In the current year, Drake, disabled taxpayer, made the following improvements:
Cost
Pool installation, which qualified as medical
expense and increased the value of the home
by $25,000 $100,000
Widening doorways to accommodate
Drake's wheelchair. The improvement
did not increase the value of his home 10,000
For regular income tax purposes and without regard to the adjusted gross income peaentage threshold limitation, what maximum would be allowable as medical expense deduction in the current year?
$ 85,000
129
Which of the following is correct concerning the LIFO method (as compared to the FIFO method) in period when prices are rising?
a. Current tax liability is lower and ending inventory is higher.
b. Current tax liability and ending inventory are higher.
c. Deferred tax and cost of goods sold are lower.
d. Current tax liability is lower and cost of goods sold is higher.
Current tax liability is lower and cost of goods sold is higher.
130
For 2013, Robert had adjusted gross income of $100,000 and potential itemized deductions as follows:
Medical expenses (before percentage limitations) $12,000
State income taxes 4,000
Real estate taxes 3,500
Qualified housing and residence mortgage interest 10,000
Home equity mortgage interest (used to
consolidate personal debts) 4,500
Charitable contributions (cash) 5,000
What are Robert's itemized deductions that are allowable for alternative minimum tax purposes?
$17,000
131
Ben Carr, a calendar-year taxpayer, was 65 years old on December 30, 2013. Ben filed his 2013 individual income tax return on April 1, 2014, and attached a check for the balance of tax due as shown on the return. On July 15, 2014, Ben realized that he had inadvertently failed to claim the additional standard deduction to which he was entitled by virtue of having attained age 65 in 2013. In order for Ben to recover the tax that he would have saved by claiming the additional standard deduction, he must file a refund claim no later than
April 15, 2017.
132
Allison. sold a building for $600,000. Allison received a down payment of $120,000 as well as annual principal payments of $120,000 for each of the subsequent four years. Allison purchased the building for $500,000 and claimed depreciation of $80,000. What amount of gain should Allison report in the year of sale using the installment method?
$36,000
133
With regard to the alimony deduction in connection with 2013 divorce, which one of the following statements is correct?
a. Alimony payments must terminate on the death of the payee spouse.
b. Alimony may be paid either in cash or in property.
c. The divorced couple may be members of the same household at the time alimony is paid, provided that the persons do not live as husband and wife.
d. Alimony is deductible by the payor spouse, and includible by the payee spouse, to the extent that payment is contingent on the status of the divorced couple's children.
Alimony payments must terminate on the death of the payee spouse.
134
Tim and Nicole Wendler were divorced in 2011. Under the terms of their divorce decree, Tim paid alimony to Nicole at the rate of $60,000 in 2011, $25,000 in 2012, and nothing in 2013. What amount of alimony recapture must be included in Tim's gross income for 2013?
$47,500
135
Which of the following statements about the child and dependent care credit is correct?
a. The credit is nonrefundable.
b. The child must be a direct descendant of the taxpayer.
c. The maximum credit is $600.
d. The child must be under the age of 18 years.
The credit is nonrefundable.
136
During 2013, Matt Johnson was assessed deficiency on his 2011 federal income tax return. As result of this assessment he was required to pay $970, determined as follows:
Additional tax $600
Late filing penalty 50
Negligence penalty 200
Interest 120
What portion of the $970 would qualify as itemized deductions for 2013?
$0
137
John Wolf, who is 45 years old and unmarried, contributed $2,000 monthly in 2013 to the support of his parents' household. The parents lived alone and their income for 2013 consisted of $2,400 from dividends and interest, and $9,600 from Social Security. Based on the above information, what is Wolf's filing status for 2013, and how many exemptions should he claim on his tax return?
Head of household and 3 exemptions.
138
Soma Corp. had $600,000 in compensation expense for book purposes in 2013. Included in this amount was a $50,000 accrual for 2013 nonshareholder bonuses. Soma paid the actual 2013 bonus of $60,000 on March 1, 2014. In its 2013 tax return, what amount should Soma deduct as compensation expense?
$610,000
139
Martin Dawson, who resided in Detroit, was unemployed for the last 6 months of 2012. In January 2013, full-time job there in February. He kept this job for the balance of the year. Martin paid the following expenses in 2013 in connection with his move:
Rental of truck to move his personal belongings
to Houston $ 800
Penalty for breaking the lease on his Detroit apartment $ 300
Total $1,100
How much can Martin deduct in 2013 for moving expenses?
$ 800
140
Marc Clay was unemployed for the entire year 2012. In January 2013, Clay obtained full-time employment 60 miles away from the city where he had resided during the 10 years preceding 2012. Clay kept his new job for the entire year 2013. In January 2013, Clay paid direct moving expenses of $1,300 in relocating to his new city of residence, but he received no reimbursement for these expenses. In his 2013 income tax return, Clay's direct moving expenses are
Fully deductible from gross income in arriving at adjusted gross income.
141
The 2012 deduction by an individual taxpayer for interest expense on investment indebtedness is
Limited to the taxpayer's 2013 net investment income.
142
Under the modified accelerated cost recovery system (MACRS) the midquarter convention applies if
More than 40% of all personal property is placed in service during the last quarter of the taxpayer's tax year.
143
John Ford files a joint return with his wife. Ford's employer pays 100% of the cost of all employees' group-term life insurance under qualified plan. Under this plan, the maximum amount of tax-free coverage that may be provided for Ford by his employer is
$50,000
144
Which one of the following statements concerning an education IRA (Coverdell Education Savings Account) is correct?
a. Contributions can be made to an education IRA on behalf of a beneficiary until the beneficiary reaches age 21.
b. A taxpayer may contribute up to $2,500 to an education IRA (Coverdell Education Savings Account) to pay the costs of the designated beneficiary's higher education.
c. Eligibility for an education IRA is not subject to income phaseout.
d. Contributions to an education IRA are not deductible.
Contributions to an education IRA are not deductible.
145
Which expense, both incurred and paid in 2013, can be claimed as an itemized deduction subject to the 2% of adjusted gross income floor?
a. Employee's unreimbursed moving expense.
b. One-half of the self-employment tax.
c. Employee's unreimbursed business auto expense.
d. Self-employed health insurance.
Employee's unreimbursed business auto expense.
146
An individual starts paying student loan interest in the current year. How many years may the individual deduct portion of the student loan interest?
Ten years
147
Jon Moseley, who retired on October 31, 2012, receives a monthly pension benefit of $900 payable for life. His life expectancy at the date of retirement is 20 years. The first payment was received on November 15, 2012. During his years of employment, Moseley contributed $24,000 to the cost of his company's pension plan. How much of the pension amounts received may Moseley exclude from taxable income for the years 2012, 2013, and 2014?
$200 in 2012, $1,200 in 2013, and $1,200 in 2014.
148
Which one of the following statements is correct regarding the credit for adoption expenses?
a. For purposes of computing the credit, qualified adoption expenses are always taken into account in the year the adoption is finalized.
b. The credit for adoption expenses is a nonrefundable credit for 2013.
c. An eligible child is an individual Who has not attained the age of 17 as of the time of adoption.
d. The maximum credit is $5,000 for the adoption of a child with special needs.
The credit for adoption expenses is a nonrefundable credit for 2013.
149
A calendar-year individual filed an income tax return on April 1. This return can be amended no later than
Three years, three months, and 15 days after the end of the calendar year.
150
A self-employed taxpayer had gross income of $57,000. The taxpayer paid self-employment tax of $8,000, health insurance of $6,000, and $5,000 of alimony. The taxpayer also contributed $2,000 to a traditional IRA. What is the taxpayer's adjusted gross income for 2013?
$40,000
151
Harold Thompson, a self-employed individual,
Gross receipts $400,000
Less COGS and deductions 320,000
Net business income $80,000
Capital gains 36,000
Gross income $116,000
In June 2014, Thompson discovers that he had inadvertently omitted some income on his 2013 return and retains Mann, CPA, to determine his position under the statute of limitations. Mann should advise Thompson that the 6-year statute of limitations would apply to his 2012 return only if he omitted from gross income an amount in excess of
$109,000
152
Chris, age five, has $3,000 of interest income and no earned income this year. Assume the current applicable standard deduction is $1,000; how much of Chris's income will be taxed at Chris's parents' maximum tax rate?
$1,000
153
Charles and Tasha Taylor began the pacess of adopting 5-year-old Joey in 2012. The Taylors incurred $2,000 in attorney and adoption fees in 2012. The adoption became final in 2013. The Taylors incurred an additional $3,500 in attorney fees and $1,000 in court costs in 2013 that were directly related to the adoption of Joey. Ignoring any AGI limitation, what is the maximum adoption credit that the Taylors can take in 2013?
$6,500
154
Frank Lyon was held up and robbed of $800 cash in June 2013. One month later, Frank had $2,000 cash stolen from him by his housekeeper. Frank's adjusted gross income for 2013 was $10,000. How much was deductible by Frank for theft losses in 2013?
$1,600
155
The following information pertains to Cole's personal residence, which sustained casualty fire damage in 2013:
Adjusted basis $150,000
Fair market value immediately before the fire 200,000
Fair market value immediately after the fire 180,000
Fire damage repairs paid for by Cole in 2013 10,000
The house was uninsured. Before consideration of any "floor" or other limitation on tax deductibility, the amount of this 2013 casualty loss was
$20,000
156
In which of the following situations may taxpayers file as married filing jointly?
a. Taxpayers who were divorced during the year.
b. Taxpayers who were married but lived under a legal separation agreement at the end of the year.
c. Taxpayers who were legally separated but lived together for the entire year.
d. Taxpayers who were married but lived apart during the year.
Taxpayers who were married but lived apart during the year.
157
Which one of the following credits in not component of the general business credit?
a. Alcohol fuels credit.
b. Child and dependent care credit.
d. Disabled access credit.
d. Work opportunity credit.
Child and dependent care credit.
158
Which one of the following will result in an accruable expense for an accrual-basis taxpayer?
a. A repair completed prior to year-end and paid upon completion.
b. An invoice dated prior to year-end but the repair completed after year-end.
c. A repair completed prior to year-end but not invoiced.
d. A signed contract for repair work to be done and the work is to be completed at later date.
A repair completed prior to year-end but not invoiced.
159
Don and Cynthia Wallace filed joint return for 2013 in which they reported adjusted gross income of $35,000. During 2013 they made the following contributions to qualified organizations:
Land held 3 years (stated at fair market value)
donated to church for new building site $22,000
Cash contributions to church 300
Cash contributions to the local community college 200
Assuming that the Wallaces did not elect to reduce the deductible amount of the land contribution by the property's appreciation in value, how much can they claim as deduction for charitable contributions in 2013?
$11,000
160
Max and Karin were divorced in January 2013. In accordance with the divorce decree, Max transferred the title in their home to Karin in 2013. The home, which had a fair market value of $250,000, was subject to a $100,000 mortgage that had 10 more years to run. Monthly mortgage payments amount to $1,000. Under the terms of settlement, Max is obligated to make the mortgage payments on the home, but his obligation to make the payments will cease if Karin dies. Max made 12 mortgage payments in 2013. What amount is taxable as alimony in Karin's 2013 return?
$ 12,000
161
Bill McDonald, a cash-basis taxpayer, is the owner of a house with two identical apartments. He resides in one apartment and rents the other apartment to a tenant under a 5-year lease dated March 1, 2011, and expiring on February 28, 2016. The tenant made timely monthly rental payments of $500 for the months of January through November 2013. Rents for December 2013 and January 2014 were paid by the tenant on January 5, 2014. The following additional information for 2013 was available:
Fuel and utilities $3,600
Depreciation of building 3,000
Maintenance and repairs
(rental apartment) 400
Insurance on building 600
What amount should McDonald report as net rental income for 2013?
$1,500
162
Dove Corp. began operating a hardware store in the current year after constructing a building at a total cost of $100,000 on land previously acquired for $50,000. In the current year, the land had a fair market value of $60,000. Dove paid real estate taxes of $5,000 in the current year. What is the total depreciable basis of Dove's business paperty?
$100,000
163
Judy Bishop had adjusted gross income of $35,000 in 2013 and itemizes her deductions. Additional information is available for 2013 as follows:
Cash contribution to church $2,500
Purchase of an art object at her church bazaar
(with fair market value of $500 on date of purchase) 800
Donation of used clothes to Goodwill Charities
(fair value evidenced by receipt received) 400
What is the maximum amount Bishop can claim as deduction for charitable contributions in 2013?
$3,200
