R1

Question 1

What would be taxable income for defined contribution plans?

Answer 1

-employer contributions
-plan earnings on the amounts contributed

(once distributed) !!!

Question 2

What is the maximum amount you can deduct for a capital loss on an investment stock sale to get to adjusted gross income?

Answer 2

$3,000

Question 3

In what situation would a state tax refund be included as income in the current year?

Answer 3

if the itemized deduction amount from the prior year exceeded the standard deduction

Question 4

T/F: Whether through cash or accrual accounting, taxpayers who sell stock or securities must recognize gains and losses on the trade date, rather than on the settlement date.

Answer 4

true

Question 5

T/F: A limited partnership loss, which is a passive loss, can only be deducted against passive activity income (if indicated in the problem).

Answer 5

true

Question 6

What is the difference between the single filing status and surviving spouse?

Answer 6

surviving spouse - within 2 years of your spouse’s death and you have at least 1 dependent

single - you didn’t remarry the next year and don’t have any dependents

Question 7

How would you calculate the passive activity loss?

Answer 7

ordinary business loss * % interest in partnership

Question 8

How would you calculate the taxable benefit of life insurance premiums?

Answer 8

total coverage
- 50,000 (maximum nontaxable amount)
/ $ coverage per year (ex. 1,000)
* taxable cost per unit
= taxable benefit

Question 9

What is the exception to the rental real estate activities rule?

Answer 9

general rule: losses from rental real estate activities are not allowed to be used as an offset against income from any nonpassive activities

exception: when the taxpayer owns at least 10% of the property and actively participates in rental real estate, 50% of up to $25,000 of passive losses over $100,000 AGI may be used to offset income from nonpassive sources

Question 10

Where does net rental income appear in the tax forms?

Answer 10

-Form 1040 – arriving at AGI
-Schedule K-1

Question 11

What is the formula for net rental income?

Answer 11

gross rental income
+ prepaid rental income
+ rent cancellation payments
+ improvements in lieu of rent
- rental expenses
= net rental income (loss)

Question 12

T/F: Income from a limited partnership interest is automatically considered passive income.

Answer 12

true