REG individual taxation

Question 1

passive activity lossess

Answer 1

e.g. partnership with no active participation. rental activities, limited partnerships are also passive activities regardless of the participation. Cannot be deducted but carried over to future

Question 2

Interest income on US series EE bond, if the taxpayer was more than 24 years old at the time of purchase, proceeds used for education of self, spouse or dependent

Answer 2

non taxable

Question 3

Interest income on US series EE bond to high earning individuals

Answer 3

taxable

Question 4

dividend received in the form of shares when the taxpayer had the option of taking cash

Answer 4

taxable, otherwise stock dividend from shares are not taxable

Question 5

Dividends on mutual fund reinvested in the fund

Answer 5

taxable

Question 6

Dividends on life insurance policies

Answer 6

Exempt

Question 7

Dividends on life insurance policies-treatment

Answer 7

reduction in expense of policy

Question 8

Federal income taxes paid-itemized deduction or not

Answer 8

not deductible on federal return

Question 9

employer’s contribution to group term life insurance

Answer 9

not taxable fringe benefits only upto a coverage of $50,000

Question 10

Deductible expenses for rental property

Answer 10

depreciation, interest on loan, insurance, repairs and maintenance

Question 11

employer provided health insurance premium

Answer 11

not taxable

Question 12

debt forgiven by employer

Answer 12

taxable

Question 13

payments from employer- breach of contract damages, jury duty fees, unemployment compensation

Answer 13

taxable

Question 14

gambling losses

Answer 14

itemized deduction from gambling winning, cannot exceed winnings. However is the taxpayer takes std deductions, no itemized deduction for losses

Question 15

stock dividend -partly common stock and partly preferred stock

Answer 15

taxable

Question 16

prizes and awards rewarded based on efforts on the part of recipient or with no effors

Answer 16

taxable

Question 17

rental income if the property is rented for less than 15 days

Answer 17

non taxable. However, the expenses and property taxes would be deductible

Question 18

Proceeds from life insurance, child support money

Answer 18

exempt

Question 19

Social security benefits if the AGI is relatively low

Answer 19

Not taxable. 50% or 85% for the prescribed higher levels of income

Question 20

Cafeteria plans

Answer 20

employees are allowed to choose cash or benefits to be received

Question 21

Value of benefits received under cafeteria plans

Answer 21

not taxable

Question 22

cash received under cafeteria plans

Answer 22

taxable

Question 23

Alimony received as per legal decree or divorce agreement

Answer 23

taxable

Question 24

Money received as a property settlement during separation

Answer 24

not taxable

Question 25

Passive losses which are not deductible in the current year

Answer 25

can be carried forward indefinitely

Question 26

Interest on US treasury bonds, jury duty serving fees

Answer 26

taxable

Question 27

Cash dividends from corporation or mutual funds

Answer 27

taxable

Question 28

Taxpayer receives asset as revenue e.g. rent received in advance

Answer 28

advance amount is taxable at the time received

Question 29

Life insurance premiums paid by the taxpayer

Answer 29

not deductible

Question 30

passive losses on rental activities

Answer 30

deductible up to $25,000 as long as the owner is an active participant in the management.

Question 31

Hobby loss rule

Answer 31

if the operation fails to earn a profit in any three of the most recent five years including the tax year

Question 32

Hobby loss rules application

Answer 32

individuals, S corporations, partnerships, estates, and trusts that are attributable to an activity not engaged in for profit

Question 33

Scholarships that cover part or all of college tuition

Answer 33

tax free

Question 34

scholarships-if the recipient is not seeking a degree.

Answer 34

taxable

Question 35

scholarships- if the person is required to perform work in exchange.

Answer 35

are also taxable

Question 36

Points paid on a home equity loan used to improve the property

Answer 36

(such as by adding a swimming pool) are deductible when paid.

Question 37

points paid to refinance an existing mortgage or Points paid on home equity loan where the proceeds are not used for home improvements

Answer 37

must be amortized over the life of the loan

Question 38

Prepayments of mortgage interest

Answer 38

to be matched with the tax years to which the interest applies

Question 39

A casualty loss

Answer 39

caused by theft, vandalism, fire, storm, or similar causes, and boat, car, and other accidents.includes a loss caused by the insolvency or bankruptcy of a financial institution

Question 40

casualty loss amount to be deducted as itemized deduction

Answer 40

lower of the tax basis of the property or the drop in value. To be further reduced by any insurance payment , $100 , 10 percent of adjusted gross income