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Exam 6: Individual for Agi Deductions

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Question 41

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Collin and Christine are married and file joint. Their dependent son, Trevor, is a full-time college student at a qualified educational institution. This year Collin and Christine borrowed $30,000 to pay for Trevor's tuition ($22,000) and room and board ($8,000). At year end Collin paid $3,200 in interest on the loan. What amounts can Collin and Christine deduct for interest and education expenses if they estimate that their AGI will be $133,000 absent any deductions for AGI?

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$2,250 for interest and $2,000 for quali...

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Question 42

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Jill currently lives in the suburbs and commutes 25 miles to her office in downtown Freeport. She is considering quitting her current job to look for new employment in the downtown area. Which of the following statements best describes how Jill can satisfy the distance test for deducting moving expenses if she accepts a new job in downtown Freeport?

A) Jill must move at least 25 miles further away from downtown Freeport.
B) Jill must move 25 miles east from downtown Freeport.
C) Jill must move 50 miles further away from downtown Freeport.
D) Jill need not move her residence because she is starting a new job.
E) Jill cannot satisfy the distance test if she accepts a job in downtown Freeport.

F) A) and B)
G) C) and E)

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Question 43

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Alfredo is self-employed and he uses a room in his home as his principal place of business. He meets clients there and doesn't use the room for any other purpose. The size of his home office is 600 square feet. The size of his entire home is 3,000 square feet. During the current year, Alfredo received $10,000 of gross income from his business activities and he reports $7,500 of business expenses unrelated to his home office. For his entire home, he reported $10,000 of mortgage interest, $2,000 of property taxes, $2,500 of home operating expenses, and $4,500 of depreciation expense. What amount of home office expenses is Alfredo allowed to deduct in the current year? Indicate the amount and type of expenses he must carry over to next year, if any.

Tyson owns a condominium near Laguna Beach, California. This year, he incurs the following expenses in connection with his condo: $\begin{array} { | l | r | } \hline \text { Insurance } & \$ 1,300 \\\hline \text { Mortgage interest } & 8,000 \\\hline \text { Property taxes } & 2,000 \\\hline \text { Repairs and maintenance } & 900 \\\hline \text { Utilities } & 2,200 \\\hline \text { Depreciation } & 10,000 \\\hline\end{array}$ During the year, Tyson rented the condo for 100 days, receiving $25,000 of gross income. He personally used the condo for 60 days. Assuming Tyson uses the Tax Court method of allocating expenses to rental use of the property. What is Tyson's net rental income for the year? (assume there are 365 days in the year)

Which of the following statements regarding Roth IRAs is false?

Taxpayers renting a home would generally report the rental income and expenses on Schedule E.

Generally, losses from rental activities are considered to be active losses.

In 2016, Jessica retired at the age of 65. The current balance in her traditional IRA was $200,000. Over the years, Jessica had made $20,000 of nondeductible contributions and $60,000 of deductible contributions to the account. If Jessica receives a $50,000 distribution from the IRA, what amount of the distribution is taxable?

Bruce is employed as an executive and his wife, Marie, is a self-employed realtor. Besides Bruce's salary, Bruce and Marie own a warehouse that they rent to a local business for storage. This year they paid $1,250 for electric service in the warehouse. Marie also paid self-employment tax of $6,200 and Bruce had $7,000 of Social Security taxes withheld from his pay. Marie paid $45 fee to rent a safe deposit box to store records associated with her realty operation. Which of the following is a true statement?

Kenneth lived in his home for the entire year except when he rented his home (near a very nice ski resort) to a married couple for 14 days in December. The couple paid Kenneth $14,000 in rent for the two weeks. Kenneth incurred $1,000 in expenses relating to the home for the 14 days. Which of the following statements accurately describes the manner in which Kenneth should report his rental receipts and expenses for tax purposes?

Rayleen owns a condominium near Orlando, Florida. This year, she incurs the following expenses in connection with her condo: $\begin{array} { | l | r | } \hline \text { Plumbing tools and supplies } & \$ 1,300 \\\hline \text { Rent on Scott's plumbing shop } & 6,250 \\\hline \text { Transportation between Scott's shop and various job sites } & 500 \\\hline \text { Plumber's unitom } & 50 \\\hline \text { Plumbing truck rental } & 7,200 \\\hline \text { Self employment tax (1/2 is employer share) } & 400 \\\hline\end{array}$ During the year, Rayleen rented the condo for 130 days and she received $25,000 of rental receipts. She did not use the condo at all for personal purposes during the year. Rayleen is considered to be an active participant in the property. Rayleen's AGI from all sources other than the rental property is $130,000. Rayleen does not have passive income from any other sources. What is Rayleen's AGI?

What is the correct order of the loss limitation rules?

The phrase "ordinary and necessary" means that an expense must be appropriate in and helpful for generating a profit.

Which of the following is a true statement?

Compared to the Tax Court method of allocating expenses between rental use and personal use, the IRS method tends to allocate more expenses to personal use than does the Tax Court method.

Kaylee is a self-employed investment counselor who also owns a rental property. This year, she collected $85,000 in fees and paid the following expenses: $\begin{array} { | l | r | } \hline \text { Insurance } & \$ 1,250 \\\hline \text { Mortgage interest } & 7,000 \\\hline \text { Property taxes } & 2,100 \\\hline \text { Repairs and maintenance } & 800 \\\hline \text { Utilities } & 2,300 \\\hline \text { Depreciation } & 9,000 \\\hline\end{array}$ Kaylee files single with one personal exemption. Calculate her adjusted gross income.

Grace is a single medical student at State University, a qualified educational institution. This year Grace paid university tuition of $12,000. Grace works part-time at the University library, and this year she reports $15,000 of salary and no other items of income or expense. Which of the following is a true statement?

Passive losses that exceed passive income are deferred until the taxpayer generates passive income to offset these passive losses.

Lewis is an unmarried law student at State University, a qualified educational institution. Last year Lewis borrowed $30,000 and used the proceeds to pay his university tuition. This year Lewis paid $1,500 of interest on the loan. Which of the following is a true statement if Lewis reports $40,000 of salary and no other items of income or expense?

All investment expenses are itemized deductions.