Section 4C

Question 1

Green is self-employed as a human resources consultant and reports on the cash basis for income tax purposes. Select the appropriate tax treatment on Form 1040 (U.S. Individual Income Tax Return) for personal life insurance premiums paid by Green.

Fully deductible on Form 1040 to arrive at adjusted gross income
Reported in Schedule A, Itemized Deductions (deductibility subject to threshold of 7.5% of adjusted gross income)
Reported in Schedule A, Itemized Deductions (deductibility subject to threshold of 2% of adjusted gross income)
Not deductible

Answer 1

not deductible

No deduction is allowed for premiums paid by an insured for personal life insurance.

Question 2

On August 1, year 16, Graham purchased and placed into service an office building costing $264,000, including $30,000 for the land. What was Graham’s MACRS deduction for the office building in year 16?

$2,250….HOW

Answer 2

otal cost $264,000
Less: Cost of land - 30,000
Depreciable basis $234,000
of building ========

While the depreciation is $6,000 per year, since it was placed in service in August, Graham can only take 4.5 months of depreciation in year 16.

$234,000 / 39 years = $6,000 per year

          4.5
$6,000 x ----- months = $2,250
          12

Question 3

For assets acquired after 1986, depreciation is computed using the____

Answer 3

modified accelerated cost recovery system (MACRS).

Question 4

MACRS depreciation cannot be used for ___property and property not depreciated in terms of ___

Real property acquisitions are subject to the \_\_\_convention

Answer 4

intangible , years

mid-month

Question 5

Under MACRS, the 200% declining-balance method is used for the 3-, 5-, 7-, and 10-year properties. t/f

Which years are the most common?

What does 5 yr include
What does 7 yr include

Answer 5

true

5 & 7

5: automobiles/equipment
7: Special purpose trucks, fixtures, furniture

Question 6

In the current year, Louise, a self-employed consultant, finances a new vehicle that is used 75% for business and 25% for personal use. How much, if any, of the interest incurred on the loan could be deductible in arriving at adjusted gross income?

Answer 6

75%

Louise could treat 75% of the interest as deductible in arriving at her net business income and would treat the remaining 25% as nondeductible personal interest.

Question 7

Tom Lewis, an individual taxpayer, performs services for the Red Cross at an out-of-town location for three weekends during the year. There was no significant element of personal pleasure for Tom on these weekend trips. He incurred the following expenses in relation to these trips:

Special uniform worn while performing services      $100
Meals and lodging while on weekend trips            $300 How much of the expenses may Tom deduct as a charitable donation on his Schedule A (itemized deduction) form (assuming that he can fully itemize and deduct all such expenses)?

Answer 7

400

Question 8

Dale received $1,000 in the current year for jury duty. In exchange for regular compensation from her employer during the period of jury service, Dale was required to remit the entire $1,000 to her employer. In Dale’s income tax return, the $1,000 jury duty fee should be:

deducted from gross income in arriving at adjusted gross income…. WHY

Answer 8

Generally, jury duty pay must be included as other income on IRS Form 1040. However, the taxpayer can deduct the amount of jury duty pay remitted to an employer in exchange for continued regular compensation.

Question 9

Moore, a single taxpayer, had $50,000 in adjusted gross income for Year 5. During Year 5, she contributed $18,000 to her church. She had a $10,000 charitable contribution carryover from her Year 4 church contribution. What was the maximum amount of properly substantiated charitable contributions that Moore could claim as an itemized deduction for Year 5?

Answer 9

The maximum cash contribution a taxpayer may deduct in each tax year is limited to 60% of the taxpayer’s AGI so long as the recipient charities are qualified for this ceiling:

60% × $50,000 AGI = $30,000
$10,000 carryover from Year 4 + $18,000 for Year 5 = $28,000 (with $0 carryover to Year 6)

Question 10

Juan Nero, an individual taxpayer, bought a personal residence for $2,000,000 in the current year. He assumed a mortgage on the full amount of this acquisition cost. On how much of this $2,000,000 loan amount may Juan deduct interest charges for on his current-year tax return (assuming that he can fully itemize and deduct all such charges)?

Answer 10

750K

Question 11

Tom and Sally White, married and filing joint income tax returns, derive their entire income from the operation of their retail stationery shop. Their adjusted gross income was $100,000. The Whites itemized their deductions on Schedule A. The following unreimbursed cash expenditures were among those made by the Whites:

Repair and maintenance of motorized wheelchair for physically handicapped dependent child: $600
Tuition, meals, and lodging at special school for physically handicapped dependent child in an institution primarily for the availability of medical care, with meals and lodging furnished as necessary incidents to that care: $8,000
Without regard to the adjusted gross income percentage threshold, what amount may the Whites claim in their tax return as qualifying medical expenses?

Answer 11

$8600

This is asking if the 10% rule is met, what could you deduc

Question 12

Jackson owns two residences. The second residence, which has never been used for rental purposes, is the only residence that is subject to a mortgage. The following expenses were incurred for the second residence:

Mortgage interest $5,000
Utilities 1,200
Insurance 6,000
For regular income tax purposes, what is the maximum amount allowable as a deduction for Jackson’s second residence?

Answer 12

$5K

Home mortgage interest is deductible for two personal residences subject to certain limits. However, utilities and insurance on a personal residence are not deductible.

If the second residence had been rented part of the year, the utilities and insurance may have been deductible, subject to the vacation home rules.

Question 13

__ is deductible for two personal residences subject to certain limits.

However, utilities and insurance on a personal residence are not deductible. T/F

If the second residence had been rented part of the year, the utilities and insurance may have been deductible, subject to the vacation home rules. t/f

Answer 13

Home mortgage interest

True

True

Question 14

Which of the following statements is false about the deductibility of interest expense as an itemized deduction?

Interest expense is not deductible if the proceeds from the loan were used to purchase tax-exempt, income-generating investments.
Personal credit card interest is not deductible.
Mortgage interest expense is limited to three personal residences.
No deduction is allowable for prepaid interest.

Answer 14

True
True
False - 2 households
True

Question 15

An individual starts paying student loan interest in the current year. How many years may the individual deduct a portion of the student loan interest?

Answer 15

duration the loan is paid

Question 16

Baker, a sole proprietor CPA, has several clients that do business in Spain. While on a 4-week vacation in Spain, Baker took a 5-day seminar on Spanish business practices that cost $700. Baker’s round-trip airfare to Spain was $600. While in Spain, Baker spent an average of $100 per day on accommodations, local travel, and other incidental expenses, for total expenses of $2,800. What amount of educational expense can Baker deduct on Form 1040, Schedule C, Profit or Loss From Business?

Answer 16

1200

he cost of Baker’s course of $700 would be deductible and the expenses of $100 per day for five days would also be deductible for an additional $500 and a total of $1,200.

Question 17

Tom Lewis, an individual taxpayer, paid the following expenses in Year 4:

Credit card interest of $1,000
Real estate taxes of $3,000 on behalf of his mother, on property owned by his mother
Which of the amounts is deductible as an itemized deduction on Tom’s Year 4 tax return?

Answer 17

Neither

Credit card interest is considered personal interest and is not deductible on an individual’s tax return.A taxpayer cannot create a deduction for himself by paying someone else’s real estate taxes

Question 18

Payment for registration and licensing of a car may be deductible as a personal property tax only if it is ___annually and assessed in ___ to the value of the car.

Alternatively, it is deductible to calculate by the weight of the car, it is not deductible.

Answer 18

imposed , proportion

F

Question 19

Tom Lewis, an individual taxpayer, was assessed $250 in the current year for the construction of street lights in his neighborhood. It is thought that the street lights will reduce crime in the neighborhood. Tom’s neighborhood is the only area of the city that is assessed the charges. Before the end of the year, Tom is assessed another $100 for repairing the street lights damaged in a storm. How much of the $350 paid by Tom is deductible as an itemized deduction in the current year?

Answer 19

$100

taxes assessed against local improvements are not deductible if they are of a nature that tends to increase the value of the property being assessed. Maintenance, repair, or interest charges related to such assessments are deductible. Thus, only the $100 for repairing the street lights is deductible.

Question 20

An individual taxpayer earned $10,000 in investment income, $8,000 in noninterest investment expenses, and $5,000 in investment interest expense. How much is the taxpayer allowed to deduct on the current year’s tax return for investment interest expenses?

Answer 20

The amount allowed as a deduction for investment interest expense for a taxable year shall not exceed the net investment income, or $2,000.

$10,000 investment income - $8,000 investment expense = $2,000 net investment income

Question 21

The amount allowed as a deduction for investment interest expense for a taxable year shall not exceed the___

Answer 21

net investment income, o00.r $2,0

Question 22

Carter incurred the following expenses in the current year: $500 for the preparation of a personal income tax return, $100 for custodial fees on an IRA, $150 for professional publications, and $2,000 for union dues. Carter’s current-year adjusted gross income is $75,000. Carter, who is not self-employed, itemizes deductions. What will Carter’s deduction be for miscellaneous itemized deductions after any limitations in the current year?

Answer 22

$0

Under the Tax Cuts and Jobs Act of 2017 (TCJA), the deduction for itemized miscellaneous deductions subject to the 2% floor was eliminated; therefore, Carter’s total deduction will be $0.

Question 23

Under the Tax Cuts and Jobs Act of 2017 (TCJA), the deduction for itemized miscellaneous deductions ____

Answer 23

are eliminated

Question 24

Charitable contributions subject to the 60% limit that are not fully deductible in the year made may be carried forward____

Answer 24

5 years

Charitable contributions subject to the 60% limit that are not fully deductible in the year made may be carried forward five years.

Question 25

Which of the following requirements must be met in order for a single individual to qualify for the addi­tional standard deduction amount?

Must be age 65 or older or blind
Must support dependent child or aged parent

Answer 25

A only

Question 26

Which of the following is not a potentially deductible medical expense as an itemized deduction?
T/F
A baby nurse for a healthy infant
Emergency room fees for a dependent child
Amounts paid for lodging while traveling for medical expenses

Answer 26

True - Its not a med exp
False - This is a med exp
False - This is a med exp
False - This is a med exp

Question 27

Jimet, an unmarried taxpayer, qualified to itemize deductions. Jimet’s adjusted gross income was $30,000 and he made a $2,000 cash donation directly to a needy family. Jimet also donated stock, valued at $3,000, to his church. Jimet had purchased the stock four months earlier for $1,500. What was the maximum amount of the charitable contribution allowable as an itemized deduction on Jimet’s income tax return?

$1500….why

Answer 27

Donations must be made to a qualifying organization to be deductible for income taxes. Individuals are not qualifying organizations, so the $2,000 cash donation to a needy family does not qualify for a tax deduction.

Property which is long-term capital gain property may be eligible for deduction of its fair market value rather than its lower cost basis. However, in this case, the property has only been owned for four months. Therefore, it is short-term capital gain property and the deduction is limited to the basis of $1,500.

Question 28

The Rites are married, file a joint income tax return, and qualify to itemize their deductions in the current year. Their adjusted gross 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 as a result of their tax payments on their current-year joint income tax return?

Answer 28

$3500

All of these types of taxes are deductible as part of the taxpayer’s itemized deductions. (Note that the itemized state and local taxes (SALT) deduction is capped at $10,000.) The Rites’ filing status and adjusted gross income are not relevant in determining which taxes are deductible.

The amount of the expense the Rites should claim on their current-year tax return is $3,500 ($2,000 + $500 + $1,000).

Question 29

Ad valorem tax is deductible T/F

Answer 29

True….idk what the fuck this is though

Question 30

In the current year, an unmarried individual with modified adjusted gross income of $25,000 paid $1,000 interest on a qualified education loan entered into on July 1. How may the individual treat the interest for income tax purposes?

Answer 30

As a $1,000 deduction to arrive at AGI for the year.

Individual taxpayers may deduct up to $2,500 of qualified student loan interest as an above-the-line deduction to arrive at AGI.

Question 31

If you are a dependent, can you deduct student loan interest?
If you are Married Filing Sep, can you deduct student loan interest?
What is the limit of qualified student loan interest?

Answer 31

No
No
$2500

Question 32

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?

Answer 32

$5500

. Disability insurance premiums are not deductible because the proceeds from disability insurance are not taxable and expenses relating to tax-exempt income are not deductible.

Question 33

. Disability insurance premiums are not deductible because the proceeds from disability insurance are not taxable and expenses relating to tax-exempt income are not deductible. T/F

Answer 33

True

Question 34

In Year 5, Joan Frazer’s residence was totally destroyed by fire. The property (exclusive of land) had an adjusted basis and a fair market value of $130,000 before the fire. During Year 5, Frazer received an insurance reimbursement of $120,000 for the destruction of her home. Frazer’s Year 5 adjusted gross income was $70,000. What amount of the fire loss was Frazer entitled to claim as an itemized deduction on her Year 5 tax return?

Answer 34

$0

personal casualty and theft loss deduction is not available, except for casualty losses incurred in a federally declared disaster. Joan Frazer’s deductible loss is $0.

Question 35

Stein, an unmarried taxpayer, had adjusted gross income of $80,000 for the year and qualified to itemize deductions. Stein had no charitable contribution carryovers and only made one contribution during the year. Stein donated stock, purchased seven years earlier for $17,000, to a tax-exempt educational organization. The stock was valued at $25,000 when it was contributed. What is the maximum amount of charitable contributions deductible allowed on Stein’s current-year income tax return?

Answer 35

$24000

For contributions of appreciated capital gain property, deductions are the lesser of the total fair market value or 30% of AGI for educational organizations. AGI of $80,000 × 0.30 limit = $24,000.

Question 36

Noncash contributions are generally deductible at their ___value.

Answer 36

fair market

Question 37

For contributions of appreciated capital gain property, deductions are the lesser of the total ___or ___% of AGI

Answer 37

FMV or 30%

Question 38

Green is self-employed as a human resources consultant and reports on the cash basis for income tax purposes. Select the appropriate tax treatment on Form 1040 (U.S. Individual Income Tax Return) for interest expense on a loan for an auto used 75% for business.

Fully deductible on Form 1040 to arrive at adjusted gross income
50% deductible on Form 1040 to arrive at adjusted gross income
Fully deductible in Schedule C—Profit or Loss From Business
Partially deductible in Schedule C—Profit or Loss From Business

Answer 38

Partially deductible in Schedule C—Profit or Loss From Business

Interest expense on a loan for an auto used 75% for business is partially deductible in Schedule C—Profit or Loss From Business.

Since the auto was used 75% for business, Green can deduct 75% of costs

Question 39

Otherwise qualified higher education expenses” must be reduced by ___not includible in gross income.

Answer 39

qualified scholar­ships

Question 40

During Year 2, Scott charged $4,000 on his credit card for his dependent son’s medical expenses. Payment to the credit card company had not been made by the time Scott filed his income tax return in Year 3. However, in Year 2, Scott paid a physician $2,800 for medical expenses of his wife, who died in Year 1. Disregarding the adjusted gross income percentage threshold, what amount could Scott claim in his Year 2 income tax return for medical expenses?

Answer 40

$6800

Medical expenses are considered paid when the credit card charge is made regardless of when the credit card is paid. Therefore, Scott could claim $6,800 for medical expenses in Year 2 ($4,000 + $2,800).

Question 41

Are the medical insurance premiums of a self-employed person deductible above the line?

Answer 41

Yes - fully deductible

A self-employed taxpayer’s whose business reports a taxable net profit can deduct 100% of the medical, health, and qualified long-term care insurance premiums for themselves, spouses, and dependents.

Question 42

Which of the following conditions must be satisfied for a taxpayer to expense, in the year of purchase, under Internal Revenue Code Section 179, the cost of new or used tangible depreciable personal property?

The property must be purchased for use in the taxpayer’s active trade or business.
The property must be purchased from an unrelated party.

Answer 42

both

Question 43

You can potentially make a tax-deductible contribution to an individual retirement account even if you are covered at work T/F

Answer 43

true

Question 44

Tom Lewis, a single taxpayer, was divorced in 2019 and had the following income and expense items for the current year:

Wages $55,000
Alimony paid to former spouse 5,000
Child support paid to former spouse 4,000
Moving expenses 2,000
Mortgage interest on personal residence 6,000
Credit card interest 1,000
Tom’s standard deduction amount for Year 5 12,000
Using the tax regulations in effect for 2019, what is Tom’s adjusted gross income?

Answer 44

Adjusted gross income is $55,000,

Question 45

Green is self-employed as a human resources consultant and reports on the cash basis for income tax purposes. Select the appropriate tax treatment on Form 1040 (U.S. Individual Income Tax Return) for interest expense on a home-equity line of credit for an amount borrowed to finance Green’s business.

Not deductible as a business expense
50% deductible on Form 1040 to arrive at adjusted gross income
Fully deductible on Schedule C—Profit or Loss From Business
Partially deductible on Schedule C—Profit or Loss From Business

Answer 45

Not deductible as a biz expense

Interest expense on a home equity line of credit for an amount borrowed to finance Green’s business is not deductible under the Tax Cuts and Jobs Act of 2017 (TCJA) unless the home equity line is used to buy, build, or substantially improve the home. If it qualifies as a deduction, taxpayers can only deduct interest on a maximum of $750,000 in home loans.

Question 46

Smith, a single individual, made the following charitable contributions during the current year. Smith’s adjusted gross income is $60,000.

Donation to Smith’s church $5,000
Artwork donated to the local art museum–
Smith purchased it for $2,000 four months ago;
a local art dealer appraised it for: 3,000
Contribution to a needy family 1,000
What amount should Smith deduct as a charitable contribution?

Answer 46

. In this case, the taxpayer purchased art work only four months prior to the donation so it does not meet the one year holding requirement. (go off of basis rather than FMV)

Smith’s charitable contribution deduction is computed as follows:

Donation to church $5,000
Donation of artwork (limited to basis) 2,000
——
Deduction $7,000

Question 47

T/F
IRA Contribution is an itemized deduction
A charitable contribution deduction is not allowed for the value of services rendered to a charity
The charitable contribution deduction for long-term appreciated stock is limited to 50% of adjusted gross income.
Foreign charities and political campaigns are NOT deductible
Funeral expenses are deductible on an individual’s income tax return.

Answer 47

False - no its not

True

False

True

False - they are not

Question 48

In the current year, Drake, a disabled taxpayer, made the following home improvements:

Pool installation, which qualified as a medical expense
and increased the value of the home by $25,000 COST: $100,000
Widening doorways to accommodate Drake’s wheelchair
(The improvement did not increase the value of his home.) COST 10,000
For regular income tax purposes and without regard to the adjusted gross income percentage threshold limitation, what maximum amount would be allowable as a medical expense deduction in the current year?

Answer 48

Drake installed a pool for medical reasons at a cost of $100,000, which increased the value of his residence by $25,000, so the medical deduction is limited to $75,000 ($100,000 - $25,000 = $75,000).

Question 49

Property contributions to qualified organizations are deductible at cost basis ORRRRR at the fair market value if it is below the cost basis.

Contribution of prop is deductible when the fair market value is above basis

Answer 49

True

False – FMV has to be below basis

Question 50

taxpayer purchased and placed in service during the year a $761,000 piece of equipment. The equipment is 7-year property. The first-year depreciation for 7-year property is 14.29%. There is an allowable Section 179 limit of $1,000,000. What amount is the maximum allowable depreciation without using bonus depreciation?

Answer 50

$0

Since Section 179 expensing is $1,000,000, which exceeds the cost of the equipment, there is no need for any depreciation.

Question 51

Tom Lewis, an individual taxpayer who is a CPA, performs volunteer accounting work for the local Red Cross throughout the year. Tom’s adjusted gross income for the year is $80,000. He incurs the following expenses for the year:

Transportation expenses to and from the Red Cross $ 200
Estimated value of accounting services performed 3,000
How much of these expenses may Tom deduct as a charitable donation on his Schedule A (itemized deduction) form (assuming that he can fully itemize and deduct all such expenses)?

Answer 51

Transportation expenses to and from an event in which an individual performs charitable services is deductible as a charitable contribution. The fair market value of services performed for a charitable organization is not deductible as a charitable contribution.

Question 52

Green is self-employed as a human resources consultant and reports on the cash basis for income tax purposes. Select the appropriate tax treatment on Form 1040 (U.S. Individual Income Tax Return) for qualifying contributions to a simplified employee pension plan.

Fully deductible on Form 1040 to arrive at adjusted gross income….WHY

Answer 52

Qualifying contributions to a simplified employee pension plan (SEP) are fully deductible on Form 1040 to arrive at adjusted gross income

Question 53

Tom Lewis, an individual taxpayer, paid an annual personal property tax amount based on the value of his car. Select the appropriate tax treatment on Tom’s tax return.

Deductible in full on Schedule A—Itemized Deductions…. WHY

Answer 53

Payment for registration and licensing of a car may be deductible as a personal property tax only if it is imposed annually and assessed in proportion to the value of the car.

Question 54

How is the depreciation deduction of nonresidential real property, placed in service in this year, determined for regular tax purposes using MACRS?

Straight-line method over 40 years
150% declining-balance method with a switch to the straight-line method over 27.5 years
150% declining-balance method with a switch to the straight-line method over 39 years
Straight-line method over 39 years

Answer 54

SL over 39 yrs

Question 55

Beginning in 2018, taxpayers are limited to deducting $____of taxes

Answer 55

10,000

Question 56

Which of the following statements is correct regarding the deductibility of an individual’s medical expenses?

t/f

A medical expense paid by credit card is deductible in the year the credit card bill is paid.

A medical expense deduction is allowed for payments made in the current year for medical services received in earlier years.

Answer 56

False - Expenses are considered as paid at the time of the credit card transaction regardless of the timing of the payment of the credit card by the taxpayer.

True

Question 57

Chris, age 5, has $3,000 of interest income and no earned income this year. How much of Chris’s income will be taxed at Chris’s parents’ maximum tax rate?

Answer 57

$0
The “kiddie tax” was greatly modified by the Tax Cuts and Jobs Act of 2017 (TCJA). No amount is taxed at the parents’ rate. The tax is now at the trust and estate tax rates, which tax at 37% in amounts in excess of $12,500.

Question 58

Carroll is 35 years old and an unmarried taxpayer with an adjusted gross income of $100,000. Carroll incurred and paid the following unreimbursed medical expenses:

Doctor bills resulting from a serious fall: $5,000
Cosmetic surgery that was necessary to correct a congenital deformity: $15,000
Carroll had no medical insurance. For regular income tax purposes, what was Carroll’s maximum allowa­ble medical expense deduction, after the applicable threshold limitation that is in effect for 2019?

Answer 58

$10K

Note that cosmetic surgery is deductible only when it is necessary to correct a congenital abnormality (as in Carroll’s case), personal injury resulting from an accident or trauma, or disfiguring disease.

20k - (100k*10%) = $10k

Question 59

The standard mileage rate for charitable use of a car in 2018 is:

Answer 59

14 cents per mile

Question 60

___cents per mile for business miles driven,
___ cents per mile driven for medical or moving purposes, and
___ cents per mile driven in service of charitable organizations.

Answer 60

54.5
18
14