Response to the following multiple choice questions:
1. During 2011, Doris paid the following interest charges:
Home mortgage $6,000
On loan to purchase a new car $1,500
On student loan $800
If Doris itemizes her deductions for 2011, then the amount deductible for interest expense as an itemized deduction is:
$1,500.
$6,000.
$7,500.
$8,300.
None of the above
2. Isabel's income from her investments for the current year is as follows:
Gain on the sale of Rosebud Country school bonds $3,000
Interest on Rosebud County school bonds $8,500
Interest received during the year on U.S. government bonds $6,500
Total $18,000
Isabel's gross income from the above is:
$3,000.
$9,500.
$15,000.
$18,000.
None of the above
3. Under the terms of a divorce agreement, Troy is to pay his wife Brook $1,200 per month. The payments are to be reduced to $800 per month when their 12-year-old child reaches age 18. During the current year, Troy paid $14,400 under the agreement. Assuming all of the other conditions for alimony are satisfied, Troy can deduct from gross income (and Brook must include in gross income) as alimony:
$0.
$4,800.
$9,600.
$14,400.
None of the above
4. During the current year, Harold sustained a serious injury in the course of his employment. As a result of the injury sustained, he received the following payments during the year:
Unemployment compensation $7,000
Worker's compensation $5,000
Reimbursement from his employer's accident and health plan for medical expenses paid by Harold $1,000
Damages for physical personal injuries $8,000
What is the amount to be included in Harold's gross income for the current year?
$5,000
$6,000
$7,000
$8,000
None of the above
5. IRA contributions should be treated as:
a deduction from AGI subject to the 2 percent of AGI floor.
a deduction from AGI not subject to the 2 percent of AGI floor.
not deductible.
deductible for AGI.
None of the above
6. Which of the following items would be a miscellaneous itemized deduction on Schedule A of Form 1040 not subject to the 2% of AGI floor?
Appraisal fees
Impairment-related work expenses of a handicapped person
Hobby losses
Professional dues
None of the above
7. Matt and Shanekwa, ages 45 and 44, respectively, file a joint tax return for 2011. They provided all of the support for their 24-year-old son, who had $2,500 of gross income. Their 23-year-old daughter, a full-time student until her graduation on June 14, 2011, earned $6,000, which was 45% of her total support during 2011. Her parents provided the remaining support. Matt and Shanekwa also provided total support for Shanekwa's father who is a citizen and life-long resident of Portugal. How many personal and dependency exemptions can Matt and Shanekwa claim on their 2011 income tax return?
Five
Four
Three
Two
None of the above
8. If a vacation home is used primarily for personal use (rented for less than 15 days per year), which of the following is true?
All expenses are deductible from AGI.
Expenses must be allocated between rental and personal use.
Depreciation is allowed as a deduction.
All rental income is excluded from AGI.
None of the above
9. Victoria, whose husband died in December 2009, maintained a household in which her dependent son lives. What is Victoria's filing status for the tax year 2011?
Surviving spouse
Single
Married, filing separately
Head of household
None of the above
10. Which, if any, of the following transactions will not accelerate the gain on an installment note?
Gift of the installment note
Sale of the installment note
Cancellation of the installment note
Transfer between spouses
None of the above
11. Tyler has a 30% interest in the XY partnership. In the current year, the partnership has sales of $2,000,000, cost of goods sold of $1,300,000, and $300,000 in operating expenses. Tyler withdrew $150,000 from the partnership during the year, but his partner did not withdraw anything.
Tyler must report $120,000 gross income from the partnership for the year.
The partnership is taxable on $400,000 for the year, and Tyler must include $120,000 in gross income.
Tyler must report $150,000 gross income from the partnership for the year.
Tyler is not required to recognize any income from the partnership for the year.
None of the above
12. Jojo decided to care for her Uncle Vince in his old age. Jojo was unaware that her uncle had securities valued with a fair market value of $75,000 at the time she started caring for her uncle. Uncle Vince made no promise to Jojo regarding payment for his care. However, the cost of comparable care in a nursing home would have been $50,000. Vince executed a will that gave the securities to Jojo. The fair market value of the securities at the time of Vince's death was $175,000. Jojo was Vince's favorite relative, and Jojo did not need the money. Jojo's gross income from the receipt of the stock is:
$0.
$50,000.
$75,000.
$175,000.
None of the above
13. Upon the recommendation of a physician, Roberto has a therapeutic pool installed in his personal residence. He suffers from severe muscular degeneration disease. If Roberto does not use the pool on a regular basis, his muscles will deteriorate to the point that he will be unable to walk. In connection with this pool, Roberto incurs and pays the following amounts during the current year:
Therapeutic pool and cost of installation $11,000
Increase in utility bills due to the pool $400
Cost of certified appraisal $500
The pool has an estimated useful life of 5 years. The appraisal was to determine the value of Roberto's residence with and without the pool. The appraisal states that the pool increased the value of Roberto's residence by $4,000. Disregarding percentage limitations, how much of the above expenditures qualify for the medical expense deduction in the current year?
$11,900
$11,400
$7,500
$7,400
None of the above