Problem 1: Billie sold her personal residence to Jean on October 1 for $100,000. Before the sale, Billie paid the real estate taxes of $3,000 for the calendar year. For income tax purposes, the real estate tax deduction is apportioned as follows: $2,250 to Billie and $750 to Jean. Jean's basis in the residence is:
a. $97,750.
b. $99,250.
c. $100,750.
d. $102,250.
e. None of the above.
Problem 2: During 2004, Sophie paid the following interest charges:
Home mortgage $5,000
On loan to purchase a new car 2,500
On student loan 800
If Sophie itemizes her deductions for 2004, the amount deductible for interest expense as an itemized deduction is:
a. $2,500.
b. $5,000.
c. $7,500.
d. $8,300.
e. None of the above.
Problem 3: In 2004, Cobalt pays $5,000 to become a charter member of Private University's Athletic Council. The membership ensures that Cobalt will receive choice seating at all of Private's home football games. Also in 2004, Cobalt pays $1,000 (the regular retail price) for season tickets for himself and his wife. For these items, how much qualifies as a charitable contribution?
a. $0.
b. $1,000.
c. $4,000.
d. $6,000.
e. None of the above.
Problem 4: In 2003, Betty invests $100,000 for a 25% partnership interest in an activity in which she is a material participant. The partnership reports losses of $300,000 in 2003 and $300,000 in 2004. Betty's share of the partnership's losses is $75,000 in 2003 and $75,000 in 2004. How much of the losses from the partnership can Betty deduct?
a. $75,000 in 2003 and $75,000 in 2004.
b. $75,000 in 2003 and $25,000 in 2004.
c. $0 in 2003 and $0 in 2004.
d. $75,000 in 2003 and $0 in 2004.
e. None of the above.
Problem 5: Carly, who is single, has $90,000 of salary, $40,000 of income from a limited partnership and a $70,000 passive loss from a real estate rental activity in which she actively participates. Her modified adjusted gross income is $175,000. Of the $70,000 loss, how much is deductible?
a. $0.
b. $40,000.
c. $30,000.
d. $70,000.
e. None of the above.