Question 1. Which of the following is not a passive activity?
Owning a business and not materially participating
Having rental condos
Owning a limited partnership interest in a real estate limited partnership
Owning a working interest in oil and gas properties
Question 2. How does the code define a capital asset?
As inventory carried by the taxpayer's business
As property used by the taxpayer in his or her business, which is depreciable
As intangible property owned by the taxpayer, regardless of whether used in his or her business or not
Does not define what a capital asset is, only what it is not
Question 3. Bob and Cindy Smith paid the following medical expenses during 2016 (all in excess of reimbursement).
Hospital and doctor bills: $800
Medicine and drugs: $700
Hospitalization insurance premiums: $6,000
Medicine and drugs (for dependent mother, age 71): $1,000
Assuming that the Smiths' adjusted gross income was $60,000, how much of a medical expense deduction may Bob and Cindy claim on their joint return?
$4,000
$2,500
$4,330
$8,500
Question 4. Which of the following expenditures is an itemized deduction for individual taxpayers?
Charitable contributions
State and local income taxes
Medical expenses exceeding applicable floor
All of the above
Question 5. If an expenditure is part business related and part personal, then _____.
the entire expenditure is deductible for tax purposes
no part of the expenditure is deductible for tax purposes
the personal portion of the expenditure may be deductible for tax purposes
only the business-related portion of the expenditure is deductible for tax purposes
Question 6. Josh sold a piece of business equipment that had an adjusted basis to him of $50,000. In return for the equipment, Josh received $90,000 cash and a painting with a fair-market value of $20,000 from the buyer. The buyer also assumed Josh's $25,000 loan on the equipment. Josh paid $5,000 in selling expenses. What is the amount of Josh's gain on the sale?
$90,000
$135,000
$75,000
$80,000
Question 7. Under the cash method of tax accounting, income is generally recognized when _____.
cash is received
the liability arises
there is net income to absorb the expense
revenue is earned
Question 8. Tom Smith had a short-term capital loss of $3,000 in 2016, a short-term capital gain of $1,900, a short-term capital loss carryover from 2015 of $700, a long-term capital gain of $1,800, and a long-term capital loss of $1,000. What is Tom's deductible loss in 2016?
$1,000
$1,800
$2,000
$3,000
Question 9. The term practice before the IRS refers to _____.
tax planning for nonprofit organizations
macro-economic tax projections
representing a client before the IRS
tax planning for timber and forest investments
Question 10. To be deductible for tax purposes, a trade or business expenditure must be _____.
ordinary.
necessary.
ordinary and necessary.
ordinary or necessary.