Question 1: Tony, age 60, is divorced. He earned $80,000 at his job where he is not an active participant in a retirement plan. Tony had the following:
$4,000 contribution to a traditional IRA
$9,600 paid in alimony
$8,000 cash contribution to his church
$18,000 paid in mortgage interest
$7,000 paid in real property tax
$16,000 paid for medical expenses
$4,000 was withheld from his salary for state income taxes
What is Tony's adjusted gross income (AGI)?
$70,400
$66,400
$80,000
$70,000
Question 2: Tony, age 60, is divorced. He earned $80,000 at his job where he is not an active participant in a retirement plan. Tony had the following:
$4,000 contribution to a traditional IRA
$9,600 paid in alimony
$8,000 cash contribution to his church
$18,000 paid in mortgage interest
$7,000 paid in real property tax
$16,000 paid for medical expenses
$4,000 was withheld from his salary for state income taxes
How much may Tony deduct for itemized deductions?
$37,000
$42,360
$46,360
$50,360
Question 3: Ned and Nelda Norman, both age 39, have two children-Nick, age 16, and Nan, age 12. Ned is an elementary teacher and Nelda manages a local office supply store. Ned's income for federal income tax purposes is $40,000 and Nelda's income for federal income tax purposes is $80,000. They earned $600 in interest and received a $600 state income tax refund. Ned and Nelda itemized deductions last year. Both Ned and Nelda are covered by qualified pension plans through their employers. Ned and Nelda had the following expenses during the year:
Ned spent $500 on materials for his classroom.
Ned and Nelda each contributed $5,000 to traditional IRAs.
They had medical expenses of $9,500, none of which were reimbursed by insurance.
They contributed $2,000 to their church.
They paid $5,000 in state income taxes.
They paid $6,000 in real estate taxes.
They paid $10,000 in mortgage interest.
They had a $5,000 casualty loss.
They had $10,000 withheld for federal income taxes.
What is their AGI?
$110,950
$120,000
$121,200
$120,950
Question 4: Ned and Nelda Norman, both age 39, have two children-Nick, age 16, and Nan, age 12. Ned is an elementary teacher and Nelda manages a local office supply store. Ned's income for federal income tax purposes is $40,000 and Nelda's income for federal income tax purposes is $80,000. They earned $600 in interest and received a $600 state income tax refund. Ned and Nelda itemized deductions last year. Both Ned and Nelda are covered by qualified pension plans through their employers. Ned and Nelda had the following expenses during the year:
Ned spent $500 on materials for his classroom.
Ned and Nelda each contributed $5,000 to traditional IRAs.
They had medical expenses of $9,500, none of which were reimbursed by insurance.
They contributed $2,000 to their church.
They paid $5,000 in state income taxes.
They paid $6,000 in real estate taxes.
They paid $10,000 in mortgage interest.
They had a $5,000 casualty loss.
They had $10,000 withheld for federal income taxes.
How much may Ned and Nelda deduct as itemized deductions?
$23,000
$0 because they should take the standard deduction
$18,000
$27,900
Question 5: Oliver, age 40, is divorced. He is a manager of a small utility company where his salary is $58,000. Oliver's only other income was $2,000 in qualified dividends from some corporate stock he owns, a $10,000 inheritance from his aunt, and a lump sum of $20,000 in life insurance death proceeds from a policy on Oliver's aunt of which he was the beneficiary. If Oliver is in the 15% marginal tax bracket, what percentage will be applied to his qualified dividends to determine the federal income tax on those dividends?
28%
0%
20%
15%
Question 6: Oliver, age 40, is divorced. He is the manager of a small utility company where his salary is $58,000. Oliver's only other income was $2,000 in qualified dividends from some corporate stock he owns, a $10,000 inheritance from his aunt, and a lump sum of $20,000 in life insurance death proceeds from a policy on Oliver's aunt of which he was the beneficiary. Oliver paid $6,000 in child support during the year. He also had unreimbursed medical and dental expenses of $900, charitable contributions of $1,500 in cash, state income taxes of $1,200, state sales taxes of $800, home mortgage interest of $2,100. Oliver's ex-wife claims their son as a dependent on her tax return. Which of the following is true?
Oliver must itemize because he has itemizable deductions.
Oliver must itemize because he pays child support to his ex-wife who itemizes deductions.
Oliver should take the standard deduction.
Oliver may not itemize or take the standard deduction.
Question 7: Which of the following losses would be deductible for AGI on an individual's income tax return?
$2,000 loss on sale of personal automobiles
$7,000 decline in value of stock held in individual's investment portfolio
$9,000 loss on sale of stock in individual's investment portfolio
$8,000 gambling loss in excess of gambling winnings
Question 8: Alan, who is a security officer, is shot while on the job. As a result, Alan suffers from a leg injury and must send most of his time in a wheelchair until his recovery. Alan's physician recommends that he install a whirlpool bath in his home for therapy. During the year, Alan makes the following expenditures:
Wheelchair: $1,200
Whirlpool bath: $2,000
Maintenance on the whirlpool: $250
Increased utility bills associated with whirlpool: $450
Entrance ramp, various home modifications: $7,200
A professional appraiser tells Alan that the whirlpool has increased the value of his home by $1,000. Alan's deductible medical expenses (before consider limitations based on AGI) will be
$6,000
$6,700
$7,000
$10,100
Question 9: Caleb's medical expenses before reimbursement for the year include the following:
Medical premiums: $11,000
Doctors, hospitals: $3,500
Prescriptions: $600
Caleb's AGI for the year is $50,000. Caleb also receives a reimbursement for medical expenses of $1,000. Caleb's deductible medical expenses that will be added to the other itemized deductions will be
$10,100
$9,100
$15,100
$14,500
Question 10: Donald sells stock he has owned for five years with an adjusted basis of $38,000 to his son, Kiefer, for its fair market value of $30,000. Kiefer sells the stock three years later for $32,000. What are the tax consequences for both Donald and Kiefer?
Donald cannot recognize the loss when he sells to Kiefer; Kiefer has no gain or loss when he sells the stock three years later.
Donald cannot recognize the loss when he sells to Kiefer; Kiefer has a $6,000 long-term capital loss when he sells the stock three years later.
Donald has a long-term capital loss of $8,000 when he sells to Kiefer; Kiefer has a $2,000 long-term capital gain when he sells the stock three years later.
Donald has a long-term capital loss of $8,000 when he sells to Kiefer; Kiefer has no gain or loss when he sells the stock three years later.
Question 11: Sidney purchased land in 2004 for $35,000 that she held as a capital asset. This year, she donated the land to the Boy Scouts of America for use as a site for a summer camp. The market value of the land at the date of contribution was $40,000. Sidney's AGI is $90,000. This was Sidney's sole charitable contribution for the year. How much may she deduct this year?
$35,000 or $45,000
$27,000 or $35,000
$27,000 or $45,000
$0
Question 12: Talia, age 60 and single, works at Turners' Taters where she earns $50,000. She is an active participant in the company's qualified retirement plan. Talia contributed $6,500 to her traditional IRA. How much can Talia deduct as an adjustment to income (for AGI)?
$5,500 and she will have to pay a penalty on the additional $1,000 because she contributed too much.
$6,500
$0 because she is over age 59 ½.
$0 because she is an active participant in a qualified plan.
Question 13: Tegan was transferred to another location by her employer. Her qualified moving expenses were $10,000. Her employer did not reimburse her for the moving expenses. Which of the following is true?
Tegan will not be able to deduct any of her moving expenses since her employer did not reimburse.
Tegan may deduct the moving expenses as a miscellaneous itemized deduction subject to the 2% floor.
Tegan may deduct the moving expenses as an "above-the-line/for AGI" deduction on the front page of the Form 1040.
Tegan may deduct the moving expenses as a miscellaneous itemized deduction NOT subject to the 2% floor.
Question 14: Todd works in sales and travels for his employer. He incurred the following business expenses while traveling for his employer: he drove 50,000 miles in his personal vehicle, all of which were for the business; he spent $6,000 on meals and entertainment of clients, $4,000 on hotels, $300 on parking and tolls, and $50 on laundry and dry cleaning. His company does not reimburse for expenses. If the current federal mileage rate is 56 cents a mile, how much may Todd deduct as a miscellaneous deduction before applying the 2% floor?
$0
$35,350
$7,350
$38,350
Question 15: Tricia had an auto accident for which she was not insured. The damage to her car was $8,000. Tricia's apartment was also burglarized for which she was also not insured; they stole $15,000 in jewelry and electronic equipment. Tricia's AGI is $50,000. What is her deductible casualty and theft loss?
$0
$23,000
$18,000
$17,800
Question 16: Five years ago, Kirk lent a friend $2,500. His friend did not pay the loan when it was due and then the friend declared bankruptcy. The loan was deemed totally uncollectible. How may Kirk treat this loss?
Because it was a personal loan, it will be treated as a short-term capital loss.
It will be treated as a long-term capital loss.
It will be deductible from ordinary income in equal portions over five years.
Because it was a personal loan, it is not deductible.