Congress allows self-employed taxpayers to deduct the cost of health insurance above the line (for AGI)
because:
A. employers are allowed to deduct social security (FICA) taxes as a business expense.
B. self-employed taxpayers need an alternate mechanism
C) this deduction provides a measure of equity between employees and the self-employed
Which of the following is a true statement?
A. Congress allows self-employed taxpayers to deduct the employer portion of their self-employment tax.
B. To deduct expenses associated with any profit motivated activity taxpayers must maintain a high level of
A) Congress allows self-employed taxpayers to deduct the employer portion of their self-employment tax
Which of the following is a true statement?
A. Unreimbursed employee business expenses are deductible as miscellaneous itemized deductions.
B. With one exception, investment expenses are deductible as itemized deductions.
C.Business deductions are one of
E) All of these are true
Which of the following is a true statement?
A. All business expenses are deducted for AGI.
B. Investment expenses are typically deducted for AGI.
C. Tax preparation fees are deducted for AGI.
D. Rental and royalty expenses are deducted for AGI.
E. All of
D) Rental and royalty expenses are deducted for AGI
Which of the following is a true statement?
A. Individuals qualify for the moving expense deduction only if they change employers.
B. To satisfy the distance test, the distance from the taxpayer's old residence to the new place of work must be at least 50
B) To satisfy the distance test, the distance from the taxpayer's old residence to the new place of work must be at least 50 miles more than the distance from the old residence to the old place of work.
Which of the following is a true statement?
A. The deduction for interest on educational loans is subject to a phase-out limitation.
B. The deduction for moving expenses is subject to a phase-out limitation.
C. Self-employed taxpayers are allowed to deduc
A) The deduction for interest on educational loans is subject to a phase-out limitation.
Which of the following is a true statement?
A.For purposes of the deduction for educational interest, an educational loan must be used to pay tuition
to any type of school.
B. The maximum deduction for educational interest is $5,000 for married taxpayers
C) Self-employed taxpayers are not allowed to deduct health care premiums if the taxpayer is eligible to participate in their spouse's employer-provided health plan.
Which of the following is a true statement?
A. For purposes of the deduction for educational interest, expenses do not include expenses for room,
board and travel.
B. For purposes of the deduction for educational interest, qualified education expenses are
B) For purposes of the deduction for educational interest, qualified education expenses are those paid for the education of the taxpayer, the taxpayer's spouse, or a taxpayer's dependent.
This year, Jong paid $3,000 of interest on a qualified education loan. Jong files married joint and reports
modified AGI of $137,000. What is Jong's deduction for interest expense on an educational loan?
A. $2,500
B. $3,000
C. $1,500
D. $1,000
E. None of
C) $1,500
Mason paid $4,100 of interest on a loan that paid tuition for him to attend a private university this year.
How much of this payment can Mason deduct as interest expense on an educational loan if he files single
and reports modified AGI of $90,000?
A. $4,
E) None of these
This year Riley files single and reports AGI of $66,000. Riley paid $1,200 of interest on a qualified
education loan. What amounts can Riley deduct for qualifying education interest?
A. The deduction for qualifying education interest is $1,200.
B. The ded
C) The deduction for qualifying education interest is $720
Max paid $5,000 of tuition for him to attend a private university this year. How much of this payment can
Mason deduct as a qualifying education expense if he files single and reports modified AGI of $60,000?
A. $5,000
B. $4,000
C. $2,000
D. $0
E. None of
B) $4,000
Han is a self-employed carpenter and his wife, Christine, works full-time as a grade school teacher. Han
paid $525 for carpentry tools and supplies, and Christine paid $3,600 as her share of health insurance
premiums for Han and herself in a qualified pla
A) The tools and supplies are deductible for AGI while the health insurance is an itemized deduction.
Bruce is employed as an executive and his wife, Marie, is a self-employed realtor. Besides Bruce's salary,
Bruce and Marie own a warehouse that they rent to a local business for storage. This year they paid
$1,250 for electric service in the warehouse. Ma
D) The safe deposit fee and the electric bill are deductible for AGI.
Casey currently commutes 35 miles to work in the city. He is considering a new assignment in the
suburbs on the other side of the city that would increase his commute considerably. He would like to
accept the assignment, but he thinks it might require tha
C) To qualify for a moving expense deduction the new commute from Casey's current residence would need to be a minimum of 85 miles.
Jill currently lives in the suburbs and commutes 25 miles to her office in downtown Freeport. She is
considering quitting her current job to look for new employment in the downtown area. Which of the
following statements best describes how Jill can satisf
E) Jill cannot satisfy the distance test if she accepts a job in downtown Freeport.
Which of the following expenses can be deducted as moving expenses?
1. The cost of a trip to purchase a new residence
2. The cost of moving personal belongings
3. Lodging (one night) while en route
4. The cost of gasoline when traveling to the new residen
C) Number 2 through 4 only.
Brice is a single, self-employed electrician who earns $60,000 per year in self-employment income. Brice
paid the following expenses this year. Which of the expenses are deductible for AGI?
1. The cost of health insurance
2. The employer portion of self-e
E) All of these are deductible for AGI.
Hector is a married self-employed taxpayer, and this year he paid $3,000 for his health insurance
premiums. Under which of the following alternative conditions can Hector deduct the cost of the
premiums for AGI?
A. Hector chose not to participate in the e
B) Hector's spouse participates in an employer-sponsored plan but Hector is not eligible to participate in this plan.
Lewis is an unmarried law student at State University, a qualified educational institution. Last year Lewis
borrowed $30,000 and used the proceeds to pay his university tuition. This year Lewis paid $1,500 of
interest on the loan. Which of the following i
A) Lewis can deduct all the interest on his student loan for AGI.
Grace is a single medical student at State University, a qualified educational institution. This year Grace
paid university tuition of $12,000. Grace works part-time at the University library, and this year she
reports $15,000 of salary and no other items
E) All of these are false.
This fall Manfred enrolled in the law school at State University (a qualified educational institution) and
paid $6,200 in tuition. Until his enrollment Manfred worked as a stock broker and this year he reports
$70,000 in wages. If Manfred files single and
E) None- the tuition is not deductible as a business expense.
This fall Millie finally repaid her student loan. She originally borrowed the money to pay tuition several
years ago when she attended at State University (a qualified educational institution). This year Millie paid
a total of $2,400 of interest on the lo
B) Millie can deduct $1,600 for AGI.
This fall Marsha and Jeff paid $5,000 for their son Josh's tuition and fees at State University (a qualified
education institution). They also paid $1,000 for Josh's books. How much of these two payments can
Marsha and Jeff deduct this year, assuming Josh
D) Marsha and Jeff can deduct $2,000 for AGI.
This fall, Josh paid $5,000 for his tuition and fees at State University (a qualified education institution).
Assume that Josh is Marsha and Jeff's son and that Marsha and Jeff claim Josh as a dependent. Marsha
and Jeff's modified AGI is $100,000. How muc
E) None- the tuition is not deductible by Marsha and Jeff.
Ned is a head of household with a dependent son, Todd, who is a full-time student. This year Ned made
the following expenditures related to Todd's support:
What amount can Ned include in his itemized deductions?
Auto Insurance Premiums $1,700
Room and Boa
D) $600 included in Ned's medical expenses
Which of the following is a true statement?
A. A taxpayer can deduct medical expenses incurred for members of his family who are dependents.
B.A taxpayer can deduct medical expenses incurred for a qualified relative even if the relative does not
meet the
E) All of these are true
Which of the following costs are deductible as an itemized medical expense?
A. The cost of prescription medicine and over-the-counter drugs.
B. Medical expenses incurred to prevent disease.
C. The cost of elective cosmetic surgery.
D. Medical expenses rei
B) Medical expenses incurred to prevent disease.
Which of the following costs are NOT deductible as an itemized medical expense?
A. The cost of eyeglasses.
B. Payments to a hospital.
C. Transportation for medical purposes.
D. The cost of insurance for long-term care services.
E. All of these are deducti
E) All of these are deductible as medical expenses
Opal fell on the ice and injured her hip this winter. As a result she paid $3,000 for a visit to the hospital
emergency room and $750 for follow-up visits with her doctor. While she recuperated, Opal paid $500
for prescription medicine and $600 to a thera
C) $3,650
Which of the following taxes will not qualify as an itemized deduction?
A. personal property taxes assessed on the value of specific property.
B. state, local, and foreign income taxes.
C. real estate taxes on a residence.
D. gasoline taxes on personal tr
D) gasoline taxes on personal travel
This year Amanda paid $749 in Federal gift taxes on a gratuitous transfer to her nephew. Amanda lives in
Texas and does not pay any state or local income taxes. Which of the following is a true statement?
A. Amanda cannot deduct Federal gift taxes.
B. Ama
A) Amanda cannot deduct Federal gift taxes.
This year Norma paid $1,200 of real estate taxes on her personal residence. Norma's other itemized
deductions (state income taxes) only amount to $3,100. Which of the following is a true statement if
Norma files single with one personal exemption?
A. Norm
E) Norma should claim the standard deduction
Madeoff donated stock (capital gain property) to a public charity. He purchased the stock 3 years ago
for $100,000, and on the date of the gift, it had a fair market value of $200,000. What is his maximum
charitable contribution deduction for the year if
C) $150,000
Carly donated inventory (ordinary income property) to a church. She purchased the inventory last month
for $100,000, and on the date of the gift, it had a fair market value of $92,000. What is her maximum
charitable contribution deduction for the year if
B) $92,000
Simone donated a landscape painting (tangible capital gain property) to a library, a public charity. She
purchased the painting five years ago for $50,000, and on the date of the gift, it had a fair market value
of $200,000. What is her maximum charitable
C) $90,000 if the library uses the painting for its charitable purpose.
Larry recorded the following donations this year:
$500 cash to a family in need
$2,400 to a church
$500 cash to a political campaign
To the Salvation Army household items that originally cost $1,200 but are worth $300.
What is Larry's maximum allowable ch
C) $2,700
Which of the following is a true statement?
A. the deduction of cash contributions to public charities is limited to 30 percent of AGI.
B. the deduction of capital gain property to private nonoperating foundations is limited to 50 percent of
AGI.
C. the d
D) the deduction of capital gain property to public charities is limited to 20 percent of AGI.
When taxpayers donate cash and capital gain property to a public charity, the AGI percentage limitation
is applied in the following order:
A. a 30 percent of AGI limitation is applied to the aggregate donation.
B. a 50 percent of AGI limitation is applied
D) a 50 percent of AGI limitation is applied to the cash donation and the fair market value of the capital gain donation is subject to the lesser of a 30 percent of AGI limitation or a 50 percent of AGI limitation.
Which of the following is a true statement?
A. Taxpayers may only deduct interest on up to $1,500,000 of acquisition indebtedness.
B. Taxpayers may deduct interest on up to $1,0000,000 of home-equity debt.
C. The deduction for investment interest expense
D) Interest on home-equity debt up to $100,000 is deductible, even if the loan proceeds are used to buy a new car.
Margaret Lindley paid $15,000 of interest on her $300,000 acquisition debt for her home (fair market
value of $500,000), $4,000 of interest on her $30,000 home-equity loan, $1,000 of credit card interest,
and $3,000 of margin interest for the purchase of
B) $22,000
Which of the following is a true statement?
A. A casualty loss can only occur from storm damage.
B. Personal casualty losses can only be deducted to the extent that aggregate casualty losses exceed 10
percent of AGI.
C. Individual casualty losses are only
B) Personal casualty losses can only be deducted to the extent that aggregate casualty losses exceed 10 percent of AGI.
Jim was in an auto accident this year. Jim paid $2,450 to repair his car after the accident and his insurance
only reimbursed him $400. Jim bought his car several years ago for $1,500. What is the amount of
casualty loss from this accident before Jim appl
D) $1,100
Which of the following is a true statement?
A. Employees cannot claim business expense deductions.
B. Employees can claim business expense deductions for AGI.
C. Employees can claim business expense deductions as miscellaneous itemized deductions not subj
D) Employees can claim business expense deductions as miscellaneous itemized deductions subject to the 2 percent of AGI limitation.
Which of the following is a true statement?
A. Traveling from a personal residence to a place of business is deducted for AGI as a moving expense.
B. Traveling from a personal residence to a place of business is a miscellaneous itemized deduction subject
E) Traveling from a personal residence to a place of business is nondeductible.
Which of the following is a true statement?
A. Fees for investment advice are included in miscellaneous itemized deductions subject to the 2 percent of AGI limitation.
B. Unreimbursed employee business expenses are included in miscellaneous itemized deduc
E) All of these are true
Fred's employer dispatched him on a business trip from the Dallas headquarters to New York this year.
During the trip Fred incurred the following expenses:
Air Fare $1,300
Lodging 750
Meals 600
Cab Fare 220
What is the amount of Fred's deduction before th
B) $2,570
Which of the following is a true statement?
A. Expenses associated with a "hobby" are never deductible.
B. The deductibility of an activity's expenses in excess of revenues depends upon whether the activity is primarily profit-motivated or a hobby as dete
B) The deductibility of an activity's expenses in excess of revenues depends upon whether the activity is primarily profit-motivated or a hobby as determined by facts and circumstances.
Glenn is an accountant who races stock cars as a hobby. This year Glenn was paid a salary of $80,000
from his employer and won $2,000 in various races. What is the effect of the racing activities on Glenn's
taxable income if Glenn has also incurred $4,200
B) increase in taxable income of $1,640.
Grace is employed as the manager of a sandwich shop. This year she earned a salary of $45,000 and
incurred the following expenses associated with her employment:
Subscriptions to food publications $300
Cooking Class "How to Make Better Subs" 250
Transport
E) None of these
Which of the following is a miscellaneous itemized deduction that is not subject to the 2 percent of AGI
floor?
A. gambling losses to the extent of gambling winnings.
B. fees for investment advice
C. employee business expenses
D. tax preparation fees
E. A
A) gambling losses to the extent of gambling winnings
Which of the following itemized deductions is not subject to the itemized deduction phase-out?
A. gambling losses.
B. mortgage interest
C. state income tax
D. charitable contributions
E. All of these are subject to the itemized deduction phase-out.
A) gambling losses.
Frieda is 67 years old and deaf. If Frieda files as a head of household, what amount of standard deduction
can she claim in 2013?
A. $10,450
B. $8,700
C. $3,900
D. $12,200
E. $1,500.
A) $10,450
Andres and Lakeisha are married and file joint. Andres is 72 years old and in good health. Lakeisha is 62
years old and blind. What amount of standard deduction can Andres and Lakeisha claim this year?
A. $14,600
B. $8,250
C. $8,700
D. $11,900
E. None of
A) $14,600
Which of the following is a true statement?
A. The standard deduction is increased for taxpayers who are blind or deaf at year end.
B. A married couple is only entitled to one addition to their standard deduction even if both spouses are
both over age 65.
D) Before any applicable phase-out, the deduction for personal and dependency exemptions is $3,900 times the number of exemptions.
Which of the following is a true statement?
A. Personal exemptions, but not dependency exemptions, are subject to phase-out.
B. A married filing joint taxpayer with AGI of $500,000 would not be able to deduct personal and
dependency exemptions.
C. At most
B) A married filing joint taxpayer with AGI of $500,000 would not be able to deduct personal and dependency exemptions.