1. Which of the following types of itemized deductions are included in the category

1. Which of the following types of itemized deductions are included in the category

1. Which of the following types of itemized deductions are included in the category of miscellaneous expenses that are deductible only if the aggregate amount of
such expenses exceeds 2% of the taxpayer’s adjusted gross income? (Points : 5) unreimbursed employee business expenses charitable contributions medical expenses
home mortgage interest expense 2. Charlie makes the following gifts in the current year: $40,000 to his spouse, $30,000 to his church, $18,000 to his nephew, and
$25,000 to a friend. Assuming Charlie does not elect gift splitting with his wife, his taxable gifts in the current year will be (Points : 5) $13,000. $17,000.
$25,000. $40,000. 3. The unified transfer tax system (Points : 5) imposes a single tax upon transfers of property during an individual’s lifetime only. imposes a
single tax upon transfers of property during an individual’s life and at death. imposes a single tax upon transfers of property only at an individual’s death. none
of above. 4. A single taxpayer provided the following information for 2011: Salary $80,000 Interest on local government bonds (qualifies as a tax exclusion) 4,000
Allowable itemized deductions 13,000 What is taxable income? (Points : 5) $59,300 $63,300 $67,000 $67,300 5. In December of this year, Jake and Stockard, a married
couple, redeemed qualified Series EE U.S. Savings Bonds which they had purchased in January 2000. The proceeds were used to help pay for their daughter’s college
tuition. Jake and Stockard received proceeds of $8,000 representing principal of $5,000 and interest of $3,000. The qualified higher educational expenses they paid
this year totaled $6,000. What is the amount of interest income Jake and Stockard can exclude from their income this year? (Points : 5) $2,250 $2,500 $3,000 $5,000
6. CT Computer Corporation, an accrual basis taxpayer, sells service contracts on the computers it sells. At the beginning of January of this year, CT Corporation
sold contracts with service to begin immediately: One for three months $200 One for 20 months 800 One for 48 months 4,000 The amount of income CT Corporation must
report for this year is (Points : 5) $200. $1,000. $1,680. $5,000. 7. Ms. Marple’s books and records for 2011 reflect the following information: Salary earned this
year $65,000 Interest on savings account (credited to her account in 2011, withdrawn in 2012) 1,000 Interest on county bonds earned and collected in 2011 2,000
What is the amount Ms. Marple should include in her gross income in 2011? (Points : 5) $66,000 $67,000 $68,000 $65,000 8. Ricky has rented a house from Sarah since
last year. The rent is usually $900 per month, but Sarah reduced the monthly rent down to $800 for all twelve months this year in exchange for Ricky constructing
an addition to the house. The addition has a fair market value of $33,000. How much total rental income must Sarah report this year? (Points : 5) $9,600 $33,000
$42,600 $43,800 9. Cameron is the beneficiary of a $300,000 policy on the life of his mother. Cameron sells the policy to his brother, Parker, for $100,000. Parker
subsequently pays premiums of $55,000. Upon his mother’s death, how much of the insurance proceeds must Parker include in income? (Points : 5) $0 $55,000 $145,000
$300,000 10. Bella transfers a $150,000 life insurance policy on her life to a partnership in which she is a partner. Subsequent to Bella’s transfer, the
partnership pays $10,000 of premiums before Bella’s death. How much of the insurance proceeds of $150,000 is includable in income? (Points : 5) $-0- $75,000
$140,000 $150,000 11. Greg is the beneficiary of a $100,000 policy on the life of his mother. Greg gives the policy to his brother, Don. Don subsequently pays
premiums of $40,000. Upon his mother’s death, how much of the insurance proceeds must Don include in income? (Points : 5) $0 $40,000 $60,000 $100,000 12. David has
been diagnosed with cancer and is expected to live less than 18 months. David is covered by a life insurance policy with a $400,000 face amount. David cashes in
the policy early under a special option and receives 80% of the face amount or $320,000. In the year of collection, David will report (Points : 5) no income.
$80,000. $320,000. $400,000. 13. Dale gave property with a basis of $16,000 to Sarah when it had a FMV of $12,000. Sarah later sold the property for $22,000
resulting in a recognized gain of (Points : 5) $-0-. $4.000. $6,000. $12,000. 14. Kathleen received land as a gift from her grandfather. At the time of the gift,
the land had a FMV of $105,000 and an adjusted basis of $85,000 to Kathleen’s grandfather. One year later, Kathleen sold the land for $110,000. What was her gain
or (loss) on this transaction? (Points : 5) no gain or loss ($ 5,000) $20,000 $25,000 15. Michelle purchased her home for $150,000, and then added a garage costing
$25,000 and a new porch costing $5,000. Repairs to the home’s plumbing cost $1,000. The adjusted basis in the home is (Points : 5) $150,000. $151,000. $180,000.
$181,000. 16. Jordan paid $30,000 for equipment two years ago and has claimed depreciation deductions of $15,600 for the two years. The cost of repairs during the
same time period was $2,000 while a major overhaul which extended the life of the equipment cost $7,000. What is Jordan’s adjusted basis in the equipment at the
end of the two-year period? (Points : 5) $14,400 $16,400 $21,400 $30,000 17. During 2011 and 2012, Danny pays property taxes of $3,500 each year on a piece of
land. During 2011, the land is vacant and unproductive. In 2012 Danny uses the land as a parking lot and generates $16,000 in income. Which of the following is
true regarding the property taxes? (Points : 5) Capitalize $3,500 each year. Deduct $3,500 each year. Capitalize $3,500 in 2011 and deduct $3,500 in 2012. Either B
or C is acceptable. 18. Carole owns 75% of Pet Foods, Inc. As CEO, Carole must travel extensively and does so on the company jet. In addition, she also uses the
jet to take several personal vacations. Carole reports the value of the personal use of the jet, $140,000, as additional compensation. Which of the following is
true in terms of the corporation? (Points : 5) The corporation includes $140,000 as miscellaneous income. The $140,000 has no impact on the corporation’s income
tax. The corporation takes a deduction of $140,000 for compensation expense. The corporation takes a deduction of $140,000 for dividend expense. 19. Which of the
following expenditures is tax deductible? (Points : 5) capital expenditures expenses related to tax-exempt income expenses related to a trade or business expenses
that are illegal or in violation of public policy 20. During the current year, Ivan begins construction of an office building and a hotel. He incurs $10,000 in
property taxes during the construction of the office building and $15,000 for the hotel. Which of the following statements is true of the property taxes during the
construction period? (Points : 5) Ivan must capitalize the property taxes on both properties each year if an election is made. Ivan must deduct the property taxes
on both properties each year. Ivan may elect to capitalize the property taxes on one of the properties while deducting the property taxes on the other for each
year. Ivan may elect to capitalize the property taxes for the properties in one year and then deduct the property taxes on the properties the next year. 21. Alan,
who is a security officer, is shot while on the job. As a result, Alan suffers from a leg injury and must spend 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 of 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 considering
limitations based on AGI) will be (Points : 5) $6,000. $10,100. $7,000. $7,700. 22. Linda had a swimming pool constructed at her house. Her physician advised and
prescribed to her that the pool would slow the effects of her degenerative disease. The pool was not suitable for recreational use. Prior to the construction of
the pool, the fair market value of her house was $172,000. After the construction of the pool, the appraised fair market value of the house was $181,000. The cost
of the pool was $13,000. What is the amount of Linda’s qualified medical expense (before considering limits based on AGI)? (Points : 5) $0 $4,000 $9,000 $13,000
23. Leo spent $6,600 to construct an entrance ramp and to widen doorways in his personal residence to make the home accessible for his wife, who is disabled and
confined to a wheelchair. The $6,600 expenditure increased the value of the residence by $2,000. How much of the $6,600 is a deductible medical expense? (Points :
5) $0 $2,000 $4,600 $6,600 24. Mitzi’s medical expenses include the following: Medical premiums $10,850 Doctors fees 2,000 Hospital fees 3,350 Prescription drugs
600 Eyeglasses 350 General purpose vitamins 100 Mitzi’s AGI for the year is $33,000. None of the medical costs are reimbursed by insurance. After considering the
AGI floor, Mitzi’s medical expenses total (Points : 5) $13,725. $14,675. $13,850. $17,150. 25. In the current year, Drew paid $6,500 for a piece of equipment to be
used in his business. In addition, he had to pay a state sales tax of $500 on the purchase. How should Drew handle the sales tax? (Points : 5) as an itemized
deduction on Schedule A as a tax expense deduction on Schedule C Add the tax to the basis of the equipment. Disregard sales tax as it is no longer deductible. 26.
Tom and Shawn own all of the outstanding stock of Brady Corporation. This year, Brady generates taxable income of $20,000 from active business operations, and also
reports investment interest of $22,000 and losses of $28,000 from a passive activity. As a result, Brady Corporation reports (Points : 5) net income of $42,000.
interest income of $22,000 and a passive loss carryover of $8,000. business income of $20,000 and a passive loss carryover of $6,000. business income of $20,000,
interest income of $22,000, and a passive loss carryover of $28,000. 27. An individual is considered to materially participate in an activity if any of the
following tests are met with the exception of (Points : 5) the individual participates in the activity for more than 500 hours during the year. the individual
participates in the activity for 75 hours during the year, and that participation is more than any other individual’s participation for the year. the individual
has materially participated in the activity in any five years during the immediate preceding 10 taxable years. the individual’s participation in the activity for
the year constitutes substantially all of the participation in the activity by all individuals. 28. Nicole has a weekend home on Pecan Island that she purchased in
2005 for $250,000. Recently, the home was appraised at $260,000. After the appraisal, a hurricane hit Pecan Island, severely damaging Nicole’s home. An appraisal
placed the value of the home at $140,000 after the hurricane. Because of its prohibitive cost, Nicole had no hurricane insurance. Before any reductions or
limitations, Nicole’s casualty loss amount is (Points : 5) $0. $10,000. $120,000. $140,000. 29. During the year, Mark reports $90,000 of active business income
from his law practice. He also owns two passive activities. From Activity A, he earns $20,000 of income, and from Activity B, he incurs a $30,000 loss. As a
result, Mark (Points : 5) reports AGI of $80,000. reports AGI of $90,000 with a $10,000 loss carryover. reports AGI of $90,000 with a $30,000 loss carryover.
reports AGI of $110,000 with a $30,000 loss carryover. 30. A fire totally destroyed office equipment and furniture which Monica uses in her business. The equipment
had an adjusted basis of $15,000 and a FMV of $10,000 before the fire. The furniture’s adjusted basis was $5,000 and its FMV was $2,000 before the fire. Monica’s
AGI for the year is $60,000. Monica does not have insurance on the destroyed assets. How much is Monica’s deductible casualty loss? (Points : 5) $5,900 $12,000
$13,900 $20,000 31. Donald takes a new job and moves to a new residence. The distances are as follows: Old residence to new job 70 miles Old residence to old job 8
miles By how many miles does the move exceed the minimum distance requirement for the moving expense deduction? (Points : 5) 12 miles 20 miles 62 miles none of the
above 32. Gayle, a doctor with significant investments in the stock market, traveled on a cruise ship to attend a general business seminar that was held at a hotel
in a foreign country. The cost of the cruise for four days is $2,500. Gayle can deduct (Points : 5) $0. $1,250. $2,000. $2,500. 33. Norman traveled to San
Francisco for four days on vacation, and while there spent another two days conducting business for his employer. Norman’s plane fare for the trip was $500; meals
cost $150 per day; hotels cost $300 per day; and a rental car cost $150 per day that was used for all six days. Norman was not reimbursed by his employer for any
expenses. Norman’s AGI for the year is $40,000 and he did not have any other miscellaneous itemized deductions. Norman may deduct (after limitations) (Points : 5)
$250. $800. $1,050. $1,200. 34. Allison, who is single, incurred $4,000 for unreimbursed employee expenses, $10,000 for mortgage interest and real estate taxes on
her home, and $500 for investment counseling fees. Allison’s AGI is $80,000. Allison’s allowable deductions from AGI are (after limitations have been applied)
(Points : 5) $10,500. $12,900. $14,000. $14,500. 35. Brett, an employee, makes the following gifts, none of which are reimbursed: Brett’s supervisor $30 Brett’s
secretary 40 4 customers ($27 each) 108 Gift wrapping customer gifts 10 What amount of the gifts is deductible before application of the 2% of AGI floor for
miscellaneous itemized deductions? (Points : 5) $135 $150 $170 $180

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