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Exam 6: Individual for Agi Deductions

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Question 31

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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 (not purchased through an exchange) 2) The employer portion of self-employment tax paid 3) Penalty on early withdrawal of funds from a certificate of deposit

A) Numbers 1 and 2 only.
B) Numbers 1 and 3 only.
C) Numbers 2 and 3 only.
D) None of these expenses are deductible for AGI.
E) All of these expenses are deductible for AGI.

F) A) and C)
G) A) and B)

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Question 32

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On the sale of a passive activity,any suspended losses can be used to offset income from:

A) other passive activities
B) capital gains
C) interest income
D) wages and tips
E) All of the choices are correct

F) C) and D)
G) B) and C)

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Question 33

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When a taxpayer experiences a net loss from a nonresidence (rental property) :

Don owns a condominium near Orlando,California.This year,he incurs the following expenses in connection with his condo:   $\begin{array}{l}\begin{array}{l}\text { Insurance } \\\text { Mortgage interest } \\\text { Property taxes } \\\text { Repairs and maintenance } \\\text { Utilities } \\\text { Depreciation }\end{array}\begin{array}{r}\$ 1,300 \\10,000 \\3,000 \\900 \\2,200 \\12,000\end{array}\end{array}$ During the year,Don rented the condo for 70 days and he received $17,400 of rental receipts.He did not use the condo at all for personal purposes during the year.Don is considered to be an active participant in the property.Don's AGI from all sources other than the rental property is $140,000.Don does not have passive income from any other sources.What is Don's AGI?

Which of the following statements regarding the IRS and/or Tax Court approaches to allocating home-related expenses between rental use and personal use is correct?

A taxpayer's at-risk amount in an activity is increased by:

Last year Henry borrowed $15,000 to help pay for his dependent daughter's college tuition.This year Henry paid $2,800 of interest on the loan.How much,if any,interest can Henry deduct if he files single with AGI of $72,500?

Daniela retired at the age of 65.The current balance in her Roth IRA is $200,000.Daniela established the Roth IRA 10 years ago.Through a rollover and annual contributions Daniela has contributed $80,000 to her account.If Daniela receives a $50,000 distribution from the Roth IRA,what amount of the distribution is taxable?

Tita,a married taxpayer filing joint,has a $700,000 business loss from her S corporation.Assume the $700,000 loss satisfies the basis,at-risk,and passive loss rules.Assume also that neither she nor her husband has any other business losses or business income.How much of the $700,000 loss may she deduct this year?

Carmello and Leslie (ages 34 and 35,respectively)are married and want to contribute to a Roth IRA.In 2018,their AGI totaled $42,000.Of the $42,000,Carmello earned $35,000 and Leslie earned $7,000.How much can each spouse contribute to a Roth IRA if they file jointly? How much can each spouse contribute to a Roth IRA if they file separately?

Rayleen owns a condominium near Orlando,Florida.This year,she incurs the following expenses in connection with her condo: $\begin{array}{l}\begin{array}{lll}\text { Insurance } \\\text { Mortgage interest} \\\text { Property taxes } \\\text { Repairs and maintenance } \\\text { Utilities } \\\text { Depreciation }\end{array}\begin{array}{lll}1250\\7,000 \\2,100 \\800 \\2,300 \\9,000\end{array}\end{array}$ During the year,Rayleen rented the condo for 130 days and she received $25,000 of rental receipts.She did not use the condo at all for personal purposes during the year.Rayleen is considered to be an active participant in the property.Rayleen's AGI from all sources other than the rental property is $130,000.Rayleen does not have passive income from any other sources.What is Rayleen's AGI?

Alexandra operates a garage as a sole proprietorship.Alexandra also owns a half interest in a partnership that operates a gas station.This year Alexandra paid or reported the following expenses related to her garage and other property.Determine Alexandra's AGI for 2018. $\begin{array} { l r } \text { Revenue from auto repairs } & \$ 143,930 \\\text { Salaries paid to mecharnics } & 72,210 \\\text { Supplies and tools } & 18,500 \\\text { Revernues frann gas station partnership (Alexarndra's share) } & 125,000 \\\text { Expenses from gas station partnership (Alexandra's share) } & 95,200 \\\text { Self-employment tax (1/2 is employer's share) } & 12,702\end{array}$

Max,a single taxpayer,has a $270,000 loss from his sole proprietorship.How much of this loss is deductible after considering the excess business loss rules?

Kaylee is a self-employed investment counselor who also owns a rental property.This year,she collected $85,000 in fees and paid the following expenses: $\begin{array}{l}\begin{array}{lll}\text { Health insurance prernums } \\\text { Life insurance premiums (whole life) } \\\text { Books on irvesting } \\\text { Repairs of the rental property } \\\text { Advertising for irvestrnent clients } \\\text { state income taxes } \\\text { Self-employment tax (1/2 is employer share) }\end{array}\begin{array}{lll}\$4,200 \\1,900 \\200 \\450 \\1,770 \\4,300 \\11,73\end{array}\end{array}$ Kaylee files single with one personal exemption.Calculate her adjusted gross income.

Judy,a single individual,reports the following items of income and loss: $\begin{array}{lccc} \text { salary } & \$ 120,000\\ \text { Loss Fromrental property } & ( 40,000 )\end{array}$ Judy owns 100% of the rental property and actively participates in the rental of the property.Calculate Judy's AGI.

Tyson (48 years old) owns a traditional IRA with a current balance of $50,000.The balance consists of $30,000 of deductible contributions and $20,000 of account earnings.Convinced that his marginal tax rate will increase in the future,Tyson receives a distribution of the entire $50,000 balance of his traditional IRA and he immediately contributes the $50,000 to a Roth IRA.Assuming his marginal tax rate is 24%,what amount of penalty,if any,must Tyson pay on the distribution from the traditional IRA?

Mercury is self-employed and she uses a room in her home as her principal place of business.She meets clients there and doesn't use the room for any other purpose.The size of her home office is 400 square feet.The size of her entire home is 2,400 square feet.During the year,Mercury received $6,300 of gross income from her business activities and she reported $2,500 of business expenses unrelated to her home office.For her entire home in the current year,she reported $3,500 of mortgage interest,$1,000 of property taxes,$600 of insurance,$500 of utilities and other operating expenses,and $3,200 of depreciation expense.What amount of home office expenses is Mercury allowed to deduct in 2018? Indicate that amount and type of expenses she must carry over to the next year,if any.

Jorge owns a home that he rents for 360 days and uses for personal purposes for five days.Jorge is not required to allocate expenses associated with the home between rental and personal use.

Given that losses from passive activities can only offset income from passive activities unless the passive activity is sold,what types of activities are not considered to be passive? Name at least three ways a taxpayer may be treated as an active participant in an activity.

When allocating expenses of a vacation home between personal use and rental use,the amount of depreciation expense allocated to the rental use is always the ratio of rental days over rental days plus personal use days.