Question 1

Which of the following taxes is deductible from adjusted gross income when paid by an individual taxpayer?
I.State income tax.
II.Property tax on property owned in Alberta,Canada.
​

Accepted Answer

Both state income tax and property tax on foreign property can be deductible from adjusted gross income for U.S. taxpayers, subject to certain limitations and conditions.

Question 2

Homer has AGI of $41,500,and makes the following donations in the current year:
What is Homer's charitable contribution deduction for the current year?

Accepted Answer

The answer of Homer has AGI of $41,500,and makes the...

Question 3

Wayne purchases a new home during the year,borrowing $725,000 from Century National Bank to finance the purchase.He also pays $7,250 in points and $4,500 in loan origination fees.During the year he pays interest of $71,000 on the loan.What is Wayne's allowable interest deduction?

Accepted Answer

The allowable interest deduction includes the $71,000 of interest paid on the loan plus any points paid at the time of closing, which in this case is $7,250. Therefore, Wayne's total allowable interest deduction is $71,000 + $7,250 = $78,250, which is option D.

Question 4

Which of the following properties from an income tax standpoint will be the best one for Juan to contribute to his favorite charity?

Accepted Answer

Juan should choose option B because when he contributed this stock, he would receive a deduction for the full FMV of the stock ($10,000), and he would avoid paying capital gains taxes on the appreciation ($3,000) in the stock since he held it for over a year. The other options either have a lower basis than FMV, resulting in a loss deduction, or have a higher basis than FMV, resulting in a potential capital loss or no tax benefit.

Question 5

Ronald pays the following taxes during the year:
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What is the amount Ronald can deduct for taxes as an itemized deduction for the year?

Accepted Answer

Ronald can deduct $3,900 for taxes as an itemized deduction for the year. This is calculated by adding up the state and local income tax ($2,500) and the property tax ($1,400).

Question 6

Linda's personal records for the current year show the following facts:
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Linda's AGI for the current year is $32,000.What is her charitable contribution deduction?

Accepted Answer

The charitable contribution deduction is limited to a percentage of the taxpayer's adjusted gross income (AGI). In this case, the deduction is limited to 30% of Linda's AGI, which is $9,800. The other answer choices are either too high or too low based on this limitation.

Question 7

Armando has AGI of $80,000 and makes the following charitable contributions:
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What is Armando's maximum charitable deduction in the current year?

Accepted Answer

The answer of Armando has AGI of $80,000 and makes...

Question 8

Certain interest expense can be carried forward if not deductible in the current year.Which of the following types of interest can be carried forward and deducted in a future year?

Accepted Answer

Interest on a loan to buy common stock can be carried forward if it is investment interest expense and not fully deductible in the current year due to the investment interest expense limitation.

Question 9

Baylen,whose adjusted gross income is $60,000,purchases a new home during the year,borrowing $300,000 from Century National Bank to finance the purchase.He also pays $3,000 in points and $4,500 in loan origination fees.During the year he pays interest of $14,000 on the loan.What is Baylen's allowable interest deduction?

Accepted Answer

The answer of Baylen,whose adjusted gross income is $60,000,purchases a...

Question 10

Linc,age 25,is single and makes an annual contribution to his church of $2,000.Linc always uses the standard deduction when filing his income tax return.Determine the amount of Linc's deduction for charitable contributions.

Accepted Answer

Since Linc uses the standard deduction, he cannot separately deduct his charitable contributions.

Question 11

Kristin has AGI of $120,000 in 2016 and 2017.She makes cash contributions to the American Cancer Society of $63,000 in 2016 and $65,000 in 2017.Kristin's charitable contribution carryover from 2017 is:

Accepted Answer

The answer of Kristin has AGI of $120,000 in 2016...

Question 12

Brock incurs $950 interest on his GMAC auto loan,$150 interest on a loan with Computer Express to buy a multi-media equipped computer (personal use),$500 interest on his credit cards,and $1,000 investment interest.Brock's net investment income is $650.Brock's deductible interest amount is

Accepted Answer

Investment interest expense is deductible to the extent of net investment income. Brock's net investment income is $650, which means he can deduct $650 of his $1,000 investment interest. The interest on the auto loan, computer loan, and credit cards is considered personal interest and is not deductible.

Question 13

Louise makes the following contributions during the current year:
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If Louise's gross income is $35,000,what is her allowable charitable contribution?

Accepted Answer

The answer of Louise makes the following contributions during the...

Question 14

Gerald purchases a new home on June 30,2017.During January 2018,he receives his real estate tax statement for calendar year 2017 showing $1,800 payable.Gerald pays the $1,800 on March 1,2018.The seller of the residence had credited Gerald with $900 of the 2017 taxes on the closing statement.What is the amount of real estate taxes that Gerald may claim as an itemized deduction in 2018?

Accepted Answer

Gerald can claim the $900 credit given to him by the seller on his closing statement. However, since he paid the remaining $900 of the 2017 taxes in 2018, he cannot claim it as a deduction in the 2017 tax year. Therefore, the total amount of real estate taxes he can claim as an itemized deduction in 2018 is $900.

Question 15

Randolph borrows $100,000 from his uncle's bank and invests the proceeds in various corporate bonds.He pays $9,000 in interest on the loan during the current year.The bonds produce $7,200 of interest income.Randolph reports adjusted gross income of $100,000 in the current year.If the interest income is his only investment income,how much of the interest expense is deductible by Randolph?

Accepted Answer

The interest expense is deductible to the extent of the investment income, which is $7,200.

Question 16

Hank,whose adjusted gross income is $100,000,purchases a new principal residence in the current year for $250,000.He borrows $220,000 from a local mortgage company and pays loan origination fees of $1,600.During the year,Hank pays $7,000 of interest on the loan.What is Hank's allowable interest deduction for the year?

Accepted Answer

Hank's allowable interest deduction for the year includes the $7,000 of interest he paid on the loan. The loan origination fees are not deductible as interest in the year they are paid but are typically amortized over the life of the loan. Therefore, only the actual interest paid on the mortgage is deductible, making $7,000 the correct answer.

Question 17

Carlyle purchases a new personal residence for $230,000.He makes a down payment of $30,000 and finances the balance at a very favorable interest rate.To obtain the favorable rate,points equal to 3% of the loan balance are paid at the closing.What amount of the points can Carlyle deduct in the current year?

Accepted Answer

The answer of Carlyle purchases a new personal residence for...

Question 18

Bender borrows $200,000 from his uncle's bank and invests the proceeds in various common stocks.He pays $9,000 in interest on the loan during the current year.The stocks produce $7,200 of dividend income,all taxed at the rate of 15%.Bender reports adjusted gross income of $100,000 in the current year.If the dividend income is his only investment income,how much of the interest expense is deductible by Bender?

Accepted Answer

The answer of Bender borrows $200,000 from his uncle's bank...

Question 19

Which of the following taxes is deductible from adjusted gross income when paid by an individual taxpayer?
I.State income tax.
II.State excise tax on gasoline.
​

Accepted Answer

Only statement I is correct. State income tax is deductible from adjusted gross income as an itemized deduction on Schedule A of Form 1040. State excise tax on gasoline is not deductible as an itemized deduction.

Question 20

Debra and Ken refinance their personal residence on July 1,2017.They borrow $96,000 over a 20-year period and paid points of $1,920.For 2017,what amount of the points is deductible?

Accepted Answer

The points paid for refinancing of a personal residence are not fully deductible in the year of payment. Instead, they must be spread over the life of the loan. In this case, since the loan is for 20 years, the deductible amount of points for 2017 would be $1,920/240 (20 years x 12 months) = $8. Therefore, the correct answer is B) $48.

Quiz 8: Taxation of Individuals

Which of the following taxes is deductible from adjusted gross income when paid by an individual taxpayer? I.State income tax. II.Property tax on property owned in Alberta,Canada.

Homer has AGI of $41,500,and makes the following donations in the current year: What is Homer's charitable contribution deduction for the current year?

Wayne purchases a new home during the year,borrowing $725,000 from Century National Bank to finance the purchase.He also pays $7,250 in points and $4,500 in loan origination fees.During the year he pays interest of $71,000 on the loan.What is Wayne's allowable interest deduction?

Which of the following properties from an income tax standpoint will be the best one for Juan to contribute to his favorite charity?

Ronald pays the following taxes during the year: What is the amount Ronald can deduct for taxes as an itemized deduction for the year?

Linda's personal records for the current year show the following facts: Linda's AGI for the current year is $32,000.What is her charitable contribution deduction?

Armando has AGI of $80,000 and makes the following charitable contributions: What is Armando's maximum charitable deduction in the current year?

Certain interest expense can be carried forward if not deductible in the current year.Which of the following types of interest can be carried forward and deducted in a future year?

Linc,age 25,is single and makes an annual contribution to his church of $2,000.Linc always uses the standard deduction when filing his income tax return.Determine the amount of Linc's deduction for charitable contributions.

Kristin has AGI of $120,000 in 2016 and 2017.She makes cash contributions to the American Cancer Society of $63,000 in 2016 and $65,000 in 2017.Kristin's charitable contribution carryover from 2017 is:

Brock incurs $950 interest on his GMAC auto loan,$150 interest on a loan with Computer Express to buy a multi-media equipped computer (personal use) ,$500 interest on his credit cards,and $1,000 investment interest.Brock's net investment income is $650.Brock's deductible interest amount is

Louise makes the following contributions during the current year: If Louise's gross income is $35,000,what is her allowable charitable contribution?

Which of the following taxes is deductible from adjusted gross income when paid by an individual taxpayer? I.State income tax. II.State excise tax on gasoline.

Debra and Ken refinance their personal residence on July 1,2017.They borrow $96,000 over a 20-year period and paid points of $1,920.For 2017,what amount of the points is deductible?

Quiz 8: Taxation of Individuals

Which of the following taxes is deductible from adjusted gross income when paid by an individual taxpayer? I.State income tax. II.Property tax on property owned in Alberta,Canada. ​

Homer has AGI of $41,500,and makes the following donations in the current year: What is Homer's charitable contribution deduction for the current year?

Wayne purchases a new home during the year,borrowing $725,000 from Century National Bank to finance the purchase.He also pays $7,250 in points and $4,500 in loan origination fees.During the year he pays interest of $71,000 on the loan.What is Wayne's allowable interest deduction?

Which of the following properties from an income tax standpoint will be the best one for Juan to contribute to his favorite charity?

Ronald pays the following taxes during the year: ​ What is the amount Ronald can deduct for taxes as an itemized deduction for the year?

Linda's personal records for the current year show the following facts: ​ Linda's AGI for the current year is $32,000.What is her charitable contribution deduction?

Armando has AGI of $80,000 and makes the following charitable contributions: ​ What is Armando's maximum charitable deduction in the current year?

Certain interest expense can be carried forward if not deductible in the current year.Which of the following types of interest can be carried forward and deducted in a future year?

Linc,age 25,is single and makes an annual contribution to his church of $2,000.Linc always uses the standard deduction when filing his income tax return.Determine the amount of Linc's deduction for charitable contributions.

Kristin has AGI of $120,000 in 2016 and 2017.She makes cash contributions to the American Cancer Society of $63,000 in 2016 and $65,000 in 2017.Kristin's charitable contribution carryover from 2017 is:

Brock incurs $950 interest on his GMAC auto loan,$150 interest on a loan with Computer Express to buy a multi-media equipped computer (personal use) ,$500 interest on his credit cards,and $1,000 investment interest.Brock's net investment income is $650.Brock's deductible interest amount is

Louise makes the following contributions during the current year: ​ If Louise's gross income is $35,000,what is her allowable charitable contribution?

Which of the following taxes is deductible from adjusted gross income when paid by an individual taxpayer? I.State income tax. II.State excise tax on gasoline. ​

Debra and Ken refinance their personal residence on July 1,2017.They borrow $96,000 over a 20-year period and paid points of $1,920.For 2017,what amount of the points is deductible?

Which of the following taxes is deductible from adjusted gross income when paid by an individual taxpayer? I.State income tax. II.Property tax on property owned in Alberta,Canada.

Ronald pays the following taxes during the year: What is the amount Ronald can deduct for taxes as an itemized deduction for the year?

Linda's personal records for the current year show the following facts: Linda's AGI for the current year is $32,000.What is her charitable contribution deduction?

Armando has AGI of $80,000 and makes the following charitable contributions: What is Armando's maximum charitable deduction in the current year?

Louise makes the following contributions during the current year: If Louise's gross income is $35,000,what is her allowable charitable contribution?

Which of the following taxes is deductible from adjusted gross income when paid by an individual taxpayer? I.State income tax. II.State excise tax on gasoline.