Question 1

Which of the following is not considered a flow-through entity?

Accepted Answer

Sole proprietorship is not considered a flow-through entity as it is not a separate legal entity from its owner, and the owner reports all income and expenses on their personal tax return. B, C, and D are all considered flow-through entities because the income, deductions, and credits flow through to the owners' personal tax returns.

Question 2

What are the different types of income that may be reported on Schedule E?

Accepted Answer

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Question 3

What are the rules concerning the deductibility of travel as it relates to rental properties? How are travel expenses to and from rental properties calculated?

Accepted Answer

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Question 4

What must the owner of rental property do with respect to the rental activity to have it be considered: 1)material participation? 2)a trade or business?

Accepted Answer

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Question 5

Explain what is considered personal use of a rental property.

Accepted Answer

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Question 6

Meredith has a vacation rental house in the Sierra Mountains.During the year,she and her immediate family used the house for 12 days for a personal vacation.Meredith spent two more weekends 4 days in total)repairing the deck.The house was rented for 120 days.How should the cabin be categorized this year for tax purposes? Explain your answer.

Accepted Answer

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Question 7

Earl and Sandra own and operate a restaurant as an S corporation.Each is a 50% owner.The business reports the following results for the year: Revenue $ 480,000
Business expenses 398,000
Investment expenses 32,000
How do Earl and Sandra report these items for tax purposes on each of their individual returns?

Accepted Answer

Each owner reports half of the net business income ($82,000 total income - $32,000 investment expenses = $50,000 net income, so $25,000 each) and half of the investment expenses ($16,000 each) on their individual returns.

Question 8

What is meant by ordinary rental expenses and what criteria must be met to be deductible? Provide some examples of deductible rental expenses.For this question,assume no personal use of the rental property.

Accepted Answer

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Question 9

Define royalty income.What criteria determine which form is used and where the royalties are reported?

Accepted Answer

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Question 10

Meredith has a vacation rental house in the Sierra Mountains.During the year,she and her immediate family used the house for 12 days for a personal vacation.Meredith spent two more weekends 4 days in total)repairing the deck.Meredith also rented her house at fair value)to her brother and his family for 9 days in addition to her personal use).The house was rented for 180 days.How should the cabin be categorized this year for tax purposes? Explain your answer.

Accepted Answer

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Question 11

Explain the difference between the two methods available; the Tax Court's method and the IRS method,to allocate expenses between personal and rental use of property.

Accepted Answer

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Question 12

What criteria determine a personal and rental use property as personal/rental? How is net income or loss treated for tax purposes for a personal/rental property?

Accepted Answer

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Question 13

When reporting the income and expenses of a rental property,what determines the use of the Schedule C versus the Schedule E?

Accepted Answer

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Question 14

What is meant by a passive activity? Why is a rental activity classified as a passive activity? Can a rental activity be classified as active? Explain.

Accepted Answer

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Question 15

Roger,Ellen,Drew and Cindy are equal partners in a local pub.The pub reports the following items for the current year:  Each partner receives a Schedule K-1 with one-fourth of the preceding items reported to him/her.How must each individual report these results on his/her Form 1040?

Accepted Answer

Since each partner is an equal partner, they will each report one-fourth of the items listed on the Schedule K-1 they receive. Therefore, each partner will report $192,500 (one-fourth of $770,000) on Schedule E. Additionally, since the partners are receiving income from a business, they may also have deductible expenses related to that business. These expenses should be reported on Schedule A, and each partner will be able to deduct one-fourth of the reported expenses, which is $40,000. Therefore, the correct answer is B.

Question 16

What are the criteria that determine an amount as capital improvement rather than repair and maintenance expense? What is the proper tax treatment of a capital improvement for rental properties?

Accepted Answer

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Question 17

Explain the three categories that a rental activity may fall under if used for both personal and rental purposes.How are the categories determined?

Accepted Answer

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Question 18

Kirk and Amy live in Augusta,Georgia.Every year during the Masters Golf Tournament,they rent their primary personal residence for 10 days for $10,000 to a large corporation that uses it to entertain clients.The rest of year,they reside full-time in their home.How should Kirk and Amy treat the rental income? Explain.

Accepted Answer

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Question 19

Which of the following entityies)isare)considered flow-through entityies)?

Accepted Answer

The answer of Which of the following entityies)isare)considered flow-through entityies)?
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Quiz 8: Rental Property, royalties, and Income From Flow-Through Entities Line 17, form 1040, and Schedule E