Question 1

In 2018, Sean, who is single and age 44, received $55,000 of gross income and had $5,000 of deductions for AGI and $5,600 of itemized deductions. Sean's taxable income is

Accepted Answer

Sean's taxable income is calculated as follows: Gross income ($55,000) minus deductions for AGI ($5,000) equals AGI ($50,000). The standard deduction for a single filer in 2018 is $12,000, which is greater than his itemized deductions ($5,600). Therefore, taxable income is $50,000 - $12,000 = $38,000.

Question 2

Expenses incurred in a trade or business generally are deductions for AGI.

Accepted Answer

Expenses incurred in a trade or business are generally deductible for AGI, meaning they can reduce your gross income before calculating your taxable income. This can include expenses such as supplies, labor costs, rent, and utilities. However, there are limitations and rules for specific types of expenses and businesses, so it is important to consult with a tax professional or refer to IRS guidelines for guidance.

Question 3

Jill is considering making a donation to her church. She wants to give $50,000 for the new church building. She has some stock with a FMV of $50,000 and an adjusted basis of $10,000 that she has held for 3 years. She is planning to sell the stock and donate the $50,000 proceeds to the church. What should she consider before taking that action?

Accepted Answer

The answer of Jill is considering making a donation to...

Question 4

Generally, deductions for adjusted gross income on an individual's tax return include all the following types of expenses except those

Accepted Answer

Gambling losses are not deducted to arrive at adjusted gross income; they are itemized deductions, limited to the extent of gambling winnings.

Question 5

For non- cash charitable donations, an appraisal will be required for donations valued at more than

Accepted Answer

An appraisal is required for non-cash charitable donations valued at more than $5,000 to substantiate the value of the donation for tax purposes.

Question 6

According to the tax formula, individuals can deduct the greater of for AGI deductions or from AGI deductions.

Accepted Answer

The answer of According to the tax formula, individuals can...

Question 7

A change to adjusted gross income cannot affect a taxpayer's itemized deductions.

Accepted Answer

Adjusted gross income (AGI) can impact a taxpayer's itemized deductions because some deductions, such as medical expenses and charitable contributions, are subject to AGI limitations or phaseouts. Therefore, a change to AGI can affect how much a taxpayer can deduct for these expenses.

Question 8

Adjusted gross income (AGI) is the basis for a number of phase- outs of deductions.

Accepted Answer

Adjusted gross income (AGI) is used as the basis for phase-outs of many deductions, such as the deduction for IRA contributions and the deduction for student loan interest.

Question 9

On Form 1040, deductions for adjusted gross income include the amounts paid for all of the following except

Accepted Answer

The answer of On Form 1040, deductions for adjusted gross...

Question 10

A single taxpayer has adjusted gross income of $325,000 and has total itemized deductions in various categories totaling $20,000. The taxpayer discovers some additional deductions for AGI. The extra deductions can not affect his itemized deductions.

Accepted Answer

The answer of A single taxpayer has adjusted gross income...

Question 11

Which of the following is not required substantiation for a noncash charitable contribution?

Accepted Answer

The use of the donation by the charitable organization is not required for substantiation of a noncash charitable contribution. The other options are necessary for proper documentation.

Question 12

Itemized deductions are deductions for AGI.

Accepted Answer

The answer of Itemized deductions are deductions for AGI....

Question 13

Special documentation rules apply to donation of

Accepted Answer

Special documentation rules apply to donation of airplanes, boats, and motor vehicles.

Question 14

Expenses incurred in connection with conducting a trade or business activity or in connection with production of income are generally deductible, but personal expenses are generally not deductible.

Accepted Answer

This is a basic rule of tax law. Expenses that are necessary and ordinary for conducting a trade or business or for producing income can be deducted from taxable income, while personal expenses, such as expenses for personal living, are generally not deductible.

Question 15

Self- employed individuals may claim, as a deduction for adjusted gross income, 50 percent of their

Accepted Answer

Self-employed individuals can deduct 50% of their self-employment tax as an adjustment to income on their tax return.

Question 16

Individuals are generally allowed to deduct the greater of the standard deduction or itemized deductions.

Accepted Answer

This statement is true. Taxpayers can choose to either take the standard deduction or itemize their deductions, whichever results in a greater deduction amount.

Question 17

A taxpayer can deduct a reasonable amount for small out- of- pocket (i.e., cash) donations.

Accepted Answer

The answer of A taxpayer can deduct a reasonable amount...

Question 18

Charles is a single person, age 35, with no dependents. In 2018, Charles has gross income of $75,000 from his sole proprietorship. Charles also incurs $80,000 of deductible business expenses in connection with his proprietorship. He has interest and dividend income of $22,000. Charles has $7,000 of itemized deductions. Charles's taxable income is

Accepted Answer

The answer of Charles is a single person, age 35,...

Question 19

Deductions for adjusted gross income include all of the following except

Accepted Answer

Unreimbursed employee business expenses are not deductible for adjusted gross income; they are considered miscellaneous itemized deductions subject to the 2% AGI floor.

Question 20

A deduction will be allowed for an expenditure unless the Internal Revenue Code specifically disallows it.

Accepted Answer

The answer of A deduction will be allowed for an...

Quiz 16: Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals