Quiz: Unnamed Quiz 19.03.

2021, 18:11

Unnamed Quiz
! This is a preview of the published version of the quiz

Started: Mar 19 at 9:10am

Quiz Instructions

Question 1 1 pts

Which of the following is not true about capital assets?

Real property used in a trade or business is not a capital asset.

Capital losses may be carried back for 3 years to offset capital gains in those years.

Net long-term capital gains are granted preferential tax treatment.

Individual taxpayers may deduct net capital losses of up to $3,000 per year.

Shares of stock held for investment are capital assets.

Question 2 1 pts

An artist's painting is not a capital asset when held by the artist.

True

False

Question 3 1 pts

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A taxpayer's personal automobile is a capital asset.

True

False

Question 4 1 pts

Accounts receivable are capital assets.

True

False

Question 5 1 pts

Which of the following is a capital asset?

A literary work held by the author

Real estate held by a developer

A taxpayer's principle residence

A truck used in a taxpayer's business

None of these

Question 6 1 pts

Which of the following is a capital asset?

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Inventory held by a manufacturer

Accounts receivable held by a dentist

All property owned by a taxpayer other than property specifically noted in the law as an
exception

Depreciable property and real estate used in a trade or business

Question 7 1 pts

Which one of the following is a capital asset?

Accounts receivable

Copyright held by the author

Securities held for investment

Inventories

All of these are capital assets

Question 8 1 pts

Sol purchased land as an investment on January 12, 2017 for $85,000. On January 31, 2020
Sol sold the land for $90,000 cash. What is the nature of the gain or loss?

Long-term capital loss

Long-term capital gain

Short-term capital gain

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Short-term capital loss

None of these

Question 9 1 pts

If the following are capital assets, mark with a “Yes.” If they are not capital assets, mark with
a “No.”

a. A taxpayer’s personal jet ski ______

b. Ford Motor Credit Company bond held by an investor ______
c. A baseball for sale at [Link] ______
d. J.K. Rowling’s personal copy of her original manuscript of
Harry Potter and the Sorcerer’s Stone ______
e. An antique grandfather clock inherited from the taxpayer’s aunt ______

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Question 10 1 pts

The following are owned by Robert. Indicate which are capital assets.

a. Rental property at 123 Main Street ______

b. Tables and chairs sold in his furniture business ______

c. The cash register used in his furniture business ______

d. A 1972 Porsche 916 ______

e. The rights to Taylor Swift’s song, “Blank Space” ______

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Question 11 1 pts

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What is a capital asset?

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Question 12 1 pts

Sol purchased land as an investment on February 12, 2019 for $85,000. On January 31, 2020,
Sol sold the land for $90,000 cash. What is the nature of the gain or loss?

Long-term capital loss

Long-term capital gain

Short-term capital gain

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Short-term capital loss

None of these

Question 13 1 pts

Emily sold the following investments during the year:

Stock Date Purchased Date Sold Sales Price

a. 1,000 shares Dot Com Co. 03-21-2009 02-04-2020 $20,000

b. 500 shares Big Box Store 05-19-2019 01-22-2020 $8,200

c. 300 shares Lotta Fun, Inc. 10-02-2019 09-21-2020 $3,000

d. 700 shares Local Gas Co. 06-17-2019 11-11-2020 $14,000

For each stock, calculate the amount and the nature of the gain or loss.

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Question 14 1 pts

The first day a capital asset acquired on August 31, 2019 may be sold for long-term capital
gain or loss treatment is September 1, 2020.

True

False

Question 15 1 pts

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If a capital asset acquired on October 27, 2018 is sold on April 30, 2020 for a gain, the gain is
a long-term capital gain.

True

False

Question 16 1 pts

If a capital asset acquired August 5, 2019 is sold on February 6, 2020, any gain is a short-
term capital gain.

True

False

Question 17 1 pts

Which of the following sales results in a short-term gain/loss?

A capital asset bought on June 30, 2019 and sold June 20, 2020.

A capital asset bought on July 25, 2019 and sold August 19, 2020.

A capital asset bought on September 12, 2013 and sold August 19, 2020.

A capital asset bought on August 15, 2019 and sold August 16, 2020.

All of these are long-term gains/losses.

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Question 18 1 pts

Indicate whether a gain or loss realized in each of the following situations would be long-
term or short-term by putting an “X” on the appropriate blank line:

Date Acquired Date Sold Long-term Short-term

a. June 6, 2015 January 20, 2020 ________ ________

b. April 18, 2020 July 13, 2020 ________ ________

c. May 14, 2019 May 9, 2020 ________ ________

d. July 12, 2019 August 15, 2020 ________ ________

e. January 6, 2018 June 20, 2020 ________ ________

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Question 19 1 pts

The basis of property received as an inheritance is generally equal to the fair market value at
the date of death.

True

False

Question 20 1 pts

If property is received from a decedent, the taxpayer who inherits the property has the same
basis in the property as the decedent.

True

False

Question 21 1 pts

If a taxpayer is relieved of a liability on the disposition of property, the amount of the liability
should be included in the amount realized on the sale or other disposition.

True

False

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Question 22 1 pts

If property is inherited by a taxpayer,

To the recipient, the basis for the property is the same as the basis to the decedent.

At sale date, the basis of the property to the recipient differs depending on whether the
property was sold at a gain or a loss.

At sale date, the recipient will not have a gain or loss even if the recipient has held the
property for more than a year.

In general, the basis to the recipient is the fair market value at the decedent’s date of
death.

Question 23 1 pts

Jessie purchased land as an investment on January 12, 2015 for $80,000. On January 31,
2020, Jessie sold the land for $33,000 cash. In addition, the purchaser assumed the mortgage
of $70,000 on the land. What is the amount of the realized gain or loss on the sale?

$47,000 loss

$15,000 gain

$23,000 gain

$10,000 loss

None of these

Question 24 1 pts

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An asset has an original basis of $45,000 and depreciation has been claimed for the asset in
the amount of $20,000. If the asset's adjusted basis is $40,000, what is the amount of capital
improvements that have been made to the asset?

$5,000

$10,000

$15,000

$20,000

None of these

Question 25 1 pts

Carlos bought a building for $110,000 in 2016. He added an addition to the building for
$26,000 in 2017. In 2020, he sold it for $212,000. What was his long-term capital gain
(ignore depreciation)?

$0

$26,000

$73,000

$76,000

$102,000

Question 26 1 pts

An asset's adjusted basis is computed as:

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Original basis + capital improvements − accumulated depreciation.

Original basis − capital improvements + accumulated depreciation.

Original basis + capital improvements + accumulated depreciation.

Original basis + capital improvements + gain or loss realized.

None of these

Question 27 1 pts

The adjusted basis of an asset may be determined by the:

Selling price + gain realized.

Selling price − gain realized.

Selling price + capital improvements − accumulated depreciation.

Original basis + capital improvements − selling price.

None of these

Question 28 1 pts

Bennett purchased a tract of land for $20,000 in 2014 when he heard that a new highway was
going to be constructed through the property and the land would soon be worth $200,000.
The highway project was abandoned in 2020 and the value of the land fell to $15,000.
Bennett can claim a loss in 2020 of:

$0

$5,000

$165,000

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$180,000

None of these

Question 29 1 pts

Job purchased land as an investment on January 12, 2017, for $80,000. On January 31, 2020,
Job sold the land for $33,000 cash. In addition, the purchaser assumed the mortgage of
$70,000 on the land. What is the amount realized (not gain realized) on the sale of the land?

$10,000

$23,000

$95,000

$103,000

None of these

Question 30 1 pts

For purposes of determining the adjusted basis of a capital asset at the time of its sale,

Capital improvements are added to the basis.

Ordinary repairs reduce the adjusted basis.

Accumulated depreciation is added to the basis.

The basis does not include costs such as title insurance and escrow fees related to the
initial purchase.

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Question 31 1 pts

Nick received a gift of stock from his father. Nick's father had purchased the stock 2 years
earlier and his father's basis in the stock was $30,000. On the date of the gift, the stock had a
fair market value of $25,000.

If Nick sells the stock for $33,000, calculate the amount of Nick's gain or loss on the
a.
transaction.

If Nick sells the stock for $22,000, calculate the amount of Nick's gain or loss on the
b.
transaction.

If Nick sells the stock for $27,000, calculate the amount of Nick's gain or loss on the
c.
transaction.

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Question 32 1 pts

Bev owns an apartment complex she purchased 10 years ago for $480,000 with a $80,000
cash down payment accompanied by a $400,000 loan. Bev has made $70,000 of capital
improvements on the complex and her depreciation claimed on the building to date is
$100,000. Calculate Bev's adjusted basis in the building.

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Question 33 1 pts

Karen received a stock portfolio upon the death of her grandmother. The stock originally cost
her grandmother $32,000, but was worth $250,000 when she died. What is Karen's tax basis
in the stock portfolio? Explain.

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Question 34 1 pts

Net short-term capital gains may be offset by net long-term capital losses.

True

False

Question 35 1 pts

Currently, long-term capital gains are afforded preferential tax treatment to individuals.

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True

False

Question 36 1 pts

Taxpayers are required to offset net short-term capital losses with net long-term capital gains.

True

False

Question 37 1 pts

Which of the following is true about capital gains?

Short-term capital gains are not netted with other capital gains and losses.

Long-term capital gains are subject to special tax treatment.

Long-term capital gains are never taxed.

Net short-term capital gains are not netted with net long-term capital losses.

None of these

Question 38 1 pts

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For the current year, Susan had salary income of $20,000. In addition, she reported the
following capital transactions during the year:

Long-term capital gain $7,000

Short-term capital gain 3,000

Long-term capital loss (2,000)

Short-term capital loss (5,000)

There were no other items includable in her gross income. What is the amount of her adjusted
gross income for the current year?

$19,000

$23,000

$24,000

$25,000

None of these

Question 39 1 pts

Robert and Becca file jointly. They have taxable income of $60,000 in 2020 (before
considering any capital gains or losses). They have a long-term capital gain of $28,000 and a
long-term capital loss of $17,000 on sales of stock in the current year. What will their capital
gains tax be in the current year?

$0

$1,650

$2,200

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$4,200

None of these

Question 40 1 pts

In December 2020, Ben and Jeri (married filing jointly) have a long-term capital gain of
$55,000 on the sale of stock held for 4 years. They have no other capital gains and losses for
the year. After the standard deduction, their ordinary income for the year, before the capital
gain, is $70,000, making their total income for the year $125,000. In 2020, married taxpayers
who file jointly pay tax of $8,008 on the first $70,000 of ordinary taxable income and 15% on
long-term capital gains above $80,000. What is their total tax liability?

$16,258.00

$14,949.50

$14,758.00

$19,080.00

Question 41 1 pts

At the end of the current year, Falstaff, a single taxpayer, sold for $4,800 General Martin
stock that was purchased 5 months ago for $4,000. He also sold Cedar stock for $6,000 at the
same time. The Cedar stock cost $4,000, 2 years ago. In addition, Falstaff has a short-term
capital loss of $500 on the sale of silver.

a. Calculate the amount of Falstaff's net short-term and net long-term capital gain or loss.

If Falstaff has a net capital gain, what is the maximum rate at which the gain will be
b.
taxed?

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Question 42 1 pts

In October of 2020, Mike sold a share of Berkshire-Hathaway for $73,000. He had acquired it
several years ago at a cost of $42,000. He also sold Microsoft stock he had held for 3 years at
a gain of $17,000. He had a short-term $2,000 loss on the sale of stock of a start-up
technology company. He has $85,000 in taxable income before capital transactions are taken
into account.

Assuming Mike is single with no dependents, what is the amount of Mike’s tax on the capital
transactions?

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Question 43 1 pts

There is no limit on the amount of capital losses that an individual may deduct against
ordinary income.

True

False

Question 44 1 pts

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Martha has a net capital loss of $17,000 and other ordinary taxable income of $45,000 for the
current year. What is the amount of Martha's capital loss carryforward?

$0

$10,000

$14,000

$17,000

None of these

Question 45 1 pts

In 2020, Paul, a single taxpayer, has taxable income of $30,000 exclusive of capital gains and
losses. Paul incurred a $1,000 short-term capital loss and a $5,000 long-term capital loss.
What is the amount of his long-term capital loss carryover to 2021?

$0

$2,000

$3,000

$5,000

None of these

Question 46 1 pts

For the current tax year, Morgan had $25,000 of ordinary income. In addition, he had an
$1,700 long-term capital loss and a $1,600 short-term capital loss. What will be the amount of
Morgan's capital loss carryforward to the next year?

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$0

$300

$500

$3,000

$3,500

Question 47 1 pts

Martha has a net capital loss of $20,000 and other ordinary taxable income of $48,000 for the
current tax year. What is the amount of Martha's taxable income after deducting the allowed
capital loss?

$28,000

$38,000

$42,000

$45,000

None of these

Question 48 1 pts

In the current year, Marc, a single taxpayer, has ordinary income of $35,000. In addition, he
has $3,000 in short-term capital gains, short-term capital losses of $6,000, and long-term
capital gains of $7,000. What is Marc's adjusted gross income (AGI) for the current year?

$32,000

$39,000

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$36,000

$34,000

Question 49 1 pts

In the current year, Estes has net short-term capital losses of $3,000, a net long-term capital
loss of $45,000, and taxable income from wages of $35,000.

a. Calculate the amount of Estes' deduction for capital losses for the current year.

Calculate the amount and nature (short-term or long-term) of his capital loss
b.
carryforward.

c. For how many years may Estes carry the unused loss forward?

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Question 50 1 pts

During 2020, William sold the following capital assets:

Description Date Purchased Date Sold Sales Price

ABC Stock 05-05-2016 08-03-2020 $500

123 Bond Fund 11-07-2019 02-25-2020 $2,000

Dune buggy 06-12-2015 09-29-2020 $2,400

Land held as an
10-09-2007 04-21-2020 $4,000
investment

Calculate the following:

a. Total short-term capital gain/loss realized for tax purposes

b. Total long-term capital gain/loss realized for tax purposes
c. Deductible capital gain/loss
d. The amount and nature (short-term or long-term) of his capital loss carryforward
e. Assuming that William has no capital gain or loss for 2021, how much can he deduct in
2021 and what is the amount and nature of any carryforward to 2022?

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Question 51 1 pts

The exclusion of gain on the sale of a personal residence may be elected only by a taxpayer
who has owned three or more residences.

True

False

Question 52 1 pts

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If not entirely used in one sale, the unused portion of the $250,000 exclusion on the sale of a
single taxpayer's principal residence may be used to reduce the recognized gain on the sale of
the taxpayer's next residence.

True

False

Question 53 1 pts

In 2020, the basis of a taxpayer's replacement residence is equal to the cost of the replacement
residence less the gain which was deferred on the sale of the old residence.

True

False

Question 54 1 pts

If a taxpayer sells their personal residence and purchases a new residence, all or part of the
realized gain may be recognized.

True

False

Question 55 1 pts

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Jerry bought his home 15 years ago for $60,000. Three years ago, Jerry married Debbie and
she moved into the same house and has lived there since. If they sell Jerry's house in the
current year for $340,000, what is their taxable gain on a joint tax return?

$0

$280,000

$155,000

$30,000

Question 56 1 pts

On August 8, 2020, Sam, single, age 62, sold for $210,000 his principal residence, which he
has lived in for 10 years, and which had an adjusted basis of $60,000. On November 1, 2020,
he purchased a new residence for $80,000. For 2020, Sam should recognize a gain on the sale
of his residence of:

$0

$25,000

$50,000

$130,000

None of these

Question 57 1 pts

Which of the following statements is true?

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A taxpayer's personal residence qualifies for a like-kind exchange.

A taxpayer who sells a personal residence may always exclude the realized gain from
taxable income.

A one-time election is available to taxpayers 55 years of age or older which allows them
to sell their personal residences and to exclude all of the realized gain.

None of the above are true.

All of these

Question 58 1 pts

Simonne, a single taxpayer, bought her home in Orlando 25 years ago for $55,000. She has
lived continuously in the home since she purchased it. In the current year, she sells her home
for $405,000. What is Simonne's taxable gain on the sale?

$0

$90,000

$100,000

$350,000

Question 59 1 pts

Russell purchased a house 1 year ago for $150,000 and, due to an employment-related move,
sold the house this year for $190,000. What is Russell's taxable gain?

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Question 60 1 pts

Stewart, age 44, sells his personal residence of 4 years on June 14, 2020, for $190,000. The
expenses of sale are $15,000 and he has paid for capital improvements of $3,000. Stewart
purchased the residence for $100,000. On February 2, 2021, Stewart purchases and occupies
a new residence at a cost of $200,000.

a. Calculate the gain realized on the sale of Stewart's residence.

b. How much gain must be recognized on the sale of Stewart's residence?

c. Calculate Stewart's basis in the new residence.

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Question 61 1 pts

In the current year, 70-year-old Jeanette sells her personal residence of the last 40 years for
$365,000. Jeanette's basis in her residence is $70,000. The expenses associated with the sale
of her home total $20,000. Jeanette decides to move in with her daughter rather than purchase
a new residence. Calculate Jeanette's realized gain and recognized gain on the sale of her
residence.

a. Realized gain

b. Recognized gain

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Question 62 1 pts

If a residence is rented for 15 days or more and is used for personal purposes for not more
than 14 days or 10 percent of the days rented, whichever is greater, no allocation of expenses
is required and the taxpayer may claim a deduction for the full amount of the expenses.

True

False

Question 63 1 pts

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Net losses on the rental of vacation homes are limited to 15 percent of total gross income.

True

False

Question 64 1 pts

In most cases, an individual taxpayer reports rental income and the related expenses on
Schedule E.

True

False

Question 65 1 pts

When a residence is rented for less than 15 days during the year, the rental income is
excluded from gross income.

True

False

Question 66 1 pts

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Lester rents his vacation home for 6 months and lives in the home during the other 6 months
of 2020. The gross rental income from the home is $4,500. For the entire year, real estate
taxes are $800, interest is $3,000, utilities and maintenance expenses are $2,200, and
depreciation expense on the entire home would be $4,000. What is Lester's allowable net loss
from renting his vacation home?

$5,500 loss

$3,000 loss

$500 loss

$250 loss

None of these

Question 67 1 pts

Bill is the owner of a house with two identical apartments. He resides in one apartment and
rents the other apartment to a tenant. The tenant made timely monthly rental payments of
$550 per month for the months of January through December 2020. The following expenses
were incurred on the entire building:

Utilities $3,600

Maintenance and repairs 900

Insurance 500

In addition, depreciation allocable to the rented apartment is $1,500. What amount should Bill
report as net rental income for 2020?

$0

$100

$1,400

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$2,600

None of these

Question 68 1 pts

Mort is the owner of an apartment building containing ten identical apartments. Mort resides
in one apartment and rents out the remaining units. For 2020, the following information is
available:

Gross rents $21,600

Utilities for total building 2,500

Maintenance and repairs (rental apartments only) 1,050

Advertising for vacant apartments 300

Depreciation of building (all ten units) 4,000

What amount should Mort report as net rental income for 2020?

$12,750

$13,500

$13,750

$14,400

None of these

Question 69 1 pts

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Donald owns a two-family home. He rents out the first floor and resides on the second floor.
The following expenses attributable to the total building were incurred by Donald for the year
ended December 31, 2020:

Real estate taxes $1,800

Mortgage interest 1,600

Utilities 1,200

Repairs (first floor) 1,400

Painting (second floor) 400

In addition, the depreciation attributable to the entire building would be $2,000. What is the
total amount of the expenses that Donald can deduct on Schedule E of Form 1040 (before any
limitations)?

$3,300

$3,850

$4,000

$4,700

None of these

Question 70 1 pts

The expenses associated with the rental of a residence used for both personal and rental
purposes are subject to three possible tax treatments. Which of the following is not included
as one of the three?

If a residence is rented for fewer than 15 days during the year the rental period is
disregarded and the residence is regarded as a personal residence for tax purposes.

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If the residence is rented for 15 days or more and is used for personal purposes for not
more than 14 days or 10 percent of the days rented, whichever is greater, the residence is
treated as rental property.

If the residence is rented for 15 days or more and is used for personal purposes for not
more than 14 days or 10 percent of the days rented, whichever is greater, the residence is
treated as a personal residence for tax purposes.

If the residence is rented for 15 days or more and is used for personal purposes for more
than 14 days or 10 percent of the days rented, whichever is greater, allocable rental
expenses are allowed only to the extent of rental income.

Question 71 1 pts

Patrick owns a home on the beach in Daytona. He lives in the house for most of the year but
leaves town during the popular motor sports race that comes through every year. During that
time, he rents his home out for 14 days to race fans for $5,000. Which of the following is
true?

Because Patrick rents the house for such a short period of time, the rental income is not
taxable and he may not deduct a percentage of expenses such as utilities and
depreciation on the home.

Patrick did not rent the house for a long enough period of time to deduct a percentage of
expenses such as utilities and depreciation on the home. The rental income he receives is
taxable.

Because Patrick rented the home for more than 10 days, he must report the income. He is
also allowed to deduct a percentage of expenses such as utilities and depreciation to the
extent of the income.

If you live in your house for more than 50 percent of the year, then it is treated as a
personal residence and you cannot deduct any expenses such as utilities and depreciation
on the home.

None of these is true.

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Question 72 1 pts

Carmen owns a house that she rents out for the entire year for $600 per month. Her expenses
for the 2020 tax year are as follows:

Real estate taxes $900

Mortgage interest 4,000

Insurance 300

General repairs 320

Carmen bought the property in March of 2006, and her basis for depreciation on the house is
$110,000. She uses straight-line depreciation with a 27 ½ -year life, so the depreciation on the
house is $4,000. Calculate Carmen’s net income or loss from renting the house if her gross
rental income is $7,200 ($600 × 12 months).

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Question 73 1 pts

Donald rents out his vacation home for 9 months and lives in his vacation home for the
remainder of the year. His gross rental income for 2020 is $7,200. The expenses attributable
to the vacation home for the entire year are as follows:

Real estate taxes $2,000

Interest on mortgage loan 4,000

Utilities 1,200

Repairs/maintenance 600

Depreciation 3,500

What amount would Donald report as net income or loss from the rental of the vacation
home?

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Question 74 1 pts

Walt and Jackie rent out their residence in San Diego to friends for 10 days while they
vacation in Europe. They collect $1,000 of rental income. How is the rental income treated on
their tax return? Explain.

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Question 75 1 pts

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Selma owns a beach cottage that she rents to tourists. In the current year she rented the
cottage for 90 days. What is the maximum number of days Selma can use the cottage before
her expense deduction will be limited to her gross rental income?

0 days

9 days

14 days

18 days

Question 76 1 pts

Selma owns a beach cottage that she rents to tourists. In the current year she rented the
cottage for 180 days. What is the maximum number of days Selma can use the cottage before
her expense deduction will be limited to her gross rental income?

0 days

9 days

14 days

18 days

Question 77 1 pts

Under the passive loss rules, real estate rental activities are specifically defined as passive,
even if the taxpayer actively manages the property.

True

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False

Question 78 1 pts

Passive losses of one activity may not be used to offset passive income from another activity.

True

False

Question 79 1 pts

Passive losses are fully deductible as long as they do not exceed $50,000 during the year.

True

False

Question 80 1 pts

Regardless of a taxpayer's involvement in the management of their rental property, individual

taxpayers may deduct up to $25,000 of rental real estate losses against other income, provided
their income does not exceed certain limits.

True

False

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Question 81 1 pts

Dividend income is considered "passive income."

True

False

Question 82 1 pts

Wages are considered "active income."

True

False

Question 83 1 pts

Nancy has active modified adjusted gross income before passive losses of $125,000. She has
a loss of $15,000 on a rental property she actively manages. How much of the loss is she
allowed to deduct against the $125,000 of other income?

None

$2,500

$5,000

$12,500

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Question 84 1 pts

Ned has active modified adjusted gross income before passive losses of $160,000. He has a
loss of $15,000 on rental property he actively manages. How much of the loss is he allowed
to deduct against his other income?

None

$10,000

$15,000

$5,000

Question 85 1 pts

Norm is a real estate professional with a real estate trade or business as defined in the tax law.
He has $150,000 of business income and $50,000 of losses from actively managed real estate
rentals. How much of the $50,000 in losses is he allowed to claim on his tax return?

$25,000

None

$50,000

$20,000

Question 86 1 pts

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Arnold purchased interests in two limited partnerships 6 years ago. During 2020, Arnold had
income of $22,000 from one of the partnerships. He had a loss from the other partnership of
$32,000, salary income of $35,000, and dividend income of $2,000. What is the amount of
net passive losses that Arnold may deduct for 2020?

$0

$2,000

$8,000

$10,000

None of these

Question 87 1 pts

Thelma works at a liquor store in 2020 and makes $44,000. She also has dividend income of
$12,000 and interest income of $1,000. She owns a beach house that gives her $11,000 in net
rental income and she owns a stake in a limited partnership that generates a $15,000 loss.
What is her adjusted gross income in 2020?

$58,000

$45,000

$69,000

$57,000

$53,000

Question 88 1 pts

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Warren invested in a limited partnership tax shelter in 2013. During 2020, his losses from the
partnership amount to $100,000. If Warren has no passive income, what is the amount of
Warren's deduction for passive losses for 2020?

$0

$10,000

$20,000

$40,000

None of these

Question 89 1 pts

Carey, a single taxpayer, purchased a rental house in 2020, which he actively manages.
During 2020, Carey had a loss of $14,000 from the rental house. If Carey's adjusted gross
income for 2020 is $138,000 before the rental loss, what is the amount of Carey's allowable
deduction for the rental activity for 2020?

$0

$3,000

$6,000

$12,000

None of these

Question 90 1 pts

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Arnold purchased two rental properties 6 years ago. He actively participates in their
management. During 2020, Arnold had income of $22,000 from one of the rentals. He had a
loss from the other rental of $32,000, as well as salary income of $35,000, and dividend
income of $2,000. What is Arnold's net passive income or loss deduction?

$8,000 net loss

$10,000 net loss

$22,000 net loss

$32,000 net loss

None of these

Question 91 1 pts

Choose the correct statement. Passive losses

May not be used to offset passive income.

May be used to offset portfolio income.

Often result from the rental of real estate.

If unused are lost forever.

Can offset portfolio income like dividends and interest

Question 92 1 pts

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Christian, a single taxpayer, acquired a rental house in 2007. The rental house, which
Christian actively manages, generated a $15,000 loss in 2020. In addition, Christian owns a
limited partnership interest which he acquired in 2012. His share of the partnership loss for
2020 is $10,000. Christian has modified adjusted gross income, before the rental loss and
partnership loss, of $134,000.

What is the amount of these losses that Christian may deduct in 2020?

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Question 93 1 pts

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For the current year, Robert, a single taxpayer, earned wages of $235,000 from Big Shot
Corporation. He also received interest income of $1,000 from Little Credit Union. Robert had
a $9,000 loss from his rental property which he actively manages. $2,000 of income was also
reported on his Schedule K-1 from ABC Limited Partnership. Neither the rental property nor
the partnership investment has passive losses carried over from prior years. Since Robert is
not an active participant in a retirement plan, he decides to contribute $6,000 to his IRA.

a. Calculate Robert’s adjusted gross income using the above information.

b. How much is Robert’s unallowed loss from his passive investments?
c. What happens to the unallowed passive loss?
d. Calculate Robert’s adjusted gross income assuming his wages were only $35,000.

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Question 94 1 pts

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For purposes of the passive loss rules, income is classified into three separate categories.
What are the three categories of individual income? Give an example of each.

(1)
(2)
(3)

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Question 95 1 pts

Which of the following can be used to offset a passive loss?

Active income such as wages

Passive income such as income from a limited partnership

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Dividend income from stock held as an investment

Pension income

Question 96 1 pts

Mike owns a house that he rents out for $1,000 per month. His expenses for the 2020 tax year
are as follows:

Real estate taxes $1,300

Mortgage interest 4,400

Insurance 600

General repairs 640

Mike bought the property in September of 2011, and his basis for depreciation on the house is
$137,500. He uses straight-line depreciation with a 27 ½-year life, so the depreciation on the
house is $5,000. Mike does not use a property manager and handles all aspects of the rental
activity himself.

a. Calculate Mike's net income or loss from renting the house if his gross rental income is
$12,000 ($1,000 × 12 months).

Is the income or loss on Mike’s rental considered to be active, passive, or portfolio

b.
income?

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Question 97 1 pts

Net operating losses generated in 2020 may be carried forward indefinitely.

True

False

Question 98 1 pts

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Patrick has a business net operating loss of $70,000 in 2020. Patrick’s business started in
2018 and generated significant taxable profits in 2018 and in 2019. Which of the following is
true?

Patrick must carryforward the net operating loss (no carryback is available).

Patrick may use the net operating loss to offset income from any year he chooses.

Net operating losses can offset 100% of the income in future years.

Patrick may elect to offset the income he generated in 2018 and 2019 with 2020’s net
operating loss. The remaining net operating loss (if any) can be used to offset up to 80%
of future annual taxable income.

None of these

Question 99 1 pts

Karen has a net operating loss in 2020. What is the earliest year to which Karen can
carryback or carry forward the net operating loss?

2015

2017

2018

2019

2021

Question 100 1 pts

The net operating loss (NOL) provisions of the Internal Revenue Code

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Apply only to individuals with wages and itemized deductions.

Require the use of a 2-year carryback in all cases.

Are primarily designed to provide relief for trade or business losses.

Allow the deduction for home mortgage interest to create an NOL.

Would not be necessary if tax rates were progressive.

Question 101 1 pts

Jess has had a couple of good years in his new business and generated large amounts of
taxable income in previous years. In 2020, however, he has a net operating loss of $8,000. He
is uncertain about the future of the business and has a serious cash flow problem. As his tax
accountant, how would you recommend Jess treat his net operating loss?

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Question 102 1 pts

Karen was ill for most of the current year. She received tax-free disability income that
covered most of her expenses. She paid the deductible expense of owning her home, interest
on the mortgage, and property taxes out of this income. Her tax return shows negative taxable
income of $25,000. Can this loss be carried forward to future years? Why or why not?

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Question 103 1 pts

In 2020, Keri has wages of $20,000, a Schedule C business loss of $30,000, and nonbusiness
capital gains of $4,000. She deducts the standard deduction of $12,400 for a taxable loss of
$18,400. Compute Keri’s NOL to carry forward to 2021.

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Question 104 1 pts

If Betty generates an NOL in 2020 of $16,000 and taxable income of $18,000 in 2021,
assuming no carryback, what is Betty’s NOL deduction in 2021?

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Question 105 1 pts

The qualified business income deduction is a percentage of wages earned by an employee.

True

False

Question 106 1 pts

The qualified business income deduction is limited to 20% of taxable income not including
long-term capital gains and qualified dividends.

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True

False

Question 107 1 pts

Gary has qualified business income of $40,000 in 2020. His taxable income without net
capital gains is $28,000. Gary’s QBI deduction for 2020is?

$0

$5,600

$8,000

$13,600

Question 108 1 pts

Pat’s 2020 taxable income exceeds $163,300 and thus he is required to phase out his QBI
deduction. The phase-out calculation is:

The greater of 50% of business wages or 25% of wages plus 2.5% of the unadjusted
basis of qualifying property

The lesser of 50% of business wages or 25% of wages plus 2.5% of the unadjusted basis
of qualifying property

50% of taxable income without the QBI deduction

50% of the amount over $163,300

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Question 109 1 pts

In 2020, Kelly has qualified business income from her Schedule C small business of
$178,000. She files jointly with her spouse and their taxable income is $214,000. They have
no capital gains or qualified dividends in 2020. If Kelly’s business is a service business (e.g.,
accounting), what is Kelly’s 2020 QBI deduction?

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Question 110 1 pts

Bennett purchased a tract of land for $20,000 in 2015 when he heard that a new highway was
going to be constructed through the property and the land would soon be worth $200,000.
The highway project was abandoned in 2020 and Bennett sells the land for $15,000. Ignoring
any limitations, Bennett can claim a loss in 2020 of:

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$0

$5,000

$165,000

$185,000

None of these

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