13 Jan $900 for deduction

1. Question :

(TCO 2) On September 3, 20X1, Able purchased stock in Red Corporation (the stock is not small business stock) for $6,000. On December 31, 20X1, the stock was worth $8,500. On August 15, 20X2, Able was notified that the stock was worthless. How should Able report this item on his 20X1 and 20X2 tax returns?

20X1: $0; 20X2: $6,000 short-term capital loss

20X1: $0; 20X2: $6,000 long-term capital loss

20X1: $2,500 short-term capital loss; 20X2: $8,500 short-term capital loss

20X1: $2,500 short-term capital gain; 20X2: $3,800 long-term capital loss

None of the above

Question 2. Question :

(TCO 2) Saul is single, is under age 65, and has gross income of $50,000. His bona fide deductible expenses are as follows.

Alimony $12,000

Charitable contributions $2,000

Contribution to a traditional IRA $3,000

Expenses paid on rental property $5,000

Interest and taxes on personal residence $7,000

State income tax $1,200

What is Saul’s AGI?

$19,800

$30,000

$35,000

$38,000

$42,000

Question 3. Question :

(TCO 2) Larry, a calendar-year cash-basis taxpayer, has the following transactions.

Salary from job $60,000

Alimony paid to ex-wife $9,000

Medical expenses $4,500

Based on this information, Larry has a (an) _____.

AGI of $46,500

AGI of $51,000

AGI of $60,000

medical expense deduction of $0

None of the above

Question 4. Question :

(TCO 3) During the current year, Chuck’s home was burglarized. Chuck had the following items stolen.

Securities worth $20,000: Chuck purchased the securities 3 years ago for $8,000.

A painting worth $10,000: Chuck purchased the painting 2 years ago for $12,000.

An antique vase worth $800: Chuck purchased the vase 5 years ago for $500.

Chuck’s homeowner’s insurance policy had a $50,000 deductible clause for thefts. If Chuck’s salary for the year was $40,000, determine the amount of Chuck’s itemized deduction as a result of the theft.

$6,400

$7,200

$13,600

$14,400

None of the above

Question 5. Question :

(TCO 10) Diane purchased a factory building on November 15, 1999, for $5 million. She sold the factory building on February 2, 20X2. Determine the cost recovery deduction for the year of the sale.

$16,025

$19,844

$26,458

$158,750

None of the above

Question 6. Question :

(TCO 10) If a vacation home is determined to be a personal- or rental-use residence, then which of the following statements is false?

All income is included in AGI.

All rental-related expenses are deductible from AGI.

Expenses must be allocated between rental and personal use.

Some expenses are deductible from AGI.

None of the above

Question 7. Question :

(TCO 10) Regarding research and experimental expenditures, which of the following are qualified expenditures?

Costs of inspecting materials for quality control

Costs of a consumer survey on a new product

Costs of testing an existing product

All of the above

None of the above

Question 8. Question :

(TCO 10) Tara purchased a machine for $40,000 to be used in her business. The cost recovery allowed for the 3 years the machine was used are as follows.

Cost Recovery Allowed Cost Recovery Allowable

Year 1 $16,000 $8,000

Year 2 $9,600 $12,800

Year 3 $5,760 $7,680

If Tara sells the machine after 3 years for $15,000, how much gain should she recognize?

$3,480

$6,360

$9,240

$11,480

None of the above

Question 9. Question :

(TCO 10) Alice purchased an office condominium on September 20, 20X2 for $200,000. On October 10, she purchased business assets (7-year property) for $80,000. Alice did not elect to expense any of the assets under § 179, and she did not elect straight-line cost recovery. Determine the cost recovery deduction for the business assets for the current year.

$2,856

$25,999

$32,002

$41,428

None of the above

Question 10. Question :

(TCO 2) Ronnie, who had AGI of $30,000, was involved in a car accident in 20X2. His car, which was used only for personal use and had a fair value of $12,000 and an adjusted basis of $9,000, was completely destroyed. He received $5,000 from his insurance company. Ronnie’s casualty loss deduction is _____.

$900 itemized deduction

$900 for deduction

$12,000 itemized deduction

$9,000 itemized deduction

$4,000 for deduction