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Are gambling losses deductible?
Only to the extent of gambling winnings.
Polly receive the following items this year: interest on a New York City school bonds = $1600; gift from grandparents = $5000; jackpot from state lottery = $42,500; gambling winnings = $3000. Compute Polly's gross income.
$45,500; Gambling winnings (lottery jackpot) are included. Education bonds and gifts are not included.
Mr. and Mrs. H have a tax liability before credits of $1,675. Their income tax withholding was $1,050, and they are entitled to a $1,189 earned in income credit. What amount of tax refund is this family entitled to?
Jane, a cash basis individual, purchased a publicly traded bond at a $6,000 market discount. If Jane holds the bond maturity what type and amount of income will she recognize?
$6,000 ordinary income
Can a child be considered a qualifying child if they provided more than 50% of their own financial support during the year?
Mr. B has a $12,200 net short-term capital gain and a $4,700 net long-term capital loss. What amount/type of gain/loss is included in his taxable income?
$7,500 short-term capital gain; Long-term capital loss can be deducted from the short-term capital gain.
Miss Lopez paid $7260 interest on a mortgage on undeveloped land that she holds an investment. Miss Lopez is AGI is $112,200 which includes $4,900 interest income from a certificate of deposit. What deduction can Miss Lopez take?
$4,900 itemized deduction; The mortgage interest is deductible to the extent of Miss Lopez's net investment income.
Sue, a single taxpayer, purchased a principal residence in 2001 for $415,000. In 2005, she paid $18,000 to add a sunroom. This year, Susan sold the residence for $686,000. Her selling expenses were $5000. How much gain must Sue recognized on the sale?
$0; If the home served as a principal residence for 2/5 years preceding sale, gain can be excluded/not recognized
Which of the following is not an itemized deduction? Dental expenses; casualty losses; 1/2 self-employment tax; state and local sales tax?
1/2 self-employment tax
True or false: taxpayers are allowed to deduct the greater of itemized deductions or above the line deductions in calculating taxable income.
False: taxpayers are allowed to deduct the greater of itemized deductions or standard deductions when calculating taxable income.
Mr. Q recognized a $900 net short-term capital gain and $1,380 long-term capital gain this year. What amount is subject to preferential tax rates? If his marginal tax rate on ordinary income is 12%, what is the total income tax on capital gains? 37%?
$1,380; $108 ($900 taxed at ordinary income rate, $1,380 taxed at 0%); $609 ($900 taxed at ordinary income rate, $1,380 taxed at 20%)
Josh donated a painting to the local art museum. He purchased a painting 20 years ago for $34,000, and it's appraised FMV at the date of gift was $115,000. What amount of gain is recognized? What amount of charitable contribution deduction can Josh claim?
No gain is recognized; $115,000 charitable contribution deduction
Mr. and Mrs. S actively manage an office building they purchased in January 1997. This year, the office building generated a $68,000 net loss. The couples income items consisted of $72,300 salary and $14,000 interest and dividends income. How much of the rental loss was deductible this year?
$25,000; Individuals can deduct $25,000 annually from a rental loss if their AGI does not exceed $100,000. When AGI exceeds this threshold, the amount is reduced by 50% of the excess.
16 years ago, Mrs. H purchased an annuity for $96,000. Beginning in September of this year, the annuity begin paying Mrs. H $4000 per month for the rest of her life. Based on her age, Mrs. H expected return is $300,000. How much of the $16,000 that she received this year is included in her taxable income?
$10,880;
$96,000/$300,000 = 0.32
$16,000-($16,000*0.32)=$10,880
Mary's husband died in 2016 leaving Mary with two small children. How long can Mary file as a surviving spouse? What will she file as when she is no longer a surviving spouse?
2 years; Head of household
Mr. and Mrs. P own stock in an S corporation, which is their only passive activity. They have $8,200 passive activity loss carry forward into this year. This year the P's are allocated a $1,600 share of corporate ordinary business income. In December of this year, they recognize a $3,500 long-term capital gain on the sale of their entire stock interest. How much of their loss carryforward can the P family deduct this year?
$8,200; with the sale of all their stock in the company, the loss is now fully deductible
Mr. Ricardo charge 75 shares of H common stock for 516 shares of N common stock pursuant to a reorganization of the two corporations. His basis in the H stock was $49,200 and the fair market value of the N stock was $138,000. which of the following statements about the exchange is true?
Mr. Ricardo recognizes no gain and takes a $49,200 basis in the N stock
A flood destroyed an antique Persian rug owned by Mr. and Mrs. McConnell. The couple purchased the rug for $13,000 15 years ago but it's appraised FMV before the flood was $42,500. Unfortunately their homeowners insurance policy does not cover flood damage. Computer McConnells casualty loss.
$12,900; Amount of casualty loss equals the lesser of the tax basis in the property or the decrease in value from the casualty. Casualty loss is reduced by any insurance proceeds received by the taxpayer so the only the unreimbursed loss is deductible. The loss from each casualty is also reduced by $100 floor.
Julie and unmarried individual lives in a home with her 13-year-old dependent son. This year, Julie had the following tax information: salary equals $95,000; interest and dividends income equals $12,800; capital gain from sale of investments equals $11,000; above the line deductions equals $800; itemized deductions equal $6,900. (HOH standard deduction equals $18,350). Compute Julia's adjusted gross income and taxable income.
Adjustable gross income of $118,000; taxable income of $99,650
Standard deduction of $18,350 is taken instead of itemized deductions.
What are the preferential rates available for dividends and capital gains?
0%; 15%; 20%
Gary is an architect who also sings at weddings. This year, he received $5400 in fees for singing and spent $6250 on voice lessons, sheet music, and travel to the weddings. Is Gary eligible for any deductions?
If facts and circumstances support Gary's claim that has singing activity is a business, he can deduct an $850 above the line loss.
Spencer paid the following taxes this year: federal income tax of $12,034; federal employee payroll taxes of $4590; state and local income tax $5725; state and local sales tax of $2998; local property tax on personal residence of $3300. Compute Spencer's itemized deduction for taxes.
$9,025; Only property tax on personal residence ($3,300) and EITHER state/local income tax ($5,725) OR state/local sales tax ($2,998) can be itemized deductions. Largest deduction includes income tax not sales tax in this case.
In 2017, Mrs. Owens paid $50,000 for 3,000 shares of a mutual fund elected to reinvest year and dividends in additional shares. In 2017 she reinvested $4,800 of dividends to purchase 240 shares at $20 per share. In 2018 she reinvested at $3,150 of dividends to purchase 150 shares at $21 per share. If Mrs. Owens sells her 3,390 shares in 2019 for $22 per share, compute her recognized gain.
$16,630; Payout of $74,580 in 2019 - (initial investment of $50,000 + 2017 investment of $4,800 + 2018 reinvestment of $3,150)
Which of the following statements regarding the calculation of regular tax liability is false? The rate schedule for calculating regular tax liability depends on the taxpayers filing status; all taxpayers regardless of the amount of their taxable income pay 10% tax on the first bracket of income; the individual tax rate schedules are adjusted annually for inflation; all of the tax brackets in the single rate schedule are 1/2 of the brackets in the married filing jointly rate schedule.
FALSE: All of the tax brackets in the single rate schedule are 1/2 of the brackets in the married filing jointly rate schedule.
Six years ago, Mr. Scott loaned $10,000 to a neighbor in exchange for an interest-bearing debt obligation. This year, the neighbor informed Mr. Scott that he was defaulting on that. What is the tax consequences to Mr. Scott this bad debt?
$10,000 short term capital loss; Capital loss from a nonbusiness bad debt is classified as a short-term loss, regardless of the time period
Which of the following are considered above the line deductions? 1/2 self-employment tax; medical expenses; contribution to IRA; interest on qualified education student loans; foreign income tax; charitable contributions?
1/2 self-employment tax; contribution to IRA; interest on qualified education student loans
When the owner of a life insurance policy liquidates that policy for its cash surrender value what amount is recognized and how is it recognized?
The owner recognizes the excess cash surrender value over their investment in the policy (total premiums paid) as ordinary income.
True or false: sole proprietors must make quarterly estimated payments of income tax, but self-employment tax is not due until the return is filed.
False: sole proprietors must make quarterly estimated payments of income tax and self-employment tax
True or false: tax incentives to purchase a home instead of a rent include allowing deductions for real property taxes, premiums paid on homeowners insurance, and interest paid on a home mortgage.
False: only real property taxes and interest paid on a home mortgage or deductible. Premiums paid on homeowners insurance are deductible for rental homes, along with other expenses for maintaining the home.
When a beneficiary receives the death benefit of a life insurance policy how is the amount received recognized in gross income?
The beneficiary excludes the death benefit from gross income.
Tina gave gifts to her family in the amount of $865,000, $3.2 million, and $8 million in the years 2007, 2012, and 2019. What does Tina owe for gift tax?
$248,000; Amount in excess of annual tax exclusion is $12,020,000. The 2019 lifetime transfer tax exclusion is $11.4 million. Her payments are in excess of this amount by $620,000 making her total tax 40% of that amount
Dotty incurred the following medical expenses this year: payments to physicians and dentists equals $4,300; payment for two day stay at Mercy Hospital equaled $6,250; payments physical therapist equaled $2,100; prescription drugs equal $1,010;. Dotty's insurance company reimbursed her for $8,800 of these expenses. If dots AGI is $26,550 compute her medical expense deduction.
$2,205; Unreimbursed medical expenses in excess of 10% of AGI can be deducted.
$13,660 (total expenses)-$8,800 (reimbursed)=$4,860
$4,860-($26,550*0.1)=$2,205
Mr. and Mrs. Duke lost their sailboat in a hurricane. They purchase the sailboat 12 years ago for $86,000 and it was completely destroyed. The fair market value of the boat prior to its destruction was $100,000, and the Dukes received a $70,000 reimbursement from the insurance company. Their AGI is $118,400 What is the Dukes casualty loss?
$4,060; Total casualty loss of $86,000 - insurance proceeds of $70,000 = unreimbursed loss of $16,000. $16,000 - $100 floor per casualty = $15,900. $15,900 - 10% AGI threshold ($11,840) = $4,060.