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Exam 6: Individual for Agi Deductions

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Question 1

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On January 1, 2016, Jill contributed $18,000 of cash to the XYZ limited partnership for a 25 percent limited partnership interest (without management rights). On April 6, 2016, XYZ, limited partnership distributed $2,000 to Jill. For the year ended December 31, 2016, Jill received the following income/loss allocations from her partnership investments: (1) XYZ, limited partnership allocated a $5,000 loss to Jill (2) ABC limited partnership allocated $2,300 of income to Jill. Jill is a limited partner in ABC with no management rights. How much of the $5,000 loss from XYZ limited partnership can Jill deduct in 2016?

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$2,300 of loss from XYZ is deducted in 2...

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Question 2

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To be deductible, business expenses must be directly related to a business activity.

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B) False

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Question 3

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Tyson (48 years old) owns a traditional IRA with a current balance of $50,000. The balance consists of $30,000 of deductible contributions and $20,000 of account earnings. Convinced that his marginal tax rate will increase in the future, Tyson receives a distribution of the entire $50,000 balance of his traditional IRA and he immediately contributes the $50,000 to a Roth IRA. Assuming his marginal tax rate is 25%, what amount of penalty, if any, must Tyson pay on the distribution from the traditional IRA?

Which of the following is a true statement?

Jennifer owns a home that she rents for 364 days and uses for personal purposes for one day. Jennifer is required to allocate expenses associated with the home between rental and personal use.

Ryan, age 48, received an $8,000 distribution from his traditional IRA to pay for medical expenses. Ryan has made only deductible contributions to the IRA and his marginal tax rate is 28 percent. What amount of taxes and early distribution penalties will Ryan be required to pay on the distribution?

Jorge owns a home that he rents for 360 days and uses for personal purposes for five days. Jorge is not required to allocate expenses associated with the home between rental and personal use.

Brice is a single, self-employed electrician who earns $60,000 per year in self-employment income. Brice paid the following expenses this year. Which of the expenses are deductible for AGI? 1. The cost of health insurance 2) The employer portion of self-employment tax paid 3) Penalty on early withdrawal of funds from a certificate of deposit

Which of the following statements regarding limitations on the deductibility of home office expenses of employees is correct?

This year Riley files single and reports AGI of $71,000. Riley paid $1,200 of interest on a qualified education loan. What amounts can Riley deduct for qualifying education interest?

All business expense deductions are claimed as "above the line" deductions.

Daniela retired at the age of 65. The current balance in her Roth IRA is $200,000. Daniela established the Roth IRA 10 years ago. Through a rollover and annual contributions Daniela has contributed $80,000 to her account. If Daniela receives a $50,000 distribution from the Roth IRA, what amount of the distribution is taxable?

Which of the following statements regarding limitations on the deductibility of home office expenses of self-employed taxpayers is correct?

Han is a self-employed carpenter and his wife, Christine, works full-time as a grade school teacher. Han paid $525 for carpentry tools and supplies, and Christine paid $3,600 as her share of health insurance premiums (not with pre-tax dollars) for Han and herself in a qualified plan provided by the school district. Which of the following is a true statement?

Which of the following statements regarding IRAs is false?

Taxpayers with home offices must allocate indirect expenses of the home between personal use and home office use. Only expenses allocated to the home office use are deductible.

An individual who forfeits a penalty for prematurely withdrawing a certificate of deposit (CD) is allowed to net the penalty against the interest income from the CD.

The definition of qualifying expenses is more restrictive for the qualified educational expense deduction than it is for the education loan interest expense deduction.

When a taxpayer experiences a net loss from a nonresidence (rental property) :

Ashton owns a condominium near San Diego, California. This year, he incurs the following expenses in connection with his condo: $\begin{array}{| l| r| }\hline\text { Revenue trom auto repairs } & \$ 143,930 \\\hline \text { Salaries paid to mechanics } & 72,210 \\\hline \text { Supplies and tools } & 18,500 \\\hline \text { Revenues from gas station partnership (Alexandra's share) } & 125,000 \\\hline \text { Expenses from gas station partnership (Alexandra's share) } & 95,200 \\\hline \text { Self-employment tax (1/2 is employer's share) } & 12,702 \\\hline\end{array}$ During the year, Ashton rented the condo for 120 days and he received $24,000 of rental receipts. He did not use the condo at all for personal purposes during the year. Ashton is considered to be an active participant in the property. Ashton's AGI from all sources other than the rental property is $120,000. Ashton does not have passive income from any other sources. What is Ashton's AGI?