For the year ended December 31, current year, David, a married taxpayer filing a joint return
1.For the year ended December 31, current year, David, a married taxpayer filing a joint return, reported the following:
Investment income from interest $24,000
Investment expenses other than interest 4,000
Interest expense on funds borrowed in 2005 to purchase investment property 70,000
What is the maximum amount that David can deduct in the current year as investment interest expense?
Charlie took a $7,000 distribution from his educational savings account and used $6,500 to pay for qualified higher education expenses. On the date of the distribution, his educational savings account had a $28,000 balance including the $21,000 he had contributed. How much of the $7,000 distribution is tax free?
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.
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.
To be deductible, the cost of uniforms must be:
A required condition of employment and not be suitable for everyday use
A required condition of employment yet can be suitable for everyday wear
Required by the employer and written in their dress code
Voted on by the employees of the organization and later incorporated into the employee hand book
In most cases, a taxpayer reports rental income and the related expenses on Schedule E.
The American Opportunity credit
Is 50 percent of the first $1,200 of tuition and fees paid and 100 percent of the next $1,200
Is available for 2 years of post-secondary education
Is fully refundable even if the credit exceeds the tax liability
Is available for qualifying expenses paid on behalf of the taxpayer and his or her spouse, in addition to those paid for dependents
American Opportunity and lifetime learning credits:
Can be added to the amount of any tax-free scholarships received to increase the amount of the credit
Can be taken for room and board as well as tuition
Can be used for tuition and fees
Can only be taken if the taxpayer is married filing a separate return
Ashton paid the following interest expense during the current tax year:
Qualified home mortgage interest $11,000
Credit card interest 1,000
Personal bank loan interest 3,000
What is the amount of Ashton’s interest deduction for the current tax year?
In some cases, a taxpayer may deduct an otherwise allowable contribution to an IRA, even though the contribution is made after the close of the tax year.
Which of the following is not an itemized deduction on Schedule A?
Personal property tax
Mortgage interest on a taxpayer’s personal residence is deductible on Schedule A.
For the current tax year, Sally, who is divorced, reported the following items of income:
Interest income $ 600
Earnings from self-employment 3,000
She maintains a household for herself and her 1-year-old son who qualifies as her dependent. What is the maximum earned income credit available to her for the current year, using the tables?
13. Donald and Jamie rent out their residence in Dallas to friends for 10 days while they vacation in Europe. They collect $1,500 of rental income. How is the rental income treated on their tax return? Explain
Wilson and Joan , both in their 30’s, file a joint income tax return for 2013. Wilson’s wages are $25,000 and Joan’s wages are $33,000 for the year. Their total adjusted gross income is $58,000, and Joan is covered by a qualified pension plan at work but Wilson is not.
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