Multiple Choice Questions 1. Glenn and Mary's house was damaged by a hurricane in 2016. The fair

Question:

Multiple Choice Questions
1. Glenn and Mary's house was damaged by a hurricane in 2016. The fair value of their home before the hurricane was $150,000. After the hurricane, the fair value of their home was $125,000. They received $10,000 from their homeowner's insurance policy. What is their casualty loss deduction for 2016 if their adjusted gross income was $40,000?
a. $10,900
b. $11,000
c. $14,900
d. $15,000
2. Hank's home is burglarized on December 22, 2016. Personal property with a fair market value of $40,000 and an adjusted basis to Hank of $25,000 is stolen. Hank paid an independent appraiser $700 on December 29 to determine the fair market value of the property at the time of the break-in. Hank's homeowner's insurance policy leads him to believe he is entitled to receive $15,000 in reimbursement for the event, but no settlement has been made with the insurance company by yearend. Hank's AGI in 2016 is $30,000. How much may Hank deduct from AGI as a result of these facts on his 2016 tax return? Assume Hank itemizes, and assume there has still been no settlement with the insurance company at the time of filing.
a. $7,000
b. $21,900
c. $6,900
d. $22,000
3. On the night of October 14, 2016, a hurricane caused serious damage to Paige's personal vehicle and to the roof of her personal residence, a townhome. Just prior to the hurricane, Paige had a $200,000 basis in her home and a $12,000 basis in her vehicle, which had a fair market value just prior to the hurricane of $10,000. The damage to the roof is appraised at $7,000, and the fair market value of the vehicle immediately after the hurricane is appraised at $5,000. Paige is uninsured and has a 2016 AGI of $40,000. What amount of casualty loss deduction may Paige claim on her 2016 tax return as a result of the hurricane?
a. $9,800
b. $7,900
c. $9,900
d. $7,800
4. Lee, a married individual, is an employee with three rental properties in which Lee does not actively participate. In 2016, Property 1 had a net loss of $10,000, Property 2 had a net gain of $25,000, and Property 3 had a net loss of $5,000. Lee's W-2 income in 2016 was $110,000. Considering only the foregoing facts, what is Lee's 2016 adjusted gross income?
a. $120,000
b. $125,000
c. $110,000
d. $135,000
5. Anscomb is an employee who also solely owns and actively participates in a rental activity which produced a $20,000 loss in the current year. Anscomb's W-2 income in the current year is $115,000. Considering only the foregoing facts, what should Anscomb's adjusted gross income be for the current year?
a. $97,500
b. $115,000
c. $107,500
d. $102,500
6. Lewis is not an active participant in three rental activities which have turned profits in recent years. The following profit and losses apply to the current year for Lewis:
Gain or (Loss)
Rental Activity 1 ................... ($10,000)
Rental Activity 2 ................... 12,000
Rental Activity 3 ................... (8,000)
Total ................................... ($ 6,000)
What amount of the suspended loss should Lewis allocate to Rental Activity 3?
a. $4,500
b. $2,667
c. $0
d. Suspended losses may be allocated according to the taxpayer's preference
7. Smith bought a rental property in year 1 for $100,000. In year 1, Smith's adjusted gross income (AGI) was $125,000, and Smith sustained a $30,000 loss on the property. In year 2, Smith's AGI was $175,000, and Smith sustained a $20,000 loss on the property. In year 3, Smith sold the property for $155,000. What amount of gain or loss must Smith report on Smith's year 3 tax return as a result of the sale? Assume Smith actively participated in the rental activity in all three years but is not considered a real estate professional for tax purposes.
a. $17,500 gain
b. $0 (no gain or loss)
c. $22,500 gain
d. $20,000 gain
8. Patel bought a rental property in year 1 for $150,000. In year 1, Patel's adjusted gross income (AGI) was $100,000, and Patel sustained a $15,000 loss on the property. In year 2, Patel's AGI was $140,000, and Patel sustained a $10,000 loss on the property. In year 3, Patel sold the property for $175,000. What amount of gain or loss must Patel report on Patel's year 3 tax return as a result of the sale? Assume Patel did not actively participate in the rental activity in any of the three years.
a. $25,000
b. $0 (no income or loss)
c. $5,000
d. $20,000
9. The following chart applies to Bettelli, an investor who owns two rental activities, Property A and Property B, and has no other involvement in passive activities:

Bettelli met the requirements for active participation in year 1 but not in year 2. Bettelli's AGI in year 1 was $140,000; in year 2, $180,000. In year 3, Bettelli sells Property A for a $15,000 gain. How much of the gain must Bettelli report on Bettelli's year 3 tax return?
a. $0
b. $3,000
c. $8,000
d. $13,000