Multiple choice questions:
1. Samuel is a CPA and earns $150,000 from his practice in the current year. He also has an ownership interest in three passive activities. Assume he is sufficiently at risk in each of the three partnerships. In the current tax year, the activities had the following income and losses:
Partnership A …………………… $ 40,000
Partnership B …………………… (32,000)
Partnership C ………………….... (24,000)
What is Samuel’s adjusted gross income for the current year?
a. $134,000.
b. $144,000.
c. $150,000.
d. $190,000.
2. Nathaniel has AGI (before any rental loss) of $65,000. He also owns several rental properties in which he actively participates. The rental properties produced a $30,000 loss in the current year. Nathaniel also has $5,000 of income from a limited partnership interest. How much, if any, of the rental loss can he deduct in the current year?
a. $0.
b. 5,000.
c. $25,000.
d. $30,000.
3. Basil has $130,000 AGI (before any rental loss). He also owns several rental properties in which he actively participates. The rental properties produced a $30,000 loss in the current year. How much, if any, of the rental loss can Basil deduct in the current year?
a. $0.
b. $10,000.
c. $15,000.
d. $25,000.
4. Raymond sells his entire interest in a rental property in which he actively participated at a gain of $18,000. The activity has a current year loss of $5,500 and $18,500 in prior year suspended losses. During the year, Raymond has $55,000 in salary. What is Raymond’s AGI for the year?
a. $49,000.
b. $55,000.
c. $67,500.
d. $73,000.
5. Jacob is single with no dependents. During 2014, he has $48,000 of taxable income. He also has $28,000 of positive AMT adjustments and $12,000 of tax preferences. Jacob does not itemize his deductions but takes the standard deduction. Calculate his AMTI.
a. $88,000.
b. $91,950.
c. $94,200.
d. $98,150.
6. Which of the following itemized deductions is not allowed for AMT?
a. Medical expenses.
b. Taxes.
c. Charitable contributions.
d. Interest on loan to purchase principal residence
7. Which of the following statements is correct with regard to the medical expense deduction?
a. Medical expenses are not deductible for AMT.
b. The medical expense deduction is decreased for AMT.
c. The medical expense deduction is increased for AMT.
d. The same amount of medical expenses that is deductible for regular tax purposes is deductible for AMT for most taxpayers.
8. Paul reported the following itemized deductions on his 2014 tax return. His AGI for 2014 was $65,000. The mortgage interest is all qualified mortgage interest to purchase his personal residence. For AMT, compute his total adjustment for itemized deductions.
Medical expenses (after the10.0% of AGI floor)………………… $6,000
State income taxes…………………………………………………. 3,600
Home mortgage interest………………………………………….. 11,500
Charitable contributions…………………………………………… 3,200
Miscellaneous itemized deductions (after the 2% of AGI floor)…. 1,800
a. $1,800.
b. $3,600.
c. $5,400.
d. $20,100.
9. After computing all tax preferences and AMT adjustments, Phillip and his wife Carmin have AMTI of $210,000. If Phillip and Carmin file a joint tax return, what exemption amount can they claim for AMT for 2014?
a. $ 0.
b. $52,900.
c. $68,725.
d. $82,100.