Multiple Choice Questions
1. What is the maximum amount of personal residence acquisition debt on which interest is fully deductible on Schedule A?
a. $1,000,000.
b. $500,000.
c. $250,000.
d. $0.
2. For 2014, the deduction by a taxpayer for investment interest expense is
a. Not limited.
b. Limited to the taxpayer’s net investment income for 2014.
c. Limited to the investment interest paid in 2014.
d. Limited to the taxpayer’s gross investment income for 2014.
3. For 2014 Thomas, a single parent, reported the following amounts relating to his investments:
Net investment income ………………………………………………………….. $7,000
Interest expense on a loan to purchase stocks …………………………………… 2,000
Interest expense on funds borrowed in 2013 to purchase land for investment …. 6,000
What is the maximum amount that Thomas can deduct in 2014 as investment interest expense?
a. $1,000
b. $2,000
c. $6,000
d. $7,000
4. Referring to the previous question, what is the treatment for the interest expense that Thomas could not deduct in 2014?
a. It is lost.
b. It cannot be used except as a carry back to previous years.
c. It can be carried forward and deducted in succeeding years.
d. None of the above.
5. Which of the following organizations qualifies for deductible charitable contributions?
a. A nonprofit educational institution.
b. The Salvation Army.
c. Churches.
d. All of the above.
6. Which of the following statements is not true regarding documentation requirements for charitable contributions?
a. If the total deduction for all noncash contributions for the year is more than $500, Section A of Form 8283, Noncash Charitable Contributions, must be completed.
b. A noncash contribution of less than $250 must be supported by a receipt or other written acknowledgement from the charitable organization.
c. A contribution charged to a credit card is a noncash contribution for purposes of documentation requirements.
d. A deduction of more than $5,000 for one property item generally requires that a written appraisal be obtained and attached to the return.
7. In 2014, the president of the United States declared a federal disaster due to brush fires in the Southwest. Lisa lives in that area and lost her home in the fires. What choice does she have regarding when she can claim the loss on her tax return?
a. It may be claimed in 2013 or 2014.
b. It must be claimed in 2013 if the loss is greater than the Modified Adjusted Gross Income.
c. It may be claimed in 2015 if an election is filed with the 2014 return.
d. It must be claimed in 2013 if the return has not been filed by the date of the loss.
8. In 2014, the Rinaldis’ vacation cottage was severely damaged by an earthquake. They had AGI of $110,000 in 2014. Following is information related to the cottage:
Cost basis ……………………………………… $95,000
FMV before casualty ………………………….. 135,000
FMV after casualty ……………………………. 20,000
The Rinaldis had insurance and received an $80,000 insurance settlement.
What is the amount of allowable casualty loss deduction for the Rinaldis in 2014 before the AGI and event limitation?
a. $ 3,900.
b. $14,900
c. $15,000
d. $ 45,000