Questions and Answers of Fundamentals Taxation 2019

Which of the following individuals can deduct education expenses?a. A real estate broker who attends college to get an accounting degree.b. A CPA who attends a review course to obtain his
Which of the following is not a relevant factor to be considered in deciding whether an activity is profit seeking or a hobby?a. Manner in which the taxpayer carries on the
Jimmy took a business trip from Dallas to Brazil. He was there for a total of seven days, of which two were weekend days. Over the weekend, he spent his time sightseeing and relaxing. His expenses
Frank purchased a vehicle for business and personal use. In 2018, he used the vehicle 70% for business (11,000 business miles incurred equally throughout the year) and calculated his vehicle expenses
During the year, Cory purchased a log skidder (7-year property) for $55,000 for his business. Assume that he has income from his business of $30,000, and he and his wife have combined salaries and
On June 30, 2018, Ken purchased an apartment building for $500,000. Determine the cost recovery deduction for 2018:a. $4,925.b. $5,335.c. $6,955.d. $9,850.
Roy purchased an office building on March 30, 2015, for $250,000. $25,000 of which was for the land. On July 30, 2018, he sold the office building. What is the cost recovery deduction for
Lawrence purchased an apartment building on February 10, 2018, for $330,000, $30,000 of which was for the land. What is the cost recovery deduction for
On April 15, 2016, Andy purchased some furniture and fixtures (7-year property) for $10,000 to be used in his business. He did not elect to expense the equipment under §179 or bonus depreciation.
On May 5, 2013, Jill purchased equipment for $40,000 to be used in her business. She did not elect to expense the equipment under Section 179 or bonus depreciation. On January 1, 2018, she sells the
Mandy, a CPA, flew from Raleigh to Seattle to attend an accounting conference that lasted four days. Then she took three days of vacation to go sightseeing. Mandy’s expenses for the trip
Atlas, a financial consultant, had the following income and expenses in his business:Fee Income$235,000Expenses: Rent Expense 18,000 Penalties assessed by the
Which of the following is not a “trade or business” expense?a. Interest on investment indebtedness.b. Property taxes on business equipment.c. Depreciation on business property.d.
Hortencia is employed as an accountant for a large firm in San Diego. For relaxation she likes to go to a nearby casino and play in blackjack tournaments. During 2018, she incurred $6,475 in gambling
During the year 2018, Ricki, who is not self-employed and does not receive employer reimbursement for business expenses, drove her car 5,000 miles to visit clients, 10,000 miles to get to her office,
Reynaldo and Sonya, a married couple, had flood damage in their home due to a dam break near their home in 2018, which was declared a Federally Designated Disaster Area., which totally ruined the
In 2018, Arturo’s pleasure boat that he purchased in 2012 for $48,500 was destroyed by a hurricane in a part of Florida that was declared a Federal Disaster Area. His loss was not totally
Jaylen made a charitable contribution to his church in the current year. He donated common stock valued at $33,000 (acquired as an investment in 2005 for $ 13,000). Jaylen’s AGI in the current
Tyrone and Akira, who are married, incurred and paid the following amounts of interest during 2018:Home acquisition debt interest ............... $15,000Credit card interest
In 2017, Tomas, a single taxpayer, had $ $3,750 in state tax withheld from his paycheck. He properly deducted that amount on his 2017 tax return as an itemized deduction that he qualified for, thus
Leslie and Jason, who are married, paid the following expenses during 2018:Interest on a car loan ........................................................ $ 100Interest on lending institution
On April 1, 2018, Paul sold a house to Amy. The property tax on the house, which is based on a calendar year, was due September 1, 2018. Amy paid the full amount of property tax of $2,500. Calculate
Dante and Rosa, both under 65 and married, have a combined AGI of $45,000 in year 2018. Due to certain heart issues, Dante has been prescribed Lipitor® by a physician. For year 2018, Dante spent a
Raquel, who works in medical sales, drives her own vehicle to various locations for client sales meetings. Her employer reimburses her $400 each month for various business expenses and does not
Mickey is a 12-year-old dialysis patient. Three times a week for the entire year he and his mother, Sue, drive 20 miles one way to Mickey’s dialysis clinic. On the way home, they go 10 miles out of
Reggie, who is 55, had AGI of $32,000 in 2018. During the year, he paid the following medical expenses:Drugs (prescribed by physicians)$200Marijuana (prescribed by physicians)1,400Health insurance
In 2018, the Rinaldis’ vacation cottage was severely damaged by an earthquake in a location that was a Presidentially Declared Disaster area. They had AGI of $110,000 in 2018. Following is
Which of the following is an other itemized deduction on the Schedule A?a. Tax preparation fees.b. Safe deposit box fee.c. Gambling losses.d. Union dues and fees.
In 2018, 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
Which expense, incurred and paid in 2018, can be claimed as an other itemized deduction?a. Self-employed health insurance.b. Unreimbursed moving expenses.c. Gambling Losses.d.
Cindy Byrd donated stock (capital gain property) to a public charity that she has long supported. She purchased the stock 4 years ago for $100,000, and on the date of the gift, it had a fair market
Referring to the previous question, what is the treatment for the interest expense that Thomas could not deduct in 2018?a. It is lost.b. It cannot be used except as a carry back to previous
For 2018, Thomas, a single parent, reported the following amounts relating to his investments:Net investment income
For 2018, the deduction by a taxpayer for investment interest expense isa. Not limited.b. Limited to the taxpayer’s net investment income for 2018.c. Limited to the investment
What is the maximum amount of personal residence acquisition debt on which interest is fully deductible on Schedule A?a. $1,000,000.b. $750,000.c. $250,000.d. $0.
Of the following items, which one does not qualify as an itemized deduction for state and local taxes?a. Personal property taxes assessed on the value of specific property.b. State, local, and
During 2018 Noriko paid the following taxes related to her home:Real Estate property taxes on residence (paid from escrow account) ......... $1,800State personal property tax on her automobile (based
Daryl, who had significant itemized deductions for 2018 and therefore was eligible to use Schedule A, purchased a new vehicle in 2018 for $40,000 with a state sales tax of 10%. The allocated
For 2018, the amount of the sales tax deduction is calculated by:a. Determining the actual sales tax paid during the year.b. Using the IRS sales tax deduction calculator.c. Using the
For 2018, Perla, who is single and 55 years of age, had AGI of $60,000. During the year, she incurred and paid the following medical costs:Doctor and dentist fees
During 2018, Raul incurred and paid the following expenses:Prescription drugs .............................................................. $ 470Vitamins and over-the-counter cold remedies
For 2018, how can the amount of the sales tax deduction be determined?
Indicate whether each of the following items is considered a for AGI, (above-the line) deduction for the 2018 tax year.a. Student loan interest.b. Gambling losses.c. Early withdrawal penalty.d. Child
Under the terms of a divorce decree executed May 1, 2018, Ahmed transferred a house worth $650,000 to his ex-wife, Farah, and was to make alimony payments of $3,000 per month. The property has
Chantel has received a 1099-INT from her financial institution showing $75 in box 2 of the form. How should she handle this on her 2018 tax return and why?
In May 2018, Regina graduated from the Naval Academy with a degree in engineering and was assigned to San Diego as a permanent duty station. In her move to San Diego, Regina incurred the following
Fabian, a single member of the military, was stationed at White Sands, New Mexico. On July 1, 2018, his army company transferred him to Florida as a permanent duty station. Fabian worked full-time
Zach attended Champion University during 2013-2017. He lived at home and was claimed by his parents as a deduction during the entire duration of his education. He incurred education expenses of
At the beginning of June 2018, Julia left her husband and is currently living in an apartment. The couple has no children. At the end of the current year, no formal proceedings have occurred in
The Renfros were granted a decree of divorce in 2017. In accordance with the decree, Josh Renfro is to pay his ex-wife $24,000 a year until their only child, Evelyn now 10, turns 18, and then
Mia is required under a 2017 divorce decree to pay $600 of alimony and $300 of child support per month for 12 years. In addition, Mia makes a voluntary payment of $100 per month. How much
If a service member moves because of a permanent change of station, they can deduct the reasonable unreimbursed expenses of moving themselves and members of their household, includinga. Moving
For 2018, the maximum aggregate annual contribution that a taxpayer, under age 55, can make to a Health Savings Account (HSA) for family coverage is:a. $1,350.b. $3,450.c. $6,900d.
In 2014 through 2017, Korey, who is single, borrowed a total of $25,000 for higher education expenses on qualified education loans. In 2018, while still living at home and being claimed by his
How does a change of duty station to a foreign location change the deduction of allowable moving expenses for a service member?
Rina, per orders of her military unit, moved from Seattle to Tampa and incurred $5,000 of unreimbursed moving expenses. What are the two criteria that are necessary for her to meet regarding her
Which form would a member of the military use to deduct qualifying moving expenses and what key pieces of information should be included there?
How do the time and distance factors for qualifying moving expenses come into play for 2018?
In 2014, Chara incurred a loan to pay for qualified higher education expenses for her 20-year-old daughter who was a dependent. In 2018, her granddaughter graduated from college, moved away to start
An individual with an OID instrument must annually report a portion of the OID asa. Dividend income.b. Pension income.c. Capital gain income.d. Interest income.
The amount of savings bond interest exempt from tax is limited when an individual is single and his or her AGI reachesa. $119,300.b. $77,550.c. $79,550.d. $78,150.
In 2018, Joseph and Patricia Jefferson redeemed $8,000 of Series EE U.S. savings bonds (principal of $5,500 and interest of $2,500), the proceeds from which were used to pay for qualified higher
On July 1, 2018, Rene, a cash-basis taxpayer, purchased $500,000 of the newly issued bonds of Acce Corporation for $452,260. The 10-year bonds carry an interest rate of 8% and were sold to yield
Each of the following taxpayers received a state income tax refund in 2018. In all cases, the taxpayer has a filing status of married filing jointly. What amount of the refund is properly
Determine the amount of taxable income that should be reported by a cash-basis taxpayer in 2018 in each of the following independent cases:a. A taxpayer completes $500 of accounting services in
In 2013, Marie borrowed $10,000. In 2018, the debt was forgiven. Marie does not believe she should report the forgiveness of debt as income because she received nothing at the time the debt was
An example of nontaxable income isa. Wages.b. Dividend income.c. Alimony payment.d. Child support payment.
Items that must be reported on line 21 (other income) of Schedule 1 includea. Dividend income.b. Capital gains.c. Interest income. d. Jury duty pay.
Graciela, who is single, reported itemized deductions of $6,450 on her 2017 tax return. Her itemized deductions included $200 of state taxes paid. In 2018, she received a $150 refund of
When an individual, who is single, has taxable income of $60,000, the tax rate on qualified dividends isa. 0%.b. 15%.c. 25%.d. 5%.
Charles and Joan Thompson file a joint return. In 2017, they had taxable income of $92,370 and paid tax of $14,571. Charles is an advertising executive and Joan is a college professor. During the
Paul has the following information:AGI for 2018 = $155,000Withholding for 2018 = $ 24,000Total tax for 2017= $ 29,000Total tax for 2018= $ 28,610a. How much must Paul pay in estimated taxes to avoid
Victoria’s 2018 tax return was due on April 15, 2019, but she did not file it until June 12, 2019. Victoria did not file an extension. The tax due on the tax return when filed was $8,500. In 2018,
Using the appropriate tax tables or tax rate schedules, determine the tax liability for tax year 2018 in each of the following instances. In each case, assume the taxpayer can take only the standard
Determine the amount of the standard deduction for each of the following taxpayers for tax year 2018:a. Christina, who is single.b. Adrian and Carol, who are filing a joint return. Their son is
Raphael and Martina are engaged and are planning to travel to Las Vegas during the 2018 Christmas season and get married around the end of the year. In 2018, Raphael expects to earn $45,000 and
Donald is a 21-year-old full-time college student. During 2018, he earned $2,550 from a part-time job and $1,150 in interest income. If Donald is a dependent of his parents, what is his standard
Shandra is a U.S. citizen and is the 68-year-old widowed mother of Janet. After retirement, Shandra decided to fulfill a lifelong dream and move to Paris. Shandra receives $1,000 of interest income,
What are the three tests a qualifying child or qualifying relative must meet to be claimed as a dependent?
The benefits of many deductions, credits, or other benefits are limited to taxpayers with Adjusted Gross Income below certain limits. a. Explain how the limitation (phaseout) process works.b.
What is the percentage of interest the IRS was charging on assessment (amount of unpaid tax liability) during March 2018? You might want to do this research by going to the IRS Web site
What is the amount of the tax liability for a married couple filing jointly with taxable income of $135,500?a. $25,418.b. $28,333.c. $26,810.d. $21,689.
Employers are required to withhold social security taxes from wages paid to employees. What is the amount of the social security wage limitation for
A married couple, both of whom are under 65 years old, decided to file as married filing separately. One of the spouses is going to itemize deductions instead of taking the standard deduction. What
Which amount represents the standard deduction for a taxpayer who is 44 years old and claiming head of household status?a. $13,600.b. $19,600.c. $18,000.d. $12,000.
Use the information in Table 1-3. If the federal tax system was changed to a proportional tax rate structure with a tax rate of 17%, calculate the amount of tax liability for 2016 for all taxpayers.
A taxpayer can claim a dependent if the person is a qualifying child or a qualifying relative and the person meets all of the following tests.a. Citizen or resident, dependent taxpayer, and age
Esmeralda is 20 years of age and a full-time student living with her parents. She had wages of $500 ($50 of income tax withholding) for 2018. Can Esmeralda file a tax return to claim her $50 of
A taxpayer’s spouse died on December 31, 2017. He has no qualifying child. Which status should the taxpayer select when filing his 2018 tax return? a. Qualifying widow(er).b. Married
Payment of alimony by the taxpayer is a for AGI deduction. Which Schedule must the taxpayer use to claim this benefit?a. Schedule 1.b. Schedule 2.c. Schedule 3.d. The taxpayer does not
A single taxpayer is 26 years old and has wages of $18,000 and interest income of $450. Which Form 1040 Schedule must the taxpayer use?a. Schedule 1.b. Schedule 2.c. Schedule 3.
Mimi is 22 years old and is a full-time student at Ocean County Community College. She lives with her parents, who provide all of her support. During the summer, she put her Web design skills to work
Why is it important to determine if the taxpayer has dependents to be claimed on the income tax return?
George and Debbie were legally married on December 31, 2018. Can they file their 2018 income tax return using the status of married filing jointly? Why or why not? What other filing status choices do
Determine the tax liability, marginal tax rate, and average tax rate (rounded to two decimal places) in each of the following cases. Use the tax tables to determine tax liability.a. Single taxpayer,
Havel and Petra are married and will file a joint tax return. Havel has W-2 income of $36,152 and Petra has W-2 income of $37,289. What is their tax liability? Determine their tax liability using
Cameron is single and has taxable income of $93,341. Determine his tax liability using the Tax Tables and using the Tax Rate Schedule. Why is there a difference between the two amounts?
What are the five filing statuses that are permitted on a Form 1040?
Wanda and Austin are under the age of 65 and file their tax return as married filing jointly. They had qualifying health coverage for three months during 2018. They were not eligible for an
Benito is age 29 and single. During all of 2018, he did not have qualifying health coverage nor was he eligible for an exemption. His household income was $47,650. What is the amount of shared

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