1. Capital gains. Pierre is single. In 2020, he earned a salary of $16,400. He also realized a gain of $13,000 on the sale of a capital asset that he had held for three years. He had no other income or transactions. He had no for AGI or itemized deductions. How much is his income tax liability for 2020?

2. Vacation home. Mahika owns a home in Queens, NY, which is her principal residence. In 2019, during the U.S. Open, she rented out her home for 7 days for $7,000. She paid no property tax or mortgage interest. Operating expenses (including maintenance, insurance, utilities, etc.) of $400 and depreciation of $500 would be allocable to the rental use of the home. How much income does she recognize and how much are her deductions?

A. $7,000 income; zero deductions

B. $7,000 income; $900 deductions

C. $7,000 income; $400 deductions

D. zero income; zero deductions

3. Vacation home. Lars owns a vacation home that he uses for vacation for 10 days and rents out to strangers at fair rental value for 90 days. The rest of the year it is not used. He uses the IRS method to allocate expenses when allocation is necessary. He had $38,000 of rental income. He paid $6,000 of mortgage interest, $2,000 of real estate taxes, and $10,000 of operating expenses (including maintenance, insurance, utilities, etc.). Depreciation would be $12,000 if the home were solely used as a rental. (To be clear, the expenses noted above are all totals BEFORE any allocation that may be necessary.) How much income or loss should he report for the home?

A. No income or loss

B. $8,000 of income

C. $11,000 of income

4. Depreciation. For his machine shop business, Ezekiel made two asset purchases in the current year. He paid $2,000 for a computer that he placed in service on January 30 and $10,000 for a lathe (a type of equipment) that he placed in service on December 15. How much depreciation (as a percentage of the purchase price) should he claim for each asset this year?

A. Computer: 35.00%; Lathe: 25.00%

B. Computer: 5.00%; Lathe: 3.57%

C. Computer: 20.00%; Lathe: 14.29%

D. Computer: 35.00%; Lathe: 3.57%

5. Vacation home. Kimba owns a vacation home which she uses for vacation for 30 days and rents to strangers at fair rental value for 30 days. The rest of the year it is not used. She uses the IRS method to allocate expenses. She had $8,000 of rental income. She paid $36,000 of mortgage interest on the home, all of which would be deductible if she solely made personal use of the home. She paid no real estate taxes. Operating expenses (including maintenance, insurance, utilities, etc.) were $10,000. Depreciation would be $18,000 if the home were solely used as a rental. (To be clear, the expenses noted above are all totals BEFORE allocation.) How much income or loss should she report for the home?

A. Loss of $24,000 [$8,000 rental income - $18,000 mortgage interest - $5,000 operating expense - $9,000 depreciation]

B. Loss of $10,000 [$8,000 rental income - $18,000 mortgage interest]

C. No income or loss

D. Income of $8,000