$1.$ Choose whether the following statement is true or false: $$All investment expenses are itemized deductions.$$

$2.$ Choose whether the following statement is true or false: $$The phrase "ordinary and necessary" means that an expense must be appropriate in and helpful for generating a profit.$$

$3.$ On which tax form does a sole$-$proprietorship report its income and losses?

a$.$ Form $1120$

b$.$ Form $1120-$S

c$.$ Form $1065$

d$.$ Form $1040,$ Schedule C

e$.$ None of the above.

$4.$ Choose whether the following statement is true or false: $$A loss from a passive activity is fully deductible as long as the taxpayer has sufficient tax basis in the activity.$$

$5.$ What is the correct order of the loss limitation rules?

a$.$ Tax basis, at$-$risk amount, passive loss limits

b$.$ At$-$risk amount, tax basis, passive loss limits

c$.$ Passive loss limits$,$ at$-$risk amount, tax basis

d$.$ Tax basis, passive loss limits$,$ at$-$risk amount

e$.$ Passive loss limits$,$ tax basis, at$-$risk amount

$6.$ A taxpayer's at$-$risk amount in an activity is increased by:

a$.$ a reduction in the amount of debt related to the activity that the taxpayer is responsible for paying.

b$.$ cash contributions to the activity.

c$.$ cash distributions from the activity.

d$.$ a reduction in the amount of debt related to the activity that the taxpayer is responsible for paying and cash contributions to the activity.

e$.$ a reduction in the amount of debt related to the activity that the taxpayer is responsible for paying and cash distributions from the activity.

$7.$ Sue invested $$5,000$ in the ABC Limited Partnership and received a $10$ percent interest in the partnership. The partnership had $$20,000$ of debt she is not responsible to repay because she is a limited partner. Sue is allocated a $10$ percent share of the debt, resulting in a tax basis of $$7,000$ and an at$-$risk amount of $$5,000.$ During the year, ABC LP generated a $($$$70,000)$ loss. How much of Sue's loss is disallowed due to her tax basis or at$-$risk amount?

a$.$ Zero; all of her loss is allowed to be deducted.

b$.$ $$2,000$ disallowed because of her at$-$risk amount.

c$.$ $$2,000$ disallowed because of her tax basis.

d$.$ $$4,000$ disallowed because of her tax basis.

e$.$ $$4,000$ disallowed because of her at$-$risk amount.

$8.$ Generally, which of the following does not correctly categorize the type of income?

a$.$ Rental real estate$$passive income$/$loss$.$

b$.$ Salary$$active income$/$loss$.$

c$.$ Dividends$$portfolio income$/$loss$.$

d$.$ Capital losses$$passive income$/$loss$.$

e$.$ All of these choices are correct.

$9.$ Michelle is an active participant in the rental condominium property she owns. During the year, the property generates a $($$$15,000)$ loss; however, Michelle has sufficient tax basis and at$-$risk amounts to absorb the loss. If Michelle has $$115,000$ of salary, $$10,000$ of long$-$term capital gains, $$3,000$ of dividends, and no additional sources of income or deductions, how much loss can Michelle deduct?

a$.$ Zero; losses from rental property are passive losses and can only be offset by passive income

b$.$ $$4,000$

c$.$ $$11,000$

d$.$ $$15,000$

e$.$ None of the choices are correct.

$10.$ Max, a single taxpayer, has a $$280,000$ loss from his sole proprietorship in $2023.$ How much of this loss is deductible after considering the excess business loss rules?

a$.$ $$280,000$

b$.$ $$270,000$

c$.$ $$10,000$

d$.$ $$0$

e$.$ None of the choices are correct.

$11.$ Kenneth lived in his home for the entire year except when he rented his home $($near a very nice ski resort$)$ to a married couple for $14$ days in December. The couple paid Kenneth $$14,000$ in rent for the two weeks. Kenneth incurred $$1,000$ in expenses relating to the home for the $14$ days. Which of the following statements accurately describes the manner in which Kenneth should report his rental receipts and expenses for tax purposes?

a$.$ Kenneth would include the rental receipts in gross income and deduct the rental expenses for AGI.

b$.$ Kenneth would exclude the rental receipts from gross income and deduct the rental expenses for AGI.

c$.$ Kenneth would include the rental receipts in gross income and would not deduct the rental expenses because he used the residence for personal purposes for most of the year.

d$.$ Kenneth would exclude the rental receipts, and he would not deduct the rental expenses.

$12.$ Katy owns a second home. During the year, she used the home for $20$ personal$-$use days and $50$ rental days. Katy allocates expenses associated with the home between rental use and personal use. Katy did not incur any expenses to obtain tenants. Which of the following statements is correct regarding the tax treatment of Katy's income and expenses from the home?

a$.$ Katy includes the rental receipts in gross income and deducts the expenses allocated to the rental use of the home for AGI.

b$.$ Katy deducts from AGI interest expense and property taxes associated with the home not allocated to the rental use of the home.

c$.$ Assuming Katy's rental receipts exceed the interest expense and property taxes allocated to the rental use,