1. Glenn is an accountant who races stock cars as a hobby. This year Glenn was paid a salary of $80,000 from his employer and won $2,000 in various races. What is the effect of the racing activities on Glenn's taxable income if Glenn has also incurred $4,200 of hobby expenses this year? Assume that Glenn itemizes his deductions.

1. Decrease in taxable income of $2,200
2. Increase in taxable income of $1,640
3. Increase in taxable income of $2,000
4. No change in taxable income
5. Decrease in taxable income of $560

2. Which of the following taxes will not qualify as an itemized deduction?

1. Personal property taxes assessed on the value of specific property
2. State, local, and foreign income taxes
3. Real estate taxes on a residence
4. Gasoline excise taxes on personal travel
5. None of the choices qualify as itemized deductions.

3. Margaret Lindley paid $15,030 of interest on her $300,300 acquisition debt for her home (fair market value of $500,300), $4,030 of interest on her $30,030 home-equity debt used to buy a new boat and car, $1,030 of credit card interest, and $3,030 of margin interest for the purchase of stock. Assume that Margaret Lindley has $10,030 of interest income this year and no investment expenses.

How much of the interest expense may she deduct this year?

1. $23,120
2. $19,060
3. $22,090
4. None of the choices are correct.
5. $18,060