1. Lonzo realized a loss on his rental property sold with the installment sale. If the taxpayer realized a loss on an installment sale, he should report the loss on which form first?
2. a)Form 1040
3. b)Schedule D
4. c)Form 4797
5. d)Form 6252
6. The Browns are both managers and file jointly with modified AGI of $166,000. Their dependent son Gary is a full-time college student. During the tax year, they paid $10,500 in qualifying education expenses for his second year of college. On their tax return, how will the Browns claim the tax benefit for Gary's education expenses?
7. a)They are not eligible to claim a tax benefit for the education expenses.
8. b)They can claim an education credit, specifically the Lifetime Learning Credit.
9. c)They can claim the American Opportunity Credit.
10. d)They can claim the Tuition and Fees deduction, an adjustment to income.
11. Geoffrey was age 23 on 12/31/16. He was a full-time student and completed his 4thyear of college in May of 2016. His Spring semester was paid for in December of the prior year and credit on those expenses has been claimed on the prior year's return. After graduation, he was unable to find employment, so he moved back in with his parents and entered graduate school in the fall of 2016. Although a full-time student, he also worked part-time as a waiter. Geoffrey's parents are claiming him as a dependent on their tax return and had an AGI of $56,000. Geoffrey received a 1098-T from the college with Box 9 checked (grad student).
12. Which of the following statements is correct?
13. a)Geoffrey's parents will claim him as a dependent and are eligible to take a Lifetime Learning Credit.
14. b)Geoffrey's parents will claim him as a dependent and are eligible to take an American Opportunity Credit.
15. c)Geoffrey's parents will claim him as a dependent and may take an American Opportunity Credit for the expenses for Geoffrey's 4thyear in college and take a Lifetime Learning Credit for Geoffrey's graduate school expenses in 2016.
16. d)Geoffrey's parents will claim him as a dependent, but are ineligible to claim either an American Opportunity Credit or Lifetime Learning Credit for 2016.
17. The Greens are filing jointly with modified AGI of $84,000. During the tax year, they paid $9,500 in qualified education expense for their only son Eric's first year of college. They have no education expenses for themselves. What is the Greens' maximum allowable education credit?
18. a)$ 0 b) $1,500 c) $1,900 d) $2,500

Comp Module 3 FE Student - 7

1. Darla graduated from college two years ago, but at age 26 was still paying principal plus interest on her student loans during the current tax year. She took a full-time academic workload throughout her college career, except for her last year when she took only half the normal full-time workload. Her modified AGI for the current tax year is $48,000 and she will not itemize deductions. Can Darla claim a student loan interest deduction on her tax return?
2. a)She cannot claim a student loan interest deduction because she took less than a normal full-time workload her last year of college.
3. b)She cannot claim a student loan interest deduction because she did not attend college during the current tax year.
4. c)She can claim a student loan interest deduction for the current tax year.
5. d)She cannot claim a student loan interest deduction because she is not itemizing.
6. Darla is now age 29 and her modified AGI has increased to $70,000. She still paid principal plus interest on her student loans during the current tax year. Can Darla claim a student loan interest on this year's tax return?
7. a)She can claim a student loan interest deduction, but the amount is subject to phase-out as her income increases.
8. b)She cannot claim the student interest deduction due to her income level.
9. c)She cannot claim a student loan interest deduction because she took less than a normal
10. full-time workload her last year of college.
11. d)She cannot claim a student loan interest deduction because she did not attend college
12. during the current tax year.
13. The Grays took out a student loan for their son, Joel, each year he was in college. They have taken all allowable tax benefits throughout his college career. Joel graduated in June of the tax year, turned age 24, and provided more than half of his own support. The Grays paid principal plus interest on the student loan throughout the tax year and will continue until it is paid off in three years. The Grays file jointly with modified AGI of $136,000. Can the Grays claim a student loan interest deduction on their tax return?
14. a)They can claim a student loan interest deduction for the current tax year.
15. b)They cannot claim a student loan interest deduction because they cannot claim Joel as
16. their dependent.
17. c)They cannot claim a student loan interest deduction due to their income level.
18. d)They cannot claim a student loan interest deduction because Joel did not attend college
19. for more than half the current tax year.
20. Regarding the Grays with $136,000 modified AGI and their son Joel, age 24, with $26,000 modified AGI, who can claim a tax benefit for tuition and fees paid during the current tax year? (Exclude Student Loan Interest Deduction from this question.)
21. a)Only the Grays can claim the Lifetime Learning Credit, American Opportunity Credit (if Joel qualifies), or the Tuition and Fees Deduction, whichever is more beneficial.
22. b)Only Joel can claim the Lifetime Learning Credit, the American Opportunity Credit (if he qualifies), or the Tuition and Fees Deduction, whichever is more beneficial.
23. c)Either the Grays or Joel (but not both) can claim the education tax benefit.
24. d)Neither the Grays nor Joel can claim an education tax benefit.

1. Rick is a project manager for a construction company and has significant unreimbursed employee business mileage between job sites. Which of the following is afalsestatement regarding how he can claim a deduction for his business mileage?
2. a)If he itemizes deductions, he must first report his business mileage expense on Form 2106.
3. b)If he does not itemize deductions, he can claim his business mileage expense as an adjustment to income.
4. c)If he itemizes deductions, the total expense from Form 2106 is carried to Schedule A under Job Expenses and is subject to the 2% AGI limitation.
5. d)He must itemize deductions to claim a deduction for employee business mileage.
6. Linda claims an exemption for her daughter Judy. She will claim an education credit on her tax return for both Judy's and her own college expenses. Which of the following statements about the American Opportunity Credit and the Lifetime Learning Credit isincorrect?
7. a)The maximum credit per eligible student is $2,500 for the American Opportunity Credit and the maximum credit per return is $2,000 for the Lifetime Learning Credit.
8. b)The American Opportunity Credit is claimed for only the first four years of postsecondary education and there is no limit on the number of years the Lifetime Learning Credit can be claimed for each student.
9. c)The MAGI limit for the current tax year for the American Opportunity Credit is $90,000 or $180,000 if MFJ and the Lifetime Learning Credit is $65,000 or $131,000 if MFJ.
10. d)The American Opportunity Credit and the Lifetime Learning Credit may not be claimed if the student has a felony drug conviction.
11. Judy's expenses for her third year at a university include the following: $3,000 for tuition, $500 for books, $2,500 for her dormitory room and $2,200 for food. What amount of the expenses will qualify for the American Opportunity Credit?
12. a)$ 0 b) $1,750 c) $8,200 d) $3,500
13. Linda will claim an education credit on her tax return for her daughter's college expenses. Which of the following will reduce qualified education expenses?
14. a)Wages
15. b)An inheritance
16. c)Pell Grants
17. d)Withdrawal from the student's personal savings
18. Walter is a salesman for a pharmaceuticals firm and has considerable unreimbursed travel expenses to develop new clients. To what extent are travel expenses deductible?
19. a) 100% b) 55% c) 50% d) 0%

1. Chris dropped out of high school and fell in with the wrong crowd. After serving time for a felony drug conviction, he straightened up and got his GED. Still living with his parents, last year he finished his first year of community college at age 20. His parents claim Chris as their dependent. Their son's felony drug conviction will prevent the use of which of the following:
2. a)American Opportunity Credit
3. b)Lifetime Learning Credit
4. c)Tuition and Fees Deduction
5. d)Student loan interest
6. Teri's uncle gave her a house on 12/25/01. The fair market value of the house at the time of the gift was $79,000. Assume he owed no gift tax. Her uncle purchased the house on 3/20/74 for $58,759. The home has never been used for business. Prior to moving into the house, Teri paid for the following:
7. New roof $9,873 Installed storm windows $1,962

Replaced a broken window Replaced gravel in the driveway

$ 127 $ 499

Assume if she sells the house in the future, Teri would realize a gain.

What is Teri's adjusted basis in her home?

a) $91,461 b) $90,835 c) $70,721 d) $70,594

1. George sold his summer home and must report it on his tax return. The taxable gain on the sale of nonbusiness residential real estate would be reported on which of the following forms first?
2. a)Form 1040
3. b)Schedule E
4. c)Form 8949
5. d)Form 4797
6. Bert is filing Married Filing Separately and has $3,500 loss from stock sales last year. What is the deductible capital loss limit for a taxpayer who is Married Filing Separately?
7. a)$ 0 b) $ 1,500 c) $ 3,000 d) $25,000
8. Jack is self-employed and owns his own business. He should report his job-related expenses on which of the following forms?
9. a)Schedule A
10. b)Form 1040A, adjustments
11. c)Schedule C
12. d)Form 2106

Copyright 2017, The Income Tax School, Inc. - All Rights Reserved

Comp Module 3 FE Student - 10

1. Dave owns a business that produces videos and music. He wants to claim depreciation expense on various business property assets. Which of the following properties can be depreciated using MACRS?
2. a)Machinery
3. b)Intangible property
4. c)Any motion picture film or videotape
5. d)Any sound recording
6. Lance owns a rental home and claims depreciation expense on several associated assets. Which of the following is anexceptionto the 7-year property rule, if used in a residential rental property?
7. a)Office furniture
8. b)Appliances
9. c)Files
10. d)Safes
11. Lance claims depreciation expense on his rental home. What is the class life of a residential rental property?
12. a)39 years
13. b)31.5 years
14. c)27.5 years
15. d)18 years
16. Lance has heard depreciation expense for certain assets must be calculated using the straight line method (also called amortization). Which of the following should be amortized?
17. a) Auto
18. b) Computer c) Furniture d) Patent
19. Andy and Elaine are married and each has a business. In the current tax year, Andy made purchases of depreciable items in the amount of $31,000. Elaine purchased $69,000 in equipment. Andy's net income is $50,500. Elaine's net income is $90,000. Andy and Elaine's taxable income is $152,000. What is the combined amount of Section 179 expense deduction that would be allowed for the current tax year?
20. a) $140,500 b) $100,000 c) $125,000 d) $140,000
21. Andy and Elaine purchased several business assets for which they plan to claim Section 179 expense deductions. Which of the following isincorrectlylisted as asset types eligible for Section 179 expense deductions?
22. a)Equipment
23. b)Property acquired from a related person
24. c)Machinery
25. d)Furniture

Copyright 2017, The Income Tax School, Inc. - All Rights Reserved

Comp Module 3 FE Student - 11

1. Dave claims depreciation expense on several assets used in his video and music business. The IRS considers some as listed property requiring special reporting. Which of the following isincorrectlyincluded in items considered listed property?
2. a)Office furniture
3. b)Passenger automobile weighing 6,000 pounds or less
4. c)Computer
5. d)Videoequipment
6. Dave may need to file Form 4562,Depreciation and Amortization.Which of the following isincorrectlylisted as a reason Form 4562 should be filed?
7. a)Depreciation is claimed on property placed in service in a prior year
8. b)Section 179 deduction is claimed
9. c)Amortization of costs that began in the current year
10. d)Depreciation is claimed on listed property
11. Shelly purchased the following assets for her business:

Imaging machine Copier

File cabinets Developer

$1,000 purchased 08/31/2016 $2,000 purchased 10/19/2016 $ 300 purchased 11/10/2016 $3,000 purchased 12/05/2016

What convention would Shelly use to depreciate her assets?

1. a)Half-yearconvention
2. b)Mid-monthconvention
3. c)Mid-quarterconvention
4. d)Mid-year convention
5. Lance, the rental property owner, made several repairs/replacements this year and must decide whether they should be depreciated. Which of the following conditions isnota determining factor in deciding when repairs and replacements should be depreciated?
6. a)Increase the value of a property
7. b)Make the property more useful
8. c)Lengthen the life of the property
9. d)Cost of the repair/replacement exceeds $2,500