QUESTION 1

Mary establishes a Roth IRA at age 50 and contributes the maximum amount per year to the Roth IRA for 15 years. The account is now worth $225,000, consisting of $100,000 in contributions plus $125,000 in accumulated earnings. How much can Mary withdraw tax-free?

	a.	$125,000
	b.	$100,000
	c.	$0
	d.	$225,000

1 points

QUESTION 2

Molly owns and operates 10 restaurants located in various cities throughout the Southeast. In 2022, she travels to San Francisco to discuss the acquisition of a hardware store. After incurring total investigation costs of $53,000, she acquires the store on October 1, 2022. How much, if any, of the $53,000 of investigation costs may Molly deduct in total for calendar year 2022?

	a.	$2,849.99
	b.	$53,000
	c.	$0
	d.	$5,000

1 points

QUESTION 3

Molly cashes in her life insurance policy and receives the cash surrender value of $300,000. She had paid $125,000 in premiums. What are the tax consequences to Molly?

	a.	She recognizes no income from the transaction
	b.	She must include all $300,000 in gross income
	c.	She has income of $125,000 in the current year
	d.	She recognizes $175,000 gain in the current year

1 points

QUESTION 4

Stuart owns 2,000 shares of Blue Corporation stock. During the year, Stuart received 100 shares of Blue Corporation stock as a result of a 5% stock dividend. Stuart was given the option of receiving cash from Blue, but he chose the stock dividend. The additional shares he received had a value of $7,200. Stuarts gross income from the receipt of the additional Blue shares is:

	a.	$4,800
	b.	$7,200
	c.	$0
	d.	$360 (5% of $7,200)

1 points

QUESTION 5

Jane pursued a hobby of making bedspreads in her spare time. Her AGI before considering the hobby is $35,000. During 2020 she sold the bedspreads for $15,000. She incurred expenses as follows:

Supplies	$4,000
Interest on loan to get business started	500
Advertising	6,500

Assuming that the activity is deemed a hobby, how should she report these items on her tax return?

	a.	Include $15,000 in income and deduct nothing.
	b.	Ignore both income and expenses since hobby losses are disallowed.
	c.	Include $15,000 in income and deduct $11,000 for AGI.
	d.	Include $15,000 in income, deduct nothing for AGI, and claim $11,000 of the expenses as itemized deductions.