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Multiple Choice Quiz
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1.
Which of the following does not increase a taxpayer's at-risk amount?
A)Cash contributed to the activity.
B)Borrowed amounts used in the activity that the taxpayer is not personally liable for.
C)Adjusted basis of property contributed to the activity.
D)Income from the activity.
2.
Which of the following does not decrease a taxpayer's at-risk amount?
A)Property distributions.
B)Fines or penalties paid by the activity.
C)Cash distributions.
D)Tax exempt interest income.
3.
In 2006, Kevin invested $40,000 for a 20% partnership interest (not a passive activity). The partnership has losses of $300,000 in 2006 and $500,000 in 2007. Kevin's share of the partnership's losses is $60,000 in 2006 and $100,000 in 2007. What amount of loss from the partnership can Kevin deduct?
A)$0 in 2006 and $0 in 2007.
B)$12,000 in 2006 and $20,000 in 2007.
C)$40,000 in 2006 and $0 in 2007.
D)$60,000 in 2006 and $100,000 in 2007.
4.
Mevin owns a 40% interest in a partnership (not involved in real estate) in which his at-risk amount was $100,000 at the beginning of the year. During the year, Mevin receives a distribution of $80,000 from the partnership. The partnership produces a $320,000 loss during the year. Ignoring passive loss rules, what is Mevin's deductible loss for the year?
A)$0.
B)$20,000.
C)$100,000.
D)$128,000.
5.
Which of the following is not a passive activity?
A)A partnership interest in which the taxpayer materially participates.
B)A rental real estate activity.
C)A trade or business in which the taxpayer does not materially participate.
D)A limited partnership interest.
6.
Jarmar has AGI (before any rental loss) of $85,000. Nathaniel also owns several rental properties in which he actively participates. The rental properties produced a $50,000 loss in the current year. Jarmar also has $15,000 income from a limited partnership interest. How much, if any, of the rental loss can Nathaniel deduct in the current year?
A)$0.
B)$15,000.
C)$25,000.
D)$40,000.
7.
Darius has AGI (before any rental loss) of $140,000. Darius also owns several rental properties in which he actively participates. The rental properties produced a $40,000 loss in the current year. How much, if any, of the rental loss can Darius deduct in the current year?
A)$0.
B)$5,000.
C)$25,000.
D)$40,000.
8.
Westin sells his entire interest in a rental property in which he actively participated at a gain of $36,000. The activity has a current year loss of $10,500 and $36,500 in prior year suspended losses. During the year, Westin has $105,000 in salary. What is Westin's AGI for the year?
A)$58,000.
B)$94,000.
C)$105,000.
D)$141,000.
9.
Johnny has one passive rental activity with an at-risk basis of $15,000. The activity has a loss for the current year of $25,000. Johnny's AGI, not including the rental property, is $110,000. How much of the loss can Johnny deduct after applying both the at-risk rules and the passive activity loss rules?
A)$0.
B)$10,000.
C)$15,000.
D)$25,000.
10.
Cob is single with no dependents. During 2006, he has $68,500 of taxable income. He has positive AMT adjustments of $27,000 and tax preferences of $10,000. He does not itemize his deductions but takes the standard deduction. Calculate Cob's AMTI.
A)$76,950.
B)$95,500.
C)$105,500.
D)$113,950.
11.
Which of the following itemized deductions is allowed in its entirety for AMT?
A)Medical expenses.
B)Taxes.
C)Charitable contributions.
D)Interest on a home equity loan to buy a car.
12.
Which of the following statements is correct with regard to the medical expense deduction?
A)Medical expenses are not deductible for AMT.
B)Only medical expenses in excess of 7.5% are deductible for AMT.
C)Only 10% of medical expense are deductible for AMT.
D)The AGI limitation is increased 2.5% more for AMT than for regular tax purposes.
13.
Justin reported the following itemized deductions on his 2006 tax return. His AGI for 2006 was $165,000. The mortgage interest is all qualified mortgage interest to purchase his personal residence. For AMT, compute his total adjustment for itemized deductions.
Medical expenses (above the 7.5% AGI floor)$12,000
State income taxes$9,900
Home mortgage interest$15,500
Charitable contributions$4,200
Miscellaneous itemized deductions (above the 2% AGI floor)$2,800
A)$4,125.
B)$12,700.
C)$14,025.
D)$16,825.
14.
After computing all tax preferences and AMT adjustments, Davis and his wife Lauren have AMTI of $290,000. If Davis and Lauren file a joint tax return, what exemption amount can they claim for AMT for 2006?
A)$0.
B)$27,550.
C)$42,500.
D)$62,550.
15.
Which of the following is not an AMT adjustment item?
A)Straight-line depreciation on a rental building.
B)State income taxes.
C)Exercising an incentive stock option.
D)Personal exemptions.





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