 |
| 1 | |
An auto rental activity is subject to the at-risk rules. |
| | A) | True |
| | B) | False |
|
|
|
| 2 | |
A taxpayer's share of recourse liabilities in an activity is the only liability that increases the taxpayer's at-risk amount. |
| | A) | True |
| | B) | False |
|
|
|
| 3 | |
A cash distribution from an activity reduces the owner's at-risk amount. |
| | A) | True |
| | B) | False |
|
|
|
| 4 | |
To be considered at-risk in an activity, a taxpayer must materially participate in the activity. |
| | A) | True |
| | B) | False |
|
|
|
| 5 | |
A passive activity loss can never be deducted against active and portfolio income. |
| | A) | True |
| | B) | False |
|
|
|
| 6 | |
In order to qualify for the $25,000 rental loss offset, the taxpayer must actively participate in the rental and be at least a 10% owner. |
| | A) | True |
| | B) | False |
|
|
|
| 7 | |
Casey is the sole owner of a lawn care business and has no other employees. In total, Casey worked 475 hours in the business during the year. Casey is not considered a material participant in the lawn care business. |
| | A) | True |
| | B) | False |
|
|
|
| 8 | |
A loss must first be allowed under the at-risk rules and then must pass through the passive loss rules in order to ultimately be deducted on the tax return. |
| | A) | True |
| | B) | False |
|
|
|
| 9 | |
The AMT tax rate for individuals is 26% or 28% depending on whether the taxpayer is married or single. |
| | A) | True |
| | B) | False |
|
|
|
| 10 | |
State and local taxes are allowed as itemed deductions for AMT purposes. |
| | A) | True |
| | B) | False |
|
|
|
| 11 | |
Which of the following decreases a taxpayer's at-risk amount? |
| | A) | Cash contributions. |
| | B) | Property contributions. |
| | C) | Release of liabilities. |
| | D) | Income items. |
|
|
|
| 12 | |
All of the following increase a taxpayer's at-risk amount except? |
| | A) | Cash contributed to the activity. |
| | B) | Recourse liabilities. |
| | C) | Income from the activity. |
| | D) | Non-recourse liabilities. |
|
|
|
| 13 | |
Billy invests $20,000 cash in a land leasing activity for a 5% share in the business. The 95% owner is Kim who contributes $20,000 and borrows $85,000 to put in the business. Only Kim is liable for repayment of the loan. The partnership incurs a loss of $150,000 during the year. What amount of the loss is deductible currently by Billy and Kim (ignore passive loss rules)? |
| | A) | $0 by Billy and $0 by Kim. |
| | B) | $7,500 by Billy and $108,000 by Kim. |
| | C) | $7,500 by Billy and $105,000 by Kim. |
| | D) | $20,000 by Billy and $142,500 by Kim. |
|
|
|
| 14 | |
Dudley and his Uncle Edgar each invested $70,000 cash in the D&E Partnership and each received a 50% interest in the partnership. To finance his investment in the partnership, Dudley borrowed $30,000 on a full recourse basis from his partner, Uncle Edgar. Which of the following statements is correct? |
| | A) | Dudley's at-risk amount in his partnership interest is $40,000. |
| | B) | Uncle Edgar's at-risk amount in his partnership interest is $70,000. |
| | C) | Dudley's at-risk amount in his partnership interest is $70,000. |
| | D) | Uncle Edgar's at-risk amount in his partnership interest is $40,000. |
|
|
|
| 15 | |
Which of the following would not be considered a passive activity? |
| | A) | A rental house. |
| | B) | A trade or business in which the taxpayer conducts all of the work. |
| | C) | A limited partnership interest. |
| | D) | An investor in a dry cleaning business. |
|
|
|
| 16 | |
Jason owns four small businesses. Each business has its own employees. Jason spends the following number of hours this year working in the various businesses: business A, 250 hours; business B, 135 hours; business C, 200 hours; business D, 75 hours. Which of the following statements is correct? |
| | A) | Businesses A, B, C, and D are all significant participation activities. |
| | B) | Jason is considered a material participant in Businesses A, B, and C. |
| | C) | Jason is considered a material participant in Businesses A, B, C, and D. |
| | D) | Both a and b are correct. |
|
|
|
| 17 | |
Ettienne is an attorney and earns $275,000 from his practice in the current year. He also has an ownership interest in three passive activities. In the current tax year, the activities had the following income and loss: | Partnership A | $ 40,000 | | Partnership B | $ (26,000) | | Partnership C | $ (22,000) |
What is Ettienne's adjusted gross income for the current year? |
| | A) | $227,000. |
| | B) | $267,000. |
| | C) | $275,000 |
| | D) | $315,000. |
|
|
|
| 18 | |
Samuel is a CPA and earns $75,000 from his practice in the current year. He also has an ownership interest in three passive activities. In the current tax year, the activities had the following income and loss:| Partnership A | $ 30,000 | | Partnership B | $ (16,000) | | Partnership C | $ (12,000) |
What is Samuel's adjusted gross income for the current year? |
| | A) | $47,000. |
| | B) | $77,000. |
| | C) | $89,000. |
| | D) | $105,000. |
|
|
|
| 19 | |
Raymond has AGI (before any rental loss) of $155,000. He has rental properties that produced a $45,000 loss in the current year. Raymond had no other passive income during the year. How much, if any, of the rental loss can he deduct in the current year? |
| | A) | $0. |
| | B) | $ 5,000. |
| | C) | $30,000. |
| | D) | $45,000. |
|
|
|
| 20 | |
Bennet has $140,000 AGI (before any rental loss). He also owns two rental properties in which he actively participates. One had income of $5,000 and one had a loss of $15,000 in the current year. How much, if any, of the rental loss can Bennet deduct in the current year? |
| | A) | $ 5,000. |
| | B) | $10,000. |
| | C) | $15,000. |
| | D) | $25,000. |
|
|
|
| 21 | |
Richard has an activity that has a current year loss of $15,500 and $18,500 in prior year suspended losses. During the year, Richard has $105,000 in salary. If Richard sells his interest for a $30,000 gain, what is Richard's AGI for the year? |
| | A) | $ 71,000. |
| | B) | $101,000. |
| | C) | $105,500. |
| | D) | $135,000. |
|
|
|
| 22 | |
When determining whether a limited partnership loss is deductible, a taxpayer must: |
| | A) | Only be concerned with the at-risk rules. |
| | B) | Only be concerned with the passive activity loss rules. |
| | C) | Apply the at-risk rules and then the passive activity loss rules. |
| | D) | Apply the passive loss rules first and then at-risk rules. |
|
|
|
| 23 | |
Edward owns but does not materially participate in an activity. Edward invested $60,000 in the activity. Edward's share of the current year loss is $75,000. Assuming Edward has $200,000 in AGI before the loss and no other passive income or loss, how much of the $75,000 loss will be deductible by Ferris: |
| | A) | $0. |
| | B) | $60,000. |
| | C) | $75,000. |
| | D) | Cannot be determined. |
|
|
|
| 24 | |
Alex invested $400,000 in activity A and $300,000 in activity B (both passive) in 2006. At the beginning of 2007, Alex's at-risk amount was $210,000 in A and $205,000 in B. Activity A had a loss of $225,000 and Activity B had income of $230,000. What is the amount of income or loss recognized in 2007 from these activities? |
| | A) | $0. |
| | B) | $ 5,000 income. |
| | C) | $20,000 income. |
| | D) | $15,000 losses. |
|
|
|
| 25 | |
Which of the following statements is correct with regard to the medical expense deduction? |
| | A) | Medical expenses are not deductible for AMT. |
| | B) | The medical expense deduction is increased for AMT. |
| | C) | The medical expense deduction is decreased for AMT. |
| | D) | Certain medical expenses that are deductible for regular tax purposes are not deductible for AMT. |
|
|
|
| 26 | |
After computing all tax preferences and AMT adjustments, Paul and his wife Joan have AMTI of $190,000. If Paul and Joan file a joint tax return, what exemption amount can they claim for AMT for 2007? |
| | A) | $0. |
| | B) | $33,750. |
| | C) | $35,000. |
| | D) | $45,000. |
|
|
|
| 27 | |
Markus is single with no dependents. During 2007, he has $89,000 of taxable income. He also has $69,000 of positive AMT adjustments and $43,000 of tax preferences. Jacob does not itemize his deductions but takes the standard deduction. Calculate his AMTI. |
| | A) | $201,000. |
| | B) | $204,400. |
| | C) | $206,350. |
| | D) | $209,750. |
|
|
|
| 28 | |
Which of the following itemized deductions is allowed for AMT? |
| | A) | Miscellaneous itemized deductions. |
| | B) | Taxes. |
| | C) | Charitable contributions. |
| | D) | Home equity interest on a loan to purchase a new auto. |
|
|
|
| 29 | |
Todd reported the following itemized deductions on his 2007 tax return. His AGI for 2007 was $95,000. The mortgage interest is all qualified mortgage interest to purchase his personal residence. For AMT, compute his total adjustment for itemized deductions.| Medical expenses (after the 7.5% of AGI floor) | $4,000 | | State income taxes | 5,700 | | Home mortgage interest | 14,500 | | Charitable contributions | 5,300 | | Miscellaneous itemized deductions (after the 2% of AGI floor) | 3,200 |
|
| | A) | $ 8,075. |
| | B) | $ 8,900. |
| | C) | $11,275. |
| | D) | $12,900. |
|
|
|
| 30 | |
Pedro is married and has AMTI of $310,000. His AMT will be calculated at which of the following rates. |
| | A) | 26%. |
| | B) | 26% less $3,500. |
| | C) | 28%. |
| | D) | 28% less $3,500. |
|
|
.