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| 1 | |
Rental income may be reported on a Schedule A or a Schedule C. |
| | A) | True |
| | B) | False |
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| 2 | |
All rental properties are depreciated using straight-line method over 39 years. |
| | A) | True |
| | B) | False |
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| 3 | |
If a tenant provides a service for the rental property in lieu of rental payment, the amount is considered rental income and must be reported. |
| | A) | True |
| | B) | False |
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| 4 | |
Rental properties that are also used as vacation homes fall under one of two categories: (1) primarily rental; or (2) primarily personal. |
| | A) | True |
| | B) | False |
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| 5 | |
In case of a primarily personal property, a taxpayer may report a net loss as long as the correct allocation method was used. |
| | A) | True |
| | B) | False |
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| 6 | |
The two methods that may be used to allocate expenses between personal and rental use of properties are the IRS method and the Tax Court method. |
| | A) | True |
| | B) | False |
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| 7 | |
A primarily rental property may report its income and expenses on a Schedule E or a Schedule D. |
| | A) | True |
| | B) | False |
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| 8 | |
A royalty income may be received from the use of books, stories, plays, copyrights, trademarks, etc. owned by the taxpayer. |
| | A) | True |
| | B) | False |
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| 9 | |
When royalties are paid, the amount paid is sent to the recipient by the payer on a Form 1099-MISC. |
| | A) | True |
| | B) | False |
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| 10 | |
Flow-through entities include LLC's, S Corporations, trusts and estates. |
| | A) | True |
| | B) | False |
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| 11 | |
On October 1 of the current year, Jose and Joyce purchased a beach house for $1,300,000. Of that amount, $800,000 was for the land value. How much depreciation deduction can Jose and Joyce take in the current year? (You may need to refer to the depreciation tables.) |
| | A) | $3,790 |
| | B) | $4,545 |
| | C) | $6,064 |
| | D) | $8,335 |
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| 12 | |
Which of the following is not considered an ordinary expense for a rental activity? |
| | A) | Management fees |
| | B) | Insurance |
| | C) | Repairs and maintenance |
| | D) | All of the above are ordinary expenses |
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| 13 | |
Chad owns a house in Palm Springs, and travels there for maintenance four times a year. The round trip to Palm Springs from where Chad lives, is approximately 170 miles. How much travel costs can Chad deduct per year related to his rental house? |
| | A) | $218 |
| | B) | $323 |
| | C) | $655 |
| | D) | $1,352 |
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| 14 | |
Sheila owns a home in Idaho that she rents for $1,400 per month that she does not use personally. While she was in Australia for the winter, the plumbing in her house broke and her tenants repaired it for $650. For the following month's rent (January), her tenants paid her $750 for rent ($1,400 – $650). What amount should Sheila include for rental income and repair expenses, respectively, for January? |
| | A) | $750; $650 |
| | B) | $650; $750 |
| | C) | $1,400; $650 |
| | D) | $1,400; $750 |
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| 15 | |
If a taxpayer materially participates in a real estate activity as a real estate professional, the income and expense of the rental activity should be reported on: |
| | A) | Schedule E |
| | B) | Schedule C |
| | C) | Either Schedule E or C |
| | D) | Niether Schedule E or C |
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| 16 | |
Janet and Jason own a four-plex in Santa Monica. They rent out 3 units and live in the fourth. Their income and expenses for the four-plex are as follows: mortgage interest $11,200, property taxes $9,000, insurance $3,500, utilities $1,500, repairs and maintenance $3,000, depreciation on the entire complex of $8,000, and rental income of $36,000. What amount of net rental income or loss should Janet and Jason report on their tax return? |
| | A) | $200 net loss |
| | B) | $8,850 net income |
| | C) | $15,800 net income |
| | D) | $36,000 net income |
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| 17 | |
A property that has been rented for 180 days and used for personal use for 16 days should be categorized as: |
| | A) | primarily rental |
| | B) | primarily personal |
| | C) | personal/rental |
| | D) | all of the above are correct |
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| 18 | |
Katie and Mike own a home in Newport Beach, CA. During the year, they rented the house for 80 days for $24,000 and used it for personal use for 30 days. The house remained vacant for the remainder of the year. The expenses for the house included $20,000 in mortgage interest, $8,500 in property taxes, $6,000 in utilities, $2,000 in maintenance, and $12,000 in depreciation. What is the deductible loss for the rental of their home (without considering the passive loss limitation)? Use the IRS method for allocation of expenses. |
| | A) | $0 |
| | B) | $5,000 net income |
| | C) | $17,414 net loss |
| | D) | $27,500 net loss |
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| 19 | |
Lois and Benjamin own a chalet in New Mexico and rented it for 12 days for $6,000. The rest of the year, the chalet was used by them and their friends and family. What is the proper tax treatment of the $6,000 income? |
| | A) | none of the rental income need to be included in gross income |
| | B) | should be reported on schedule E |
| | C) | the amount should be reported on schedule C |
| | D) | the amount should be reported as other income |
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| 20 | |
Which of the following statements is true concerning vacation home properties? |
| | A) | A property rented for more than 15 days and used for personal use for less than 14 days is categorized as primarily rental. |
| | B) | A property rented for more than 15 days and used for personal use for more than 14 days is categorized as primarily personal. |
| | C) | A property categorized as primarily personal is one rented for zero days. |
| | D) | Report all income and expense for a personal/rental property and the net can be either net income or net loss. |
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| 21 | |
Which of the following expense items is (are) deductible as rental expense? |
| | A) | Property taxes |
| | B) | Depreciation |
| | C) | Insurance |
| | D) | All are deductible rental expenses |
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| 22 | |
Elizabeth rented her personal residence for 12 days to summer vacationers for $4,800. She has an AGI of $105,000 excluding the rental income. Related expenses for Elizabeth's personal residence for the year include these: | Real property taxes | $4,500 | | Utilities | 5,000 | | Insurance | 900 | | Mortgage interest | 7,000 | | Repairs | 800 | | Depreciation | 15,000 |
What is Elizabeth's AGI taking into consideration the rental income and related expenses? |
| | A) | $4,800 |
| | B) | $100,200 |
| | C) | $105,000 |
| | D) | $109,800 |
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| 23 | |
Robert and Melissa own a home in Big Bear Lake, California. During the year, they rented it for 55 days for $11,000 and used it for 12 days for personal use. The house remained vacant for the remainder of the year. The expenses for the house included $12,000 in mortgage interest, $2,000 in property taxes, $1,000 in utilities, $600 in maintenance, and $4,000 in depreciation. What is their income or loss from their cabin (without considering the passive loss limitation)? Use the IRS method for allocation of expenses. |
| | A) | $0 |
| | B) | $2,947 net loss |
| | C) | $5,806 net loss |
| | D) | $11,000 net income |
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| 24 | |
Royalties can be earned from allowing others the right to use: |
| | A) | patents |
| | B) | plays |
| | C) | songs |
| | D) | all of the above |
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| 25 | |
When royalty income is received, the recipient generally reports the income on which form? |
| | A) | Schedule D |
| | B) | Schedule K-1 |
| | C) | 1099-MISC |
| | D) | Schedule E |
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| 26 | |
Darlene is a full-time author and recently published her third romance novel. The royalty income she receives from the publisher this year should be reported on what schedule? |
| | A) | Schedule C |
| | B) | Schedule K-1 |
| | C) | 1099-MISC |
| | D) | 1099-INT |
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| 27 | |
Paul is a 45 year old stockbroker. When he was in his 20s, he was a member of a band called the Zombies and wrote several hit songs. Paul should report the royalty income he receives in the current year from his songs on what schedule? |
| | A) | Schedule E |
| | B) | Schedule D |
| | C) | Schedule A |
| | D) | Schedule C |
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| 28 | |
Royalties can NOT be earned from which of the following: |
| | A) | oil wells |
| | B) | patents |
| | C) | coal mines |
| | D) | stocks |
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| 29 | |
Which of the following entity(ies) is (are) considered flowthrough entity(ies)? |
| | A) | C corporation |
| | B) | sole proprietorship |
| | C) | Non profit corporations |
| | D) | Estates |
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| 30 | |
Earl and Sandra own and operate a restaurant as a S corporation. Each is a 50% owner. The business reports the following results for the year:| Revenue | $ 480,000 | | Business expenses | 398,000 | | Investment expenses | 32,000 |
How do Earl and Sandra report these items for tax purposes on each of their individual returns? |
| | A) | $41,000 income on Schedule E; $16,000 investment expense on Schedule A |
| | B) | $41,000 income on Schedule E; $32000 investment expense on Schedule A |
| | C) | $82,000 income on Schedule E; $32,000 investment expense on Schedule A |
| | D) | $480,000 income on Schedule E; $16,000 investment expense on Schedule A |
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