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Exam 17: Tax Consequences of Personal Activities

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Question 41

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Mr.and Mrs.King had only one casualty loss this year.A tornado severely damaged their home,decreasing its value by $70,000.The couple received a $48,000 reimbursement from their insurance company.Compute the Kings' itemized deduction for casualty losses if their AGI was $98,200.

A) $22,000
B) $21,900
C) $12,080
D) $60,080

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Question 42

Multiple Choice

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Spencer paid the following taxes this year. Compute Spencer's itemized deduction for taxes.

A) $5,725
B) $13,615
C) $9,025
D) $12,023

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Question 43

Multiple Choice

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Ted and Alice divorced this year.Pursuant to the divorce agreement,Ted pays $5,000 alimony and $7,500 child support to Alice every month.Alice is the custodial parent.Which of the following statements is true?

Mrs.Hanson's financial support this year consisted of: $14,650 Social Security benefits; $9,600 pension from her former employer's qualified retirement plan,and $15,000 cash gifts from her children.Compute Mrs.Hanson's AGI.

Mr.and Mrs.Perry own three personal residences,all of which are subject to an acquisition mortgage.The mortgage on the first residence is $290,000,the mortgage on the second residence is $400,000,and the mortgage on the third residence is $357,000.Which of the following statements is true?

Three years ago,Suzanne bought a new personal automobile for $26,900.This year,she sold it for $19,000.What is the amount and character of Suzanne's recognized loss?

Tax return preparation fees are miscellaneous itemized deductions subject to the 2% AGI floor.

Mia inherited $1 million from her deceased grandfather.Mia must include the inheritance in gross income.

Which of the following itemized deductions is disallowed in the computation of alternative minimum taxable income (AMTI) ?

Any gain recognized on the sale of a personal residence is excluded from the seller's gross income.

Mrs.Kronin received $16,200 child support payments from her former husband.These payments are excluded from Mrs.Kronin's gross income.

An activity will be classified as a hobby if the taxpayer fails to make a profit from the activity.

Ms.Bjorn's only contribution this year was a donation of marketable securities (FMV $600,000; tax basis $273,000) to a public charity.Her AGI was $814,000.Which of the following statements is true?

Mr.Haugh owns a sporting goods store as a sole proprietorship.This year,he donated baseball equipment (bats,gloves,balls) to the local YMCA to use in their community sports programs.His cost basis in the inventory items was $45,700,and their retail value was $68,200.Which of the following statements about this donation is true?

Mr.and Mrs.Blake suffered two casualty losses this year.Mr.Blake's wallet containing $1,300 cash was stolen,and their uninsured sailboat (basis $67,000; FMV $50,000) sank after colliding with a reef.Compute the Blakes' itemized deduction for casualty losses if their AGI was $112,200.

Polly received the following items this year. Compute Polly's gross income.

Gifts are not included in the recipient's gross income.

Six years ago,Milo Lenz,an amateur artist,sculpted a garden gnome as a gift for his mother.This year,his mother sold the gnome on eBay for $1,200.What is the amount and character of the mother's gain?

Mary Stone,a single individual,sold a personal residence on June 3,2016,and excluded her $93,600 gain from gross income.If she sells another personal residence before June 4,2018,she can exclude a maximum of $156,400 of any gain.

Personal exemptions are allowed in computing alternative minimum taxable income (AMTI).