Tax Exam 2 Review Guide Flashcards

Tax Exam 2 Review Guide Flashcards Indicate the amount the taxpayer must include in gross

income and explain your answer:Al Bore won the Nobel

Peace Prize of $500,000 this year. Rather than take the prize, Al designated that the entire award should go to Weatherhead Charity, a tax-exempt organization.None included in GIMeets exemption of donating to charity 27) Madeoff donated stock (capital gain property) to a public charity. He purchased the stock three years ago for $100,000, and on the date of the gift, it had a fair market value of $200,000. What is his maximum charitable contribution deduction for the year related to this stock if his AGI is $500,000?A) $100,000B) $200,000C) $150,000D) $250,000E) None of the choices are correct

C) $150,000

Indicate the amount the taxpayer must include in gross

income and explain your answer:Ted won a compact car

worth $17,000 in a TV game show. Ted plans to sell the car next year $17,000 included in GI 40) Andres and Lakeisha are married and file jointly.Andres is 72 years old and in good health. Lakeisha is 62 years old and blind. What amount of standard deduction can Andres and Lakeisha claim in 2019? Standard deductionA) $27,000.B) $27,700.C) $25,850.D) $25,700.E) None of the choices are correct.

A) $27,000.

Larry purchased an annuity from an insurance company that promises to pay him $1,500/month for the rest of his life. Larry paid $170,820 for the annuity. Larry is 72 years old and in good health. Larry received the first annuity payment of $1,500 this month. Use the expected number of payments in Exhibit 5-1 for this problem.b. If Larry lives more than 15 years after purchasing the annuity, how much of each additional payment should he include in gross income?All of it

• Charles and Camilla got divorced in 2018. Under the

terms of the decree Charles pays Camilla $50,000 in cash in each of the next five years (or until Camilla's death or remarriage). In addition, Charles transferred a castle worth $2,000,000 to Camilla in 2018 and will pay $12,000 per year to support their son, Clyde, until he turns 19 years old.What amount (if any) is included in Camilla's gross income in 2019?A) $2,062,000B) $12,000C) $50,000D) $2,050,000E) None of the payments are included in gross income

C) $50,000

Kevin provided services to several clients this year who paid with different types of property. Which of the following payments is not included in Kevin's gross income?A) Cash.B) Shares of stock listed on the New York Stock Exchange.C) A used car.D) Gold coins.E) All of these are included in gross income.

• All of these are included in gross income.

Courtney purchased disability insurance last year.Courtney also received $600 for lost wages due to the accident from her disability insurance policy. How much of the $600 is Courtney allowed to exclude from her gross income?All of itShe paid the premiums on the policy so she can exclude it Indicate the amount the taxpayer must include in gross

income and explain your answer:Gene won $400 in the

office March Madness pool $400does not meet any exclusion requirements 45) Max, a single taxpayer, has a $270,000 loss from his sole proprietorship. How much of this loss is not deductible after considering the excess business loss rules?A) $270,000.B) $255,000.C) $15,000.D) $0.E) None of the choices are correct.

C) $15,000.

When the wash sale rules apply, the realized loss is:A)

recognized at time of sale.B) not recognized at time of sale and does not affect basis of newly acquired stock.C) recognized at time of sale and added to basis of the newly acquired stock.D) not recognized at time of sale and added to basis of the newly acquired stock.E) not recognized at time of sale and subtracted from the basis of the newly acquired stock.

• not recognized at time of sale and added to basis of the

newly acquired stock.Larry purchased an annuity from an insurance company that promises to pay him $1,500/month for the rest of his life. Larry paid $170,820 for the annuity. Larry is 72 years old and in good health. Larry received the first annuity payment of $1,500 this month. Use the expected number of payments in Exhibit 5-1 for this problema. How much of the first payment should Larry include in gross income?

• $525 is taxable because exclusion ratio is 65%

(170,820/262800)262800 = 18K x 14.618K = 1500 x 12 78) Mason paid $4,100 of interest on a loan that paid tuition for him to attend a private university this year. How much of this payment can Mason deduct as interest expense on an educational loan if he files single and reports modified AGI of $90,000?A) $4,100B) $4,000C) $2,667D) $2,000E) None of the choices are correct

• None of the choices are correct

72) Which of the following is a true statement?A) Congress allows self-employed taxpayers to deduct the employer portion of their self-employment tax.B) To deduct expenses associated with any profit-motivated activity taxpayers must maintain a high level of involvement or effort in the activity

throughout the year.C) Business activities never require a relatively high level of involvement or effort from the taxpayer.D) All business expenses are deducted for AGI.E) All of the choices are true.

• Congress allows self-employed taxpayers to deduct the

employer portion of their self-employment tax.Identify the rule that states that income has been realized when a taxpayer receives the income and there are no restrictions on the taxpayer's use of the income (e.g., no

obligation to repay the amount):A) Claim of rightB)

Constructive receiptC) Return of capital principleD) Wherewithal to payE) None of the choices are correct.

• Claim of right

Suppose that Courtney is a 40% partner in KJZ partnership. KJZ reported $20,000 of business income and