1. For federal tax purposes, royalty income not derived in the ordinary course of a business is classified as:
None of the above
2. Which of the following is not an example of a nontaxable like-kind exchange?
An ice cream making machine for inventory of Rocky Road ice cream.
Land for an office building.
A printer for a computer.
The trade of an apartment building for a store building.
3. Al and Amy file a joint return for the 2007 tax year. Their adjusted gross income is $80,000. They had net investment income of $7,000. In 2007, they had the following interest expenses:
Personal credit card interest $4,000;
Home mortgage interest $8,000; and
Investment interest (on loans used to buy stocks) $10,000.
What is the interest deduction for Al and Amy for the 2007 tax year?
4. Charitable contribution deductions for cash donations made by individuals to public charities are limited to:
50% of AGI
40% of AGI
30% of AGI
20% of AGI
5. The following taxes were paid by Tim: Real estate taxes on his home: $2,000; State income taxes: $900; and State gasoline tax (personal use of automobile): $150.
In itemizing his deductions, what is the amount that Tim may claim as a deduction for taxes?
6. Josh sold a piece of business equipment that had an adjusted basis to him of $50,000. In return for the equipment, Josh received $60,000 cash and a painting with a fair market value of $20,000 from the buyer. The buyer also assumed Josh's $25,000 loan on the equipment. Josh paid $5,000 in selling expenses. What is the amount of Josh's gain on the sale?
7. Ben's property, which has an adjusted basis of $85,000, is condemned by the state government. The authorities replace his property with other qualified property which cost them $120,000. What is Ben's recognized gain?
8. Sean, a calendar year taxpayer, purchased stock on June 18, 2006, for $8,000. The stock became worthless on June 4, 2007. What is Sean's loss in 2007?
$8,000 short-term capital loss
$8,000 long-term capital loss
$8,000 itemized deduction for investments
1) B. Portfolio income.
2) A. Properties exchanged have to be "like-kind" (same nature and character). Ice cream making machine and ice cream are not like-kind properties.
3) B. Personal interest is not deductible. Investment interest is deductible to the ...