FEDERAL INCOME TAX ACCOUNTING

• 
• 
  
• 
  

1. If a trade or business or rental activities generate operating losses, what are the three loss limits or hurdles the operating losses must clear in order to be deductible currently? Describe all three. (Chapter 6)

1

2. Scott owns a condominium in Washington, DC. This year, he incurs the following expenses in connection with his condo:
During the year, Scott rented the condo out to others for 90 days, receiving $20,000 of gross income. He personally used the condo for 50 days. Assuming Scott uses the IRS method of allocating expenses to rental use of the property, what is his net rental income for the year? (Chapter 6)

3. Allison is self-employed and she uses a room in her home as her principal place of business. She meets clients there and doesn't use the room for any other purpose. The size of her home office is 400 square feet. The size of her entire home is 2,400 square feet. During the year, Allison received $6,300 of gross income from her business activities and she reported $2,500 of business expenses unrelated to her home office. For her entire home in the current year, she reported $3,500 of mortgage interest, $1,000 of property taxes, $600 of insurance, $500 of utilities and other operating expenses, and $3,200 of depreciation expense. What amount of home office expenses is Allison allowed to deduct in 2013? Indicate that amount and type of expenses she must carry over to the next year, if any. (Chapter 6)

2

4. Brenda, age 40, has made deductible contributions to her traditional IRA over the years. When the balance in her IRA was $40,000, Brenda received a distribution of $34,000 from her IRA in order to purchase a new car. How much of the $34,000 distribution will she have remaining after paying income taxes and early distribution penalties on the distribution? Her marginal tax rate is 25
percent. (Chapter 6)

5. Jonathan is a self-employed financial advisor who also owns a rental property. This year, he collected $85,000 in fees and paid the following expenses:
Jonathan files single with one personal exemption. Calculate his adjusted gross income. (Chapter 6)

3

6. Michelle (age 50) files single and reports AGI of $40,000. This year she has incurred the following medical expenses:

Calculate the amount of medical expenses that will be included with Michelle's other itemized deductions. (Chapter 7)

7. This year Kelly made the following charitable contributions:
Determine the maximum amount of charitable deduction for Kelly's contribution of the painting if her AGI is $80,000 this year. You may assume that both the stock and painting have been owned for 10 years. (Chapter 7)

4

8. Max and Gloria are married. They are preparing to file their 2013 tax return. If they were to file as single taxpayers, Max and Gloria would report $40,000 and $60,000 of taxable income, respectively. On their joint tax return, their taxable income is $100,000. How much of a marriage penalty or benefit will Max and Gloria experience in 2013? (Chapter 8)

9. Thomas wants to reduce his income tax liability by shifting some of his income to his 10-year-old daughter (a dependent), Darlene. Last year, Thomas gifted corporate bonds to Darlene. This year, Darlene received $1,500 in interest income from the bonds. What amount of tax will Darlene pay on the interest income? (Chapter 8)
10. Vincent earned $17,300 from his sole proprietorship in 2013. This was his only source of income. How much in self-employment taxes will Vincent be able to deduct? (Chapter 8)

5

11. Marge's twins, Bart and Lisa, finished their first year of school at an accredited university in 2013. Marge paid $10,000 in qualified educational expenses for Bart and $2,000 of qualifying expenses for Lisa. Marge is a head of household with an AGI of $85,000. What amount of American opportunity credit may she
claim? (Chapter 8)

12. In 2013, Jesse's AGI is $170,000. He earned the income evenly throughout the year. He owed $24,900 in federal income tax plus alternative minimum tax of $263, and self-employment taxes of $2,590. Last year, he had a gross tax liability of $50,000. What is the minimum quarterly estimated tax payment Jesse must pay each quarter to avoid underpayment penalties for 2013? (Chapter 8)

6 

Get Professional Help with Your Research Essay Paper Today From Our Student Essay Service!