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problem 1: Suppose the same facts as in the preceding problem (again, ignore any deduction that might relate to self-employment taxes). Mohammed’s Taxable Income for 2013 is:

a. $76,000
b. $70,000
c. $64,000
d. $50,100

problem 2: Janice and Jason are married taxpayers who file a joint return. In year 2012, they had AGI of $600,000 and their preliminary itemized deductions totaled $40,000. In year 2013, they will as well have AGI of $600,000 and preliminary itemized deductions of $40,000.  In year 2012 and 2013 their itemized deductions comprise mortgage interest. Which of the given is true?

a. Whenever comparing their 2012 and 2013 returns, they will deduct more itemized deductions on their 2012 return.
b. Whenever comparing their 2012 and 2013 returns, they will deduct more itemized deductions on their 2013 return.
c. Whenever comparing their 2012 and 2013 returns, they will deduct the similar amount of itemized deductions on each return.
d. They will not deduct any itemized deductions on either their 2012 return or their 2013 return.

problem 3: Which of the given statements is true?

a. Taxpayers frequently prefer deductions FOR AGI to deductions FROM AGI
b. The U.S. government always “breaks-even” with regards to alimony payments (that is, as the reduction in taxes for the spouse paying the alimony will always equivalent the increase in taxes for the spouse receiving the alimony)
c. The amount of tax-exempt interest received by a taxpayer could never impact the amount of his/her Social Security advantages that are subject to taxation
d. A dependent’s earned income amount could never impact the size or amount of his/her standard deduction amount.

problem 4: Suppose that Rewal received some unique payments in the year 2013. Which of the given items might Rewalexclude from gross income?

a. $5,000 received as a gift from Rewal’s childhood friend.
b. $60,000 of punitive damages received from a lawsuit against Big Company, LLC
c. $2,000 received from her NCAA basketball pool winnings.
d. All the above.

problem 5: In early 2013, Yuri received a gift of a home valued at $400,000 (from Yuri’s uncle, Holman). Holman as well gave Yuri a $20,000 cash gift. During the year 2013, Yuri rented the home to Juliana. As a result of the lease with Juliana, Yuri will earn net rental income of $30,000 (for 2013). What amount of income must Yuri’s 2013 tax return comprise from such transactions?

a. $0
b. $20,000
c. $30,000
d. $450,000

problem 6: In the year 2013, Lakesha, a calendar-year taxpayer, purchased business equipment (5-year property) for $2,400,000. The property was placed in service during the year 2013 (and is being employed exclusively in Lakesha’s extremely profitable business). No other personal property is purchased by Lakesha in the year 2013. What is the most that Lakesha might deduct in 2013 under Section 179 of the Code (avoid any potential deductions resultant from bonus deprecation or MACRS)?

a. $2,400,000
b. $500,000
c. $100,000
d. $0

problem 7: Suppose that the same facts as in the previous problem.  Though, for this problem, suppose that Lakesha purchased the business equipment for $900,000 (rather than $2,400,000).  What is the most that might be deducted in 2013 under Section 179 of the Code (avoid any potential deductions resultant from bonus deprecation or MACRS)?

a. $900,000
b. $500,000
c. $100,000
d. $0

problem 8: Which of the given is most likely deductible FORAGI (that is, PRE-AGI)?

a. Amounts paid for moving expenses.
b. Amounts paid for state income taxes.
c. Amounts paid for an employee’s unreimbursed travel expenses (that is, the travel was related to taxpayer’s fulltime position at a big corporation)
d. Each of the above items would be deducted FROM AGI (that is, POST-AGI)

problem 9: Pedro has AGI of $100,000 in 2013. All through 2013, Pedro as well had an uninsured personal casualty loss of $15,000 (after the $100 reduction). The personal casualty loss related to an accident that Pedro had with Fernando. Pedro carried no collision insurance and Fernando was as well an uninsured motorist. Suppose Pedro itemizes deductions in 2013. What is the casualty loss amount that Pedro might deduct on his return?

a. $15,000
b. $10,000
c. $5,000
d. $0

problem 10: Refer to the facts in the prior problem. Though, for purposes of this problem suppose that Pedro takes the standard deduction in 2013. What is the casualty loss amount that Pedro might deduct on his return?

a. $15,000
b. $10,000
c. $5,000
d. $0

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