Total=18 questions T/F & multiple choices 1. 2. In some cases, a taxpayer may deduct an otherwise allowable contribution to an IRA, even though the contribution is made after the close of the tax year. 3. Subject to the annual dollar limitation and the earned income limitation, deductible IRA contributions are allowed for all taxpayers who do not participate in a qualified retirement plan. 4. If under 50 years of age, a taxpayer may make a nondeductible contribution to an IRA, subject to the earned income limitation and the $5,000 annual limitation. 5. In most cases, a taxpayer reports rental income and the related expenses on Schedule E. 6. 7. Without regard to their involvement in the management of the rental property, individual taxpayers may deduct up to $25,000 of rental real estate losses against other income, provided their income does not exceed certain limits. MC 11. Lester rents his vocation home for 6 months and lives in the home during the other 6 months of 2010. The gross rental income from the home is $4,500. For the entire year, real estate taxes are $800, interest is $3,000, utilities and maintenance expenses are $2,200, and depreciation expense on the entire home would be $4,000. What is Lester's allowable net loss from renting his vacation home? a. $5,500 loss b. $3,000 loss c. $500 loss d. $250 loss e. None of the above 12. Bill is the owner of a house with two identical apartments. He resides in one apartment and rents the other apartment to a tenant. The tenant made timely monthly rental payments of $500 per month for the months of January through December, 2010. The following expenses were incurred on the entire buidling: Utilities=$3,600 Maintenance and repairs=800 Insurance on building=600 In addition, depreciation allocable to the rented apartment is $1,500. What amount should Bill report as net rental income for 2010? a. $6,000 b. $2,750 c. $2,000 d. $1,500 e. None of the above 13. Arnold purchased interests in two limited partnerships 6 years ago. During 2010, Arnold had income of $22,000 from one of the partnerships. He had a loss from the other partnership of $32,000, salary income of $35,000, and divident income of $2,000. What is the amount of net passive losses that Arnold may deduct for 2010? a. $0 b. $800 c. $1,000 d. $8,000 e. None of the above 14. 15. Under the Keogh plan provisions, deductible contributions to a qualified retirement plan on behalf of a self-employed individual whose net earned income is $20,000 are limited to: a. $1,500 b. $2,000 c. $4,000 d. $5,000 e. None of the above 16. Acacia Corp. had inventory of $100,000 on Dec 31, 2010. Other information is as follows: Purchase=$1,500,000 Sales=3,000,000 Inventory 1/1/2010=300,000 What is the amount of Acacia's cost of goods sold for 2010? 17. Jody is a physician (not covered by a retirement plan) with a salary of $40,000 from the hospital where she is employed. She supports her husband, Andre, who sells art work and has no earned income. Both are in their twenties. What is the maximum total amount that Jody and Andre may contribute to their IRAs and deduct for the 2010 tax year? a. $5,000 b. $4,500 c. $10,000 d. $9,000 e. None of the above 18. 19. Paul earns $55,000 during the current year. His employer contributes $3,000 during the year to a qualifeid retirement plan on behalf of Paul. The amount of the contribution for the year is based on Paul's desire to have a monthly retirement benefit of $3,500. What type of retirement plan is this? a. Defined benefit plan b. Defined contribution plan c. Employee earnings plan d. Profit sharing plan e. None of the above 20. 21. Polly, age 45, participates in her employer's section 401(k) plan which allows employees to contribute up to 15 percent of their salary. Her annual salary is $100,000 in 2010. What is the maximum she can contribute to this plan on a tax-deferred basis under a salary reduction agreement? a. $20,500 b. $15,000 c. $15,500 d. $20,000 e. None of the above 22. 23. 24. Donald, a 40-year-old married taxpayer, has a salary of $55,000 and interest income of $6,000. What is the maximum amount Donald can contribute to a Roth IRA? a. $550 b. $610 c. $1,220 d. $3,000 e. $5,000 25. Monica has a Roth IRA to which she contributed $15,000. The IRA has a current value of $37,500. She is 54 years old and take a distribution of $25,000. How much of the distribution will be taxable to Monica? a. $0 b. $10,000 c. $15,000 d. $25,000 e. $37,500 26. 27. What is the deadline for making a contribution to traditional IRA or a Roth IRA for 2010? a. April 15, 2011 b. December 15, 2010 c. April 15, 2010 d. October 15, 2010 28. Thelma works at a liquor store in 2010 and makes $45,000. She also has dividend income of $12,000 and interest income of $1,000. She owns a beach house that gives her $11,000 in rental income and she owns a stake in a limited partnership that generates a $15,000 loss. What is her adjusted gross income in 2010? a. $58,000 b. $45,000 c. $69,000 d. $57,000 e. $54,000 29. Ellen loans Nicole $45,000 to start a hair salon. Unfortunately, the business fails in 2010 and she is unable to pay back Ellen. In 2010, Ellen also had $20,000 of income from her part-time job and $12,000 of capital gain from the sale of stock. How much of the $45,000 bad debt can Ellen claim as a capital loss in 2010? a. $45,000, with $33,000 carried forward to 2011 b. $12,000 c. $32,000 d. $45,000, with $30,000 carried forward to 2011 e. $0 30.