Question

1. Quentin and Linda were divorced in 2012. In 2013, Quentin paid Linda $25,000 in alimony and $4,600 in child support. Linda received a W-2 from her job for $35,000 in 2013. What is Linda’s AGI?

1. $25,000

2. $35,000

3. $60,000

4. $64,6000

------------------------------------

2. A revenue agent has determined that Michael understated his tax liability for 2013 by $100,000. The agent concluded that $25,000 of the understatement was due to sloppy record keeping, and the remainder of the understatement was caused by his misapplication of a complex tax provision. What is the negligence penalty that the revenue agent can impose on Michael?

1.$20,000

2.$5,000

3.$2,500

4. $0

----------------------------------------------

3. Julia owns a condominium near the university that she rents to students. The condominium generated a $21,000 loss in 2013. Before the loss deduction, Julia’s AGI was $75,000. How much of the loss on the condominium is deductible for Julia?

1. $25,000
2. $21,000
3. $4,000
4. $0

---------------------------------------------------

4. John and Jennie Thomas are married and wish to file their taxes jointly. They are both 52 years old, neither is legally blind, and they had combined wage income of $85,000 in 2013. They also had interest income of $1,000 from a certificate of deposit and itemized deductions of $10,500. Their Taxable income for 2013 is:

1. $63,500.
2. $65,500.
3. $66,000.
4. $68,500.

Answer 1

1) Linda’s AGI = $35,000 (salary) + $25,000(Alimony Received) = $60,000
2) The negligence penalty that the revenue agent can impose on Michael is $25000 x 20% = $5000
The negligence penalty equals 20% of the $25,000 portion of the deficiency attributable to a deliberate disregard of tax rules.
3) The loss on the condominium is deductible for Julia = $21000.(Maximum limit is $25000)
4) Taxable Income = $85000 (salary) + $1000(interest )  - $12200 (standard deduction) - 3900 x 2 (Personal Exemption) = $66000