Question

True or False?

11.   If startup expenses total $52,000 in 2015, $3,000 is expensed.

____   12.   When contributions are made to a Roth IRA, they are deductible by the participant. Later distributions from a the IRA, however, are fully taxed.

____   13.   Gorgi contributed $3,500 to a qualifying Health Savings Account in 2016. The entire amount qualifies as a medical expense and is potentially deductible from AGI.

____   14.   Sedie mailed a check for $2,200 to a qualified charitable organization on December 30, 2015. The $2,200 contribution is deductible on Sedie’s 2015 tax return.

____   15.   Jim is the sole owner and a material participant in a business in which he has $40,000 at risk. If the business incurs a loss of $45,000 from operations, Jim can deduct $45,000.

____   16.   In the current year, Jan invests $40,000 for a 10% interest in a passive activity. Her share of the loss this year is $20,000. If this is her only passive activity, the $20,000 loss from the activity this year is suspended for use in a future year.

____   17.   Jul’s tentative AMT is $84,000. Her regular income tax liability is $73,000. Jul’s AMT is $22,000.

____   18.   The tax benefit received from a tax credit is affected by the tax rate of the taxpayer.

____   19.   The credit for child and dependent care expenses is an example of a refundable credit.

____   20.   The purpose of the work opportunity tax credit is to encourage employers to hire individuals from specified target groups traditionally subject to high rates of unemployment.

____   21.   Molanda sells a parcel of land for $54,000 in cash and the buyer assumes Molanda’s mortgage of $32,000 on the land. Molanda pays a real estate agent $3,000 on the transaction. Molanda’s amount realized is $86,000.

____   22.   Cassie purchases a sole proprietorship for $130,000. The fair market value of the tangible assets is $110,000 and the agreed to value of goodwill is $15,000. Assuming there are no other intangible assets, Cassie’s basis for the tangible assets is $115,000 and her basis for the goodwill is $15,000.

____   23.   Sam purchased an SUV for $52,000 which he uses 100% for personal purposes. When the SUV is worth $19,000, he contributes it to his business. The gain basis is $52,000, the loss basis is $19,000, and the basis for cost recovery is $52,000.

Answer 1

11.   If startup expenses total $52,000 in 2015, $3,000 is expensed- TRUE

12.   When contributions are made to a Roth IRA, they are deductible by the participant. Later distributions from a the IRA, however, are fully taxed- FALSE13.   Gorgi contributed $3,500 to a qualifying Health Savings Account in 2016. The entire amount qualifies as a medical expense and is potentially deductible from AGIA- TRUE.

14.   Sedie mailed a check for $2,200 to a qualified charitable organization on December 30, 2015. The $2,200 contribution is deductible on Sedie’s 2015 tax return- TRUE.