Question

1. Jason’s automobile, which he used solely for personal purposes, was stolen this year. Jason originally purchased the automobile for $20,000. The fair market value of the automobile on the date it was stolen was $12,000. How much can Jason deduct as a casualty loss as an itemized deduction?

		a. Zero.
		b. $12,000.
		c. $20,000.
		d. None of the above.

2. Sam works full-time on the assembly line at the Ford plant. He owns an apartment building that has a net rental loss of $26,000 during the current year. Sam does not materially participate in the activity, but he actively participates. Sam’s AGI is $90,000 for the current year (without considering the rental loss). He has no other passive activities. How much of the $26,000 net rental loss can he deduct during the current year?

		a. $26,000.
		b. Zero.
		c. $25,000.
		d. None of the above.

3. Noel own two passive activities. One generated $4,000 of income and the other generated a $5,000 loss. How much net total income or loss will Noel have as a result of his passive activities?

		a. $(1,000)
		b. zero.
		c. $4,000.
		d. ($5,000).

4. Lena sold 200 shares of Ford stock to Arnold (her brother) for $5,000. Lena had purchased the stock four years ago for $8,000. How much of her loss will Lena will allowed to recognize in the current year?

		a. $3,000 as long as the true fair market value of the stock is $5,000.
		b. zero.

5. In order to qualify for the earned income credit, a taxpayer must have at least one (1) dependent.

		a. true.
		b. false.

6. Congress enacted the Alternative Minimum Tax System (AMT) in order to reduce the amount of tax wealthy taxpayers would be required to pay.

		a. true.
		b. false.

7. Generally, which of the following does not correctly categorize the type of income?

		A) Rental real estate — passive income/loss.
		B) Salary — active income/loss.
		C) Dividends — portfolio income/loss.
		D) Capital losses — passive income/loss.
		E) All of the choices are correct.

8. Self-employed taxpayers are allowed to deduct the full amount of the self-employment taxes they pay.

		a. true.
		b. false.

Answer 1

1 ANS :  $20,000.

2 ANS : Zero.

3 ans :zero.

4 ANS : $3,000 as long as the true fair market value of the stock is $5,000

5 ANS : False

6 ANS : True

7 ANS : Capital losses — passive income/loss.

  Passive activity losses are generally not deductible. They can be used to offset other income that came from passive activities, but they cannot be used to reduce your other taxable income. ... First, if you actively participate in your rental properties, you may be able to deduct losses up to a certain maximum.

8 ANS : True