Question

1.Qualified Residence Interest is acquisition indebtedness on a primary or secondary personal residence

True

False

2.Sydney purchases a piece of real estate in 1990. A redevelopment project is announced nearby that increases the value of the property by $700,000. As a result Sydney must report a $700,000 gain in the year of the announcement.

True

False

3. Sam has plastic surgery on his nose to improve his breathing and treat his sleep apnea. The plastic surgery is an allowable medical expense to the extent not reimbursed.

True

False

4. Dr. Adam's employer pays $24,000 per year for his health insurance. Because the hospital wants him to be readily available in an emergency, he is allowed to eat meals at the hospital where he works and does so approximately half the time for a value of $5000. The hospital also pays for and apartment located at the hospital in which he is required to live, worth $30,000 per year. As a result Dr. Adams has gross income of

		$30,000
		$35,000
		$59,000
		Zero
		None of the above

5. A recovery of capital on the disposition of an asset:

		Is not income
		May be affected by prior losses or depreciation deducted on the property
		May be affected by prior improvements in the property
		All of the above
		None of the above

6. A capital asset is defined as an asset:

		Not specifically listed as an ordinary asset in the Internal Revenue Code
		Specifically listed as a capital asset in the Internal Revenue Code
		Real estate assets only
		Tangible personalty only
		None of the above

7. The following constitute "returns of capital":

		Recovery of the cost of an asset
		A depreciation deduction for an asset
		A lost deduction on destruction of a portion of an asset
		All of the above
		None of the above

8. Investment bad debts are treated as " non-business"

True

False

9. John finds a bag with $200,000 cash in it on the street. John does not have to reported as income since it was not earned

True

False

10. Total percentage depletion can never exceed the adjusted basis of the natural resource

True

False

11. An activity is presumptively a hobby, if it does not involve horses, and it does not make a profit in:

		Four out of five consecutive years
		Three out of five consecutive years
		Two out of five consecutive years
		All five of its first years of operation
		None of the above

12. Joe inherits stock worth 1 million dollars which had cost the decedant $5000. As a result Joe must report Gross Income of:

		Zero
		$995,000
		$1,000,000
		$5,000
		None of the above

13. Joe gets married on December 1. For tax purposes he may

		File jointly with his wife for the entire year
		File as unmarried for the entire year
		Finally return part married (one month) and part unmarried (11 months)
		All of the above
		None of the above

14. Janice receives the $100,000 proceeds of a life insurance policy her husband, George, bought the policy only one month before his death. He had named her his beneficiary and made premium payments of only $500 before his death. As a result

		Janice reports gross income of $95,500
		Janice reports gross income of $100,000
		Janice reports zero gross income
		George's estate gets a deduction of $500 on its last income tax return
		None of the above

15. Ed, who is confined to a wheelchair has ramps installed, and widens the doorways of his home to allow him access. These improvements increase the value of his home by $5000. The entire $10,000 cost of installing these access related improvements qualifies as a medical expense.

True

False

16. John sells his GM stock which had cost him $10,000 to his son George for its fair market value of $8,000. As a result John can deduct:

		Ordinary Loss of $2,000
		Capital Loss of $2,000
		Capital Loss of $1,000
		Zero
		None of the above

17. Child support received by the custodial parent is gross income to the parent

True

False

18. A business bad debt may be treated as a:

		Deduction when it is partially worthless
		Deduction only when it is completely worthless
		Treated as a short-term capital loss in the year it becomes completely worthless
		Non-deductible
		None of the above

Answer 1

1. Qualified Residence Interest is acquisition indebtedness on a primary or secondary personal residence-- True

Reason-- Qualified residence interest is interest incurred from buying, building or improving of an existing property

Acquisition indebtedness is defined as mortgage debt used taken out for the purpose of acquisition or improvement of an existing property or for the purpose of new construction.

so Qualified residence interest is a part of acquisition indebtedness which is deductable  up to two qualified residences i.e. primary or secondary personal residence.