1. If a taxpayer disposes of property within five years on which the tax credit for rehabilitation expenditures was taken, part of the tax credit must be recaptured.______TRUE______FALSE2. Peter is considering making a $20,000 investment in a venture which its promoter promises will generate immediate tax benefits for him. Peter, who does not anticipate itemizing his deductions, is in the 25% marginal tax bracket. If the investment is of a type that produces a tax credit of 20% of the amount of the expenditure, by how much will Peter’s tax liability decline because of the investment?a. $0b. $4,000c. $5,000d. $20,000e. None of the above3. Several years ago, Victor purchased a structure for $150,000 that was originally placed in service in 1929. In the current year, he incurred qualifying rehabilitation expenditures of $300,000. The amount of the tax credit for rehabilitation expenditures, and the amount by which the building’s basis for cost recovery would increase as a result of the rehabilitation expenditures are the following amounts:a. $30,000 credit, $270,000 basisb. $30,000 credit, $420,000 basisc. $30,000 credit, $300,000 basisd. $60,000 credit, $340,000 basise. None of the above4. During 2013, Brick Company paid wages of $300,000, of which $40,000 was qualified wages for the work opportunity tax credit. Brick Company’s deduction for wages for the year is:a. $300,000b. $284,000c. $260,000d. $220,000e. None of the above5. In May 2013, Russet Corporation hires three persons certified to be eligible employees for the work opportunity tax credit, each of whom is paid $12,000 during the year. As a result of this employment, Russet Corporation may claim a work opportunity tax credit of:a. $36,000b. $18,000c. $7,000d. $14,400e. None of the above6. Sienna Company, in the renovation of its building, incurs $11,000 of expenditures that qualify for the disabled access credit. The disabled access credit is:a. $11,000b. $10,750c. $5,375d. $5,000e. None of the above7. Wayne and Shirley each make a $5,000 contribution to their traditional IRA during 2013. If their AGI is $35,000 on their joint return, what is the amount of their credit for certain retirement plan contributions?a. $10,000b. $4,000c. $2,000d. $800e. None of the above8. Which of the following statements is false regarding the education tax credits?a. The American Opportunity credit is available for qualifying tuition, books, and related expenses incurred by students pursuing undergraduate and graduate degrees.b. The lifetime learning credit permits a maximum credit of 25 percent of qualified expenses up to $10,000 per year.c. The American Opportunity credit is calculated per eligible student, while the lifetime learning credit is available per eligible taxpayer.d. Continuing education expenses may qualify for the lifetime learning credit.e. None of the above.9. In describing FICA taxes, which (if any) of the following statements is correct?a. A newspaper carrier under age 18 is subject to FICA.b. Tips of less than $40 per month are exempt.c. Workers compensation payments are not exempt.d. Payments to one’s spouse in the course of spouse’s business are not exempt.e. None of the above.10. Shandra generated self-employment income in 2013 of $60,000. The self-employment tax is:a. $0b. $4,590c. $7,370d. $8,478e. None of the aboveNext Chapter:1. Larry participates for 145 hours in Activity A and 356 hours in Activity B, both of which are nonrental business. Both activities are active._____TRUE_____FALSE2. When assessing whether an individual is a material participant, participation by an owner’s spouse generally counts._____TRUE_____FALSE3. Norbert owns a small apartment building that produces a $25,000 loss during the year. His AGI before considering the rental loss is $85,000. Norbert need not be a real estate professional in order to deduct the $25,000._____TRUE_____FALSE4. Samuel owns and actively participates in the operations of an apartment building which produces a $20,000 loss during the year. He has AGI of $140,000 from an active business. He may deduct only $10,000 of the loss._____TRUE_____FALSE5. Jonah receives a gift of a passive activity from his father whose basis was $60,000. Suspended losses related to the activity are $18,000. Jonah must add the $18,000 suspended losses to the adjusted basis of the property._____TRUE_____FALSE6. In 2012, Lillian invests $150,000 for a 40% partnership interest in an activity in which she is a material participant. The partnership reports losses of $200,000 in 2012 and $200,000 in 2013. Lillian’s share of the partnership losses is $80,000 in 2012 and $80,000 in 2013. How much ofthe losses from the partnership can Lillian deduct?a. $80,000 in 2012 and $80,000 in 2013.b. $80,000 in 2012 and $70,000 in 2013.c. $0 in 2012 and $0 in 2013.d. $80,000 in 2012 and $0 in 2013.e. None of the above.7. Christopher has three passive activities and has at-risk amounts in excess of $200,000 for each. During the year, the activities produced the following income (losses).Activity A ($200,000)Activity B ($100,000)Activity C $150,000Net passive loss ($150,000)Christopher’s suspended losses are as follows:a. $200,000 is allocated to A; $100,000 to B.b. $50,000 is allocated to A; $100,000 to B.c. $100,000 is allocated to A; $50,000 to B.d. $50,000 is allocated to A, B, and C.e. None of the above.8. A closely held C corporation that is a personal service corporation may use passive losses to offset:a. Active income only.b. Passive and active income.c. Portfolio income only.d. Passive income only.e. None of the above.9. Jerome, a doctor, earns $300,000 from his medical practice in the current year. He receives $45,000 in dividends and interest during the year as well as $70,000 of income from a passive activity. In addition, he incurs a loss of $80,000 from an investment in a passive activity. What is Jerome’s AGI for the current year after considering the passive investments?a. $30,000b. $335,000c. $345,000d. $415,000e. None of the above10. Which, if any, of the following statements best describes the treatment of suspended losses when the property is transferred by installment sale?a. The suspended losses are added to the donee’s basis in the property.b. The suspended losses are used only be the donor.c. The suspended losses are subtracted from the basis of the property.d. The suspended losses are used each year, in part, as income is recognized.e. None of the above.
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