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Exam 17: Tax Consequences of Personal Activities

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Question 51

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Which of the following tax payments is allowed as an itemized income tax deduction?

A) Federal gift tax
B) Payroll tax on wages paid to a housekeeper
C) Social Security tax withheld from salary
D) Local property tax on personal automobile

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Question 52

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A nondeductible charitable contribution may be carried forward five years.

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Question 53

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Mr. and Mrs. McGraw received $50,160 Social Security benefits this year. They also received $108,000 taxable pension payments and earned $47,300 interest and dividends from their investment portfolio. How much of the McGraw's Social Security is included in gross income?

Polly received the following items this year. Irterest on New York City Bchoolbonds $\quad$$\quad$$51,600$ Gift from grardparents $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\$ 5,000$ Jackpot From state lottery $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\$ 50,000$ Carbling wiruings $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\$ 3,000$ Compute Polly's gross income.

Which of the following statements about the tax consequences of gambling is true?

Recipients of the Nobel Peace Prize must include the prize in gross income.

Which of the following statements about tax subsidies for higher education is false?

Any gain recognized on the sale of a personal residence is excluded from the seller's gross income.

A flood destroyed an antique Persian rug owned by Mr. and Mrs. McConnell. The couple purchased the rug for $13,000 fifteen years ago, but its appraised FMV before the flood was $42,500. Unfortunately, their homeowners' insurance policy does not cover flood damage. Compute the McConnells' casualty loss resulting from the flood.

Mr. and Mrs. Stimson incurred $3,937 of miscellaneous itemized deductions this year. Their AGI was $97,300, and their marginal rate on ordinary income was 25%. Which of the following statements is false?

An activity will be classified as a hobby if the taxpayer fails to make a profit from the activity.

Mr. and Mrs. Allen made the following interest payments. Determine their deduction for each payment. a. $28,000 on a $400,000 acquisition mortgage secured by their personal residence b. $5,000 on a $60,000 second mortgage secured by their personal residence. The Allens used the proceeds to pay off credit card debt and take a second honeymoon. c. $2,400 on credit card debt d. $1,500 on a bank loan incurred to purchase a new family car e. $1,890 on an unsecured bank loan incurred to pay for a new roof on their personal residence

Losses realized on the sale of personal use assets are deductible.