1) Amy paid the following interest expense during 2012: Qualified home mortgage interest $11,000 Credit card interest 1,000 Personal bank loan interest 3,000 What is the amount of Amy’s

1) Amy paid the following interest expense during 2012:

Qualified home mortgage interest

$11,000

Credit card interest

1,000

Personal bank loan interest

3,000

What is the amount of Amy’s interest deduction for 2012?

Select one:

a. None of the above

b. $3,000

c. $11,000

d. $12,300

e. $15,000

Question 2

An accountable expense reimbursement plan:

Select one:

a. Does not require the employee to return any excess reimbursement

b. Requires the employee to report business expenses as itemized deductions

c. Requires the employee only to substantiate expenses with receipts

d. Requires the employee to substantiate expenses with receipts and to return any excess reimbursement

Question 3

April and Wilson are married and file a joint tax return. Wilson is a police officer, and in the current tax year he spends $375 on uniforms and $150 for dry cleaning the uniforms. April is in the National Guard and military regulations restrict her from wearing her uniforms when she is off duty. The cost of uniforms for the year was $225 and the cost of dry cleaning them amounted to $75. April was granted a uniform allowance of $200 for the year. She also purchased a pair of standard black shoes to wear while on duty that cost $45. How much may they deduct on Schedule A for special clothing and uniforms (before applying the 2 percent of adjusted gross income limitation)?

Select one:

a. None of the above

b. $525

c. $625

d. $670

e. $825

Question 4

Bill has a mortgage loan on his personal residence. He decides to pay 24 months of interest in advance on July 1, 2012. The total advanced interest payment is $72,000. How much of the advance interest payment can he deduct in 2012?

Select one:

a. Mortgage interest is not deductible.

b. $36,000

c. $72,000

d. $18,000

e. If a taxpayer makes an advance payment, he may not deduct any interest.

Question 5

Carla is a high school teacher who is required by her school district to take continuing education courses which are offered at the local college. She is also in the process of taking classes at a different university where she is pursuing her Ph.D. to become a research specialist. She pays the tuition for both schools. Which of the following is true?

Select one:

a. She may not deduct tuition from either school.

b. She may deduct all of the tuition from each school because they are education expenses related to job skill improvement.

c. She may not deduct the continuing education tuition because it is required by her job.

d. None of the above is correct.

e. She may deduct the continuing education tuition from the local college because it meets her employer’s requirement to maintain her current job skills.

Question 6

Catherine is a CPA employed by a large accounting firm in San Francisco. In 2012, she paid the following amounts:

CPA Society dues $ 200

One year tax service 700

“Wiley Accountant” magazine 70

“Modern Sailing” magazine 75

How much may she deduct on Schedule A as a miscellaneous deduction, before considering the 2 percent of adjusted gross income limitation?

Select one:

a. $270

b. $970

c. $1,045

d. $345

e. None of the above

Question 7

Charles, a corporate executive, incurred business related, unreimbursed expenses in 2012 as follows:

Entertainment $ 900

Transportation 700

Education 400

Assuming that Charles itemizes his deductions, how much of these expenses should he deduct on his 2012 Schedule A (before the 2 percent of adjusted gross income limitation)?

Select one:

a. $1,550

b. $700

c. $2,000

d. None of the above

e. $1,100

Question 8

Charlie is a single taxpayer with income of $107,000 which includes $22,500 of interest income. Contributions to educational savings accounts are phased out between $95,000 and $110,000. What is the maximum contribution Charlie can make to an educational savings account?

Select one:

a. $1,600

b. $2,000

c. $-0-

d. $2,250

e. $400

Question 9

Christine saw a television advertisement asking for donations of used vehicles to a charitable foundation and decided to donate her old car. Which of the following statements is correct?

Select one:

a. She can take a deduction greater than the amount for which the charity actually sells the vehicle

b. She can take a tax deduction large enough on an after-tax basis to equal the amount she would have gotten if she sold the car directly

c. She can claim an estimated value for the auto if the charity uses it rather than selling it

d. The charity is not required to provide her with any information about what they do with the auto

Question 10

Damage resulting from which of the following would probably not give rise to a casualty loss deduction?

Select one:

a. Rust

b. Automobile accident

c. Earthquake

d. Flood

e. Fire

Question 11

During 2012, George, a salaried taxpayer, paid the following taxes which were not incurred in connection with a trade or business:

Federal income tax (withheld by employer)

$1,500

State income tax (withheld by employer)

1,000

FICA tax (withheld by employer)

700

Real property taxes

900

Federal auto gasoline taxes

200

Federal excise tax on telephone bills

50

What amount can George claim for 2012 as an itemized deduction for the taxes paid, assuming he elects to deduct state and local income taxes?

Select one:

a. $4,350

b. None of the above

c. $2,850

d. $1,000

e. $1,900

Question 12

During 2012, Mary paid the following expenses:

Prescription drugs

$470

Aspirin and over the counter cold capsules

130

Hospital and doctors

700

Health insurance

250

What is the total amount of medical expenses (before considering the limitation based on adjusted gross income) that would enter into the calculation of itemized deductions on Mary’s 2012 income tax return?

Select one:

a. $1,550

b. $1,300

c. $1,420

d. $1,170

e. None of the above

Question 13

During 2012, Mr. and Mrs. West paid the following taxes:

Property taxes on residence

$1,800

Special assessment for installation of a sewer system in their neighborhood

1,000

State personal property tax on their automobile (based on value)

600

Property taxes on land held for long-term appreciation

300

What amount can the Wests deduct as property taxes in calculating itemized deductions for 2012?

Select one:

a. $2,100

b. $2,700

c. $3,100

d. $3,700

e. None of the above

Question 14

During 2012, Seth, a self-employed individual, paid the following taxes:

Federal income tax

$5,000

State income tax

2,000

Real estate taxes on land in South America (held as an investment)

900

Personal property taxes

500

Federal self-employment tax

800

What amount can Seth claim as an itemized deduction for taxes paid during 2012, assuming he elects to deduct state and local income taxes?

Select one:

a. None of the above

b. $3,400

c. $4,200

d. $8,400

e. $2,500

Question 15

During the current year, Cary and Bill incurred acquisition debt on their residence of $1,300,000 and a home equity loan of $200,000. On a joint tax return, what is the amount of their qualified acquisition debt and qualified home equity debt, respectively?

Select one:

a. None of the above

b. $900,000 and $100,000

c. $1,000,000 and $100,000

d. $1,300,000 and $200,000

e. $1,000,000 and $0

Question 16

For 2012, Eugene and Linda had adjusted gross income of $30,000. Additional information for 2012 is as follows:

Cash contribution to church

$1,500

Tuition paid to a parochial school

1,200

Contribution to a qualified charity

250

Cash contribution to a needy family

100

What is the maximum amount that they can use as a deduction for charitable contributions for 2012?

Select one:

a. None of the above

b. $3,050

c. $1,750

d. $1,500

e. $1,850

Question 17

For married taxpayers filing a joint return in 2012, at what AGI level does the phase-out limit for contributions to Qualified Tuition Programs (Section 529 plans) start?

Select one:

a. $225,750

b. There is no phase-out limit on QTP contributions

c. $188,150

d. $150,500

Question 18

For the year ended December 31, 2012, David, a married taxpayer filing a joint return, reported the following:

Investment income from interest

$24,000

Investment expenses other than interest

4,000

Interest expense on funds borrowed in 2005 to purchase investment property

70,000

What is the maximum amount that David can deduct in 2012 as investment interest expense?

Select one:

a. $20,000

b. $24,000

c. $21,000

d. None of the above

e. $7,000

Question 19

Frank is a resident of a state that imposes a tax on income. The following information pertaining to Frank’s state income taxes is available:

State income taxes withheld in 2012

$3,500

Refund of 2011 tax received in 2012

400

Deficiency assessed and paid in 2012 for 2010:

Tax

600

Interest

100

What amount should Frank use as state and local income taxes in calculating itemized deductions for his 2012 Federal tax return, assuming he elects to deduct state and local income taxes?

Select one:

a. $3,700

b. $3,500

c. $4,200

d. None of the above

e. $4,100

Question 20

Harris had adjusted gross income in 2012 of $130,000. During the year his personal summer home was almost completely destroyed by a cyclone. Pertinent data with respect to the home follows:

Cost basis

$139,000

Value before casualty

145,000

Value after casualty

13,000

Harris was partially insured for his loss and in 2012 he received a $115,000 insurance settlement. What is Harris’ allowable casualty loss deduction for 2012?

Select one:

a. $4,000

b. $17,000

c. $3,900

d. None of the above

e. $16,900

Question 21

Harvey itemized deductions on his 2011 income tax return. Harvey plans to itemize deductions again in 2012 and the following information is available regarding state and local income taxes:

Taxes withheld in 2012

$2,500

Refund received in 2012 of 2011 tax

500

Assessment paid in 2012 of 2010 tax

300

Assuming he elects to deduct state and local income taxes, the above information should be reported by Harvey in his 2012 tax return as:

Select one:

a. Itemized deduction for state and local income taxes of $2,300

b. None of the above

c. Itemized deduction for state and local income taxes of $2,800 and income from state and local tax refund of $500

d. Itemized deduction for state and local income taxes of $2,500, and income from state and local tax refund of $200

e. Itemized deduction for state and local income taxes of $2,800

Question 22

In 2012, David had adjusted gross income of $30,000. During the year he paid the following medical expenses:

Prescription medicines

$ 200

Doctors

2,100

Medical care insurance

400

Crutches for a broken leg

100

What amount can David deduct as medical expenses (after the adjusted gross income limitation) in calculating his itemized deductions for 2012?

Select one:

a. $2,250

b. $550

c. $450

d. $2,800

e. None of the above

Question 23

In 2012, Jennie receives $12,000 (of which $3,000 is earnings) from a Qualified Tuition Program. She uses the funds to pay for new furniture for her apartment. What amount is taxable to Jennie?

Select one:

a. $0

b. $12,000

c. $3,000

d. $9,000

Question 24

Jean’s employer has an accountable plan for reimbursing employee expenses. Jean is reimbursed for $1,500 of business travel and $500 for various business subscriptions and professional dues. The $2,000 reimbursement should be treated as follows:

Select one:

a. No taxable income should be reported to Jean

b. $2,000 of income to Jean should be reported

c. Income to Jean and a corresponding miscellaneous deduction for Jean, subject to the 2 percent of AGI floor

d. $500 of income should be reported to Jean

Question 25

Jerry and Ann paid the following amounts during 2012:

Interest on automobile loan

$1,500

Interest on bank loan (proceeds were used to purchase municipal bonds)

5,000

Qualified home mortgage interest

3,000

What is the maximum amount they can use as interest expense in calculating itemized deductions for 2012?

Select one:

a. $3,000

b. $8,000

c. None of the above

d. $4,500

e. $3,150

Question 26

Jon had adjusted gross income of $25,000 in 2012. During the year, he incurred and paid the following medical expenses:

Drugs and medicines prescribed by doctors

$ 300

Health insurance premiums

750

Doctors’ fees

2,250

Eyeglasses

75

Jon received $900 in 2012 as a reimbursement for a portion of the doctors’ fees. If Jon were to itemize his deductions, what would be his allowable medical expense deduction after the adjusted gross income limitation is taken into account?

Select one:

a. None of the above

b. $425

c. $1,000

d. $600

e. $0

Question 27

Margo has $2,100 withheld from her wages for state income taxes during 2012. In March of 2012, she paid $300 in additional taxes for her 2011 state tax return. Her state income tax liability for 2012 is $2,500 and she pays the additional $400 when she files her 2012 state tax return in April of 2013. What amount should Margo deduct as an itemized deduction for state income taxes on her 2012 federal income tax return, assuming she elects to deduct state and local income taxes?

Select one:

a. $2,100

b. $2,500

c. $2,800

d. $2,400

e. None of the above

Question 28

Mary Lou took a $7,000 distribution from her educational savings account and used $6,500 to pay for qualified higher education expenses. On the date of the distribution, her educational savings account had a $28,000 balance including the $21,000 she had contributed. How much of the $7,000 distribution is tax free?

Select one:

a. $1,750

b. $7,000

c. $6,875

d. $-0-

e. $6,500

Question 29

Matthew purchases a new principal residence in 2012 and pays points of $2,000 to obtain a mortgage loan. What is the proper tax treatment for the points paid?

Select one:

a. The points are a nondeductible personal expense

b. The points must be amortized over the life of the loan

c. The points must be amortized over 5 years

d. The points must be capitalized into the cost of the residence

e. The points are fully deductible in 2012

Question 30

Peter is a plumber employed by a major contracting firm. During 2012, he paid the following miscellaneous expenses:

Unreimbursed employee business expenses

$410

Union dues

600

Tax return preparation fee

100

Safe deposit box rental fee (used only for personal effects)

20

If Peter were to itemize his deductions for 2012, what amount could he claim as miscellaneous itemized deductions (before applying the 2 percent of adjusted gross income limitation)?

Select one:

a. None of the above

b. $700

c. $1,110

d. $1,130

e. $1,010

Question 31

Randy is advised by his physician to install an elevator in his residence, since he is afflicted with heart disease. The cost of installing the elevator is $8,000 and it has an estimated useful life of 10 years. He installs the elevator in January of 2012, and it increases the value of his residence by $5,000. Disregarding the limitation based on adjusted gross income, how much of the cost of the elevator may Randy take into account in determining his medical expense deduction for 2012?

Select one:

a. $8,000

b. $3,000

c. None of the above

d. $300

e. $800

Question 32

Roberto’s AGI is $110,000. He has medical expenses of $12,000. How much of the medical expenses can Roberto deduct on his Schedule A for 2012?

Select one:

a. $0

b. $3,750

c. $12,000

d. None of the above is correct.

e. $8,250

Question 33

Shellie, a single individual, received her Bachelor’s degree in 2011, and took a job with a salary of $45,000 per year. In 2012, she began paying interest on qualified education loans. She was able to pay $1,500 in 2012. Which of the following statements is not correct?

Select one:

a. The full $1,500 is deductible in arriving at adjusted gross income (AGI)

b. Taxpayers are not allowed a deduction for education loan interest in 2012

c. If her payment had been $3,000, only $2,500 would have been deductible in arriving at AGI and the $500 excess would have been treated as nondeductible consumer interest

d. If her income had been $80,000, the deductible amount would have been phased out

Question 34

Stewart had adjusted gross income of $22,000 in 2012. During the year, he made the following contributions to recognized public charities:

$5,000 cash

1,000 shares of Able Corporation common stock, acquired in 1979 (cost and fair market value of $7,000)

Considering the charitable contribution deduction limitation, what amount can Stewart claim as a deduction for charitable contributions in 2012?

Select one:

a. $6,600

b. None of the above

c. $11,600

d. $11,000

e. $12,000

Question 35

Weber resides in a state that imposes a tax on income. The following information relating to Weber’s state income taxes is available:

State income taxes withheld in 2012

$3,000

Refund received in 2012 of 2011 tax

300

Assessment paid in 2012 of 2010 tax

800

Assuming he elects to deduct state and local income taxes, what amount should Weber use as state and local income taxes in calculating itemized deductions for his 2011 Federal income tax return?

Select one:

a. $3,800

b. $3,500

c. None of the above

d. $2,700

e. $3,000

Question 36

What income tax form does an employee use to report expenses that are not reimbursed by an employer under an accountable plan?

Select one:

a. Schedule C

b. Schedule D

c. Form 2106, Employee Business Expenses

d. No form, the expenses are not deductible to the employee

e. Schedule R

Question 37

What is the maximum amount of home equity debt (not acquisition debt) on which interest is fully deductible?

Select one:

a. None of the above

b. $100,000

c. $50,000

d. $200,000

e. $0

Question 38

Which of the following charitable contributions is not tax deductible?

Select one:

a. Cash donated to a qualified church.

b. Time donated to a qualified veterans’ organization.

c. Donation of a car to a qualified non-profit organization.

d. All of the above are tax deductible.

e. Clothing donated to a qualified veterans’ organization.

Question 39

Which of the following employees may deduct the cost of a uniform?

Select one:

a. A police officer who must wear a uniform while on duty

b. A stock broker required by her employer to wear a business suit

c. A delivery person who must wear khaki-colored clothes on the job

d. A construction worker required by her employer to wear blue jeans

e. A washer repair woman who must wear overalls while on the job

Question 40

Which of the following interest expense amounts is not deductible in the current year?

Select one:

a. Home equity loan interest of $9,000 on a loan of $100,000, the proceeds of which were used to purchase a motor home.

b. Points of $2,000 paid on a mortgage loan for the purchase of a new principal residence.

c. Investment interest expense of $10,000, assuming the taxpayer has $15,000 of investment income.

d. Education loan interest of $2,000, assuming the taxpayer is single and has income of $150,000.

Question 41

Which of the following is a miscellaneous itemized deduction?

Select one:

a. Casualty losses

b. Auto registration fees

c. Property taxes

d. Job hunting expenses

Question 42

Which of the following is correct for Qualified Tuition Programs for 2012?

Select one:

a. Contributions are not deductible and qualified educational expense distributions are taxable

b. Contributions are deductible and qualified educational expense distributions are taxable

c. Contributions are deductible and qualified educational expense distributions are tax-free

d. Contributions are not deductible and qualified educational expense distributions are tax-free

Question 43

Which of the following is deductible as a miscellaneous itemized deduction?

Select one:

a. Investment expenses

b. Job hunting expenses

c. Professional dues and subscriptions

d. Union dues

e. All of the above are miscellaneous deductions

Question 44

Which of the following is not an itemized deduction?

Select one:

a. Union dues

b. Personal property taxes

c. All of the above are itemized deductions

d. Medical expenses

e. IRA contribution deduction

Question 45

Which of the following is not considered a deductible medical expense?

Select one:

a. Prescription drugs

b. Eye exams

c. Medical insurance

d. A face lift

Question 46

Which of the following is not deductible as a medical expense on Schedule A?

Select one:

a. Payments for psychiatric care

b. All of the above are deductible as medical expenses

c. Payments for marriage counseling

d. Payments for dentures

e. Payments to a nurse

Question 47

Which of the following is not deductible as an itemized deduction?

Select one:

a. Personal property taxes

b. State income taxes

c. Charitable contributions

d. Local income taxes

e. All of the above may be deductible as itemized deductions

Question 48

Which of the following is not deductible as interest expense on Schedule A?

Select one:

a. Loan fee charged for appraisal service

b. All of the above are deductible as interest expense

c. Home mortgage interest

d. Home mortgage prepayment penalties

e. Mortgage interest on a second residence

Question 49

Which of the following is true with respect to an education incentive?

Select one:

a. Contributions to Qualified Tuition Programs (Section 529 plans) are deductible.

b. Contributions to education savings accounts (Coverdell ESAs) are deductible.

c. Married taxpayers at any income level may contribute to a Qualified Tuition Program (Section 529 plan).

d. Tuition paid by a taxpayer earning $300,000 of income is deductible.

Question 50

Which of the following miscellaneous deductions are not subject to the 2 percent of adjusted gross income limitation?

Select one:

a. Investment expenses

b. Gambling losses to the extent of gambling winnings

c. None of the above

d. Union dues

e. Unreimbursed employee business expenses

Question 51

Which of the following miscellaneous deductions are subject to the 2 percent of adjusted gross income limitation?

Select one:

a. Handicapped impairment related work expenses

b. All of above

c. Gambling losses to the extent of gambling winnings

d. Unreimbursed employee business expenses

e. None of the above

Question 52

Which of the following taxes is not potentially deductible as an itemized deduction?

Select one:

a. Sales tax in a state with no income tax

b. State income tax

c. Federal income tax

d. Property tax on second residence

Question 53

Which of the following types of interest is not deductible in 2012?

Select one:

a. Qualified mortgage interest on residence

b. All of the above

c. Qualified mortgage interest on second residence

d. Credit card interest

e. None of the above

Question 54

Which one of the following is not considered a casualty or theft loss for tax purposes?

Select one:

a. A taxpayer’s car is destroyed by rust.

b. A taxpayer’s car is crushed by a tree during a storm.

c. All of the above are casualty or theft losses.

d. A taxpayer’s residence is burned down during a wild fire.

e. A taxpayer’s bicycle is vandalized by local teenagers.

Question 55

Which one of the following is not tax deductible?

Select one:

a. Local income taxes

b. All of the above are tax deductible.

c. Real estate taxes

d. Property taxes

e. State income taxes

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