Reference no: EM131794

Question 1. For federal tax purposes, royalty income not derived in the ordinary course of a business is defined as:

active income.
passive income.
portfolio income.
None of the above

Question 2. When comparing corporate and individual taxation, the subsequent statements are true, except:

Individuals have exemptions and a standard deduction; corporations do not.

Both types of taxpayers have percentage limitations on the charitable contribution deduction, coupled with a carryover of the excess contribution.

All taxpayers can carry net operating losses back two years, forward 20 years.

Both corporate and individual taxpayers may have a long-term capital loss carry forward.

Question 3. Al and Amy file a joint return for the 2012 tax year. Their adjusted gross income is $80,000. They had net investment income of $9,000. In 2012, they had the subsequent interest expenses:

Personal credit card interest: $4,000
Home mortgage interest: $8,000
Investment interest (on loans used to buy stocks): $10,000

What is the interest deduction for Al and Amy for the 2012 tax year? (Points : 5)

$17,000
$8,000
$12,000
$18,000

Question 4. Charitable contribution deductions for cash donations made by individuals to public charities are limited to:

50% of AGI.
40% of AGI.
30% of AGI.
20% of AGI.

Question 5. The subsequent taxes were paid by Tim:

Real estate taxes on his home: $1,000
State income taxes: $900
State gasoline tax (personal use of automobile): $150

In itemizing his deductions, what is the amount that Tim may claim as a deduction for taxes?

$2,000
$3,050
$0
$1,900

Question 6. Smith, Inc. had gross receipts from operations of $200,000, operating and other expenses of $310,000, and dividends received from a 65 percent-owned domestic corporation of $120,000. Hoover's tax position for the year is:

$10,000 taxable income.
$86,000 net operating loss.
$40,000 taxable income.
$110,000 net operating loss.

Question 7. All of the outstanding stock of a closely held C corporation is owned equally by Evelyn Humo and Steve Bufusno. In 2012, the corporation prepares taxable income of $20,000 from its active business activities. In addition, it earns $20,000 of interest from investments and incurs a $40,000 loss from a passive activity.

How much income does the C corporation report for 2012?

$10,000 of portfolio income

$0

$20,000 of portfolio income

None of the above

Question 8. Bob, who is single, has $90,000 of salary, $25,000 of income from a limited partnership, and a $30,000 passive loss from a real estate rental activity in which he actively participates. His modified adjusted gross income is $90,000. Of the $30,000 loss, how much is deductible?

$30,000
$10,000
$25,000
$0