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Exam 4: Additional Income and the Qualified Business Income Deduction

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Question 41

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Sol purchased land as an investment on January 12, 2013 for $85,000. On January 31, 2019, Sol sold the land for $30,000 cash. In addition, the purchaser assumed the mortgage of $70,000 on the land. What is the amount of the realized gain or loss on the sale?

A) $65,000 loss
B) $15,000 gain
C) $5,000 gain
D) $90,000 gain
E) None of these

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Question 42

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Carmen owns a house that she rents out for $600 per month. Her expenses for the 2019 tax year are as follows: $\begin{array} { l r } \text { Real estate taxes } & \$ 900 \\\text { Mortgage interest } & 4,000 \\\text { Insurance } & 300 \\\text { General repairs } & 320\end{array}$ Carmen bought the property in March of 2005, and her basis for depreciation on the house is $110,000. She uses straight-line depreciation with a 27 ½ -year life, so the depreciation on the house is $4,000. Calculate Carmen's net income or loss from renting the house if her gross rental income is $7,200 ($600 × 12 months).

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$2,320 loss, calcula...

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Question 43

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Sol purchased land as an investment on February 12, 2018 for $85,000. On January 31, 2019, Sol sold the land for $90,000 cash. What is the nature of the gain or loss?

Passive losses are fully deductible as long as they do not exceed $50,000 during the year.

Selma owns a beach cottage that she rents to tourists. In the current year she rented the cottage for 180 days. What is the maximum number of days Selma can use the cottage before her expense deduction will be limited to her gross rental income?

Which of the following is a capital asset?

Which of the following is not true about capital assets?

In 2019, the basis of a taxpayer's replacement residence is equal to the cost of the replacement residence less the gain which was deferred on the sale of the old residence.

If Betty generates an NOL in 2019 of $16,000 and taxable income of $18,000 in 2020, what is Betty's NOL deduction in 2020?

Which one of the following is a capital asset?

Mort is the owner of an apartment building containing ten identical apartments. Mort resides in one apartment and rents out the remaining units. For 2019, the following information is available: $\begin{array}{lr}\text { Gross rents } & \$ 21,600 \\\text { Utiliti es for total building } & 2,500 \\\text { Maintenance and repairs (rental apartments only) } & 1,050 \\\text { Advertising for vacant ap artments } & 300 \\\text { Depreciation of building (all ten units) } & 4,000\end{array}$ What amount should Mort report as net rental income for 2019?

Currently, long-term capital gains are not afforded preferential tax treatment to individuals.

In 2019, Paul, a single taxpayer, has taxable income of $30,000 exclusive of capital gains and losses. Paul incurred a $1,000 short-term capital loss and a $4,000 long-term capital loss. What is the amount of his long-term capital loss carryover to 2020?

Regardless of a taxpayer's involvement in the management of their rental property, individual taxpayers may deduct up to $25,000 of rental real estate losses against other income, provided their income does not exceed certain limits.

In the current year, Estes has net short-term capital losses of $3,000, a net long-term capital loss of $45,000, and taxable income from wages of $35,000. a.Calculate the amount of Estes' deduction for capital losses for the current year. b.Calculate the amount and nature (short-term or long-term) of his capital loss carryforward. c.For how many years may Estes carry the unused loss forward?

At the end of the current year, Falstaff, a single taxpayer, sold for $4,800 General Martin stock that was purchased 5 months ago for $4,000. He also sold Cedar stock for $6,000 at the same time. The Cedar stock cost $4,000, 2 years ago. In addition, Falstaff has a short-term capital loss of $500 on the sale of silver. a.Calculate the amount of Falstaff's net short-term and net long-term capital gain or loss. b.If Falstaff has a net capital gain, what is the maximum rate at which the gain will be taxed?

For the current tax year, Morgan had $25,000 of ordinary income. In addition, he had an $1,900 long-term capital loss and a $1,600 short-term capital loss. What will be the amount of Morgan's capital loss carryforward to the next year?

Which of the following can be used to offset a passive loss?

If a taxpayer sells his personal residence and purchases a new residence, all or part of the realized gain may be recognized.

The net operating loss (NOL) provisions of the Internal Revenue Code