1. (TCO E) Which of the following is not a passive activity? (Points : 5)
2. (TCO D) Tom Tanner traded in a printing press with an adjusted basis of $20,000 for a smaller press valued at $12,000. In addition to the smaller press, Tom received $3,000 in cash and was relieved of the existing liability of $5,000 on the old press. What is Tom's recognized gain? (Points : 5)
3. (TCO H) Bob and Susan file a joint return for the 2010 tax year. Their adjusted gross income is $80,000. They had a net investment income of $9,000. In 2010, they had the following interest expenses.
Personal credit card interest: $5,000
Home mortgage interest: $10,000
Investment interest (on loans used to buy stocks): $10,000
What is the interest deduction for Bob and Susan for the 2010 tax year? (Points : 5)
4. (TCO B) Mike and Mindy Miller paid the following medical expenses during the year (all in excess of reimbursement).
Hospital and doctor bills: $840
Medicine and drugs: $730
Hospitalization insurance premiums: $6,200
Medicine and drugs (for dependent mother, age 71): $1,060
Assuming that the Millers' adjusted gross income was $50,000, how much of a medical expense deduction may the Millers claim on their joint return? (Points : 5)
5. (TCO A) The following taxes were paid by Adam Smith.
Real estate taxes on his home: $3,000
State income taxes: $900
Cigarette taxes: $500
State gasoline tax (personal use of automobile): $150
Social security tax (withheld from wages): $5,500
Penalty on tax underpayment: $800
In itemizing his deductions, what is the amount that Adam may claim as a deduction for taxes? (Points : 5)
6. (TCO E) Josh sold a piece of business equipment that had an adjusted basis to him of $50,000. In return for the equipment, Josh received $60,000 cash and a painting with a fair market value of $20,000 from the buyer. The buyer also assumed Josh's $25,000 loan on the equipment. Josh paid $5,000 in selling expenses. What is the amount of Josh's gain on the sale? (Points : 5)
7. (TCO I) In October of 2011, David and Betty Bennett sold their residence for $400,000. They purchased it in 2000 for $200,000. They made major capital improvements during their 10-year ownership, which totaled $80,000.
What is their recognized gain? (Points : 5)
8. (TCO I) Which of the following entities may select any tax period (calendar or fiscal)? (Points : 5)
9. (TCO D) For 2011, Greg Grammer had a short-term capital loss of $4,000, a short-term capital gain of $1,900, a short-term capital loss carryover from 2010 of $700, a long-term capital gain of $800, and a long-term capital loss of $1,000. What is Greg's deductible loss in 2011? (Points : 5)
10. (TCO A) The term "Practice before the IRS" refers to _____. (Points : 5)
11. (TCO F) To be deductible for tax purposes, a trade or business expenditure must be _____.
12. (TCO A) The art of using existing tax laws to pay the least amount of tax legally possible is known as _____. (Points : 5)
13. (TCO C) Which of the following items is not subject to federal income tax? (Points : 5)
14. (TCO B) Sam owes Bob $8,000. Bob cancels (forgives) the debt. The cancellation is not a gift, and Sam is bankrupt. Which of the following statements is correct concerning the impact of this transaction? (Points : 5)
15. (TCO G) All of the following income items are includible in an employee's gross income except _____. (Points : 5)
16. (TCO F) Which of the following types of taxes is not deductible? (Points : 5)