Becker Professional Review

2K5 Exported Questions

2K5 Exported Questions–Regulation 2 Export Date: 7/11/2005

1

2K5 Exported Questions

Becker Professional Review

Adjustments and Itemized Deductions CPA-01921 Type1 M/C A-D Corr Ans: B PM R 2-01

1. CPA-01921 ARE R03 #2

Page 24

Smith, a single individual, made the following charitable contributions during the current year. Smith’s adjusted gross income is $60,000. • • • a. b. c. d. Donation to Smith’s church Art work donated to the local art museum (Smith purchased it for $2,000 four months ago and a local art dealer appraised it for) Contribution to a needy family $5,000 $7,000 $8,000 $9,000 $5,000

3,000 1,000

What amount should Smith deduct as a charitable contribution?

CPA-01921 Explanation Choice "b" is correct. This question is asking for the actual deduction and requires the candidate to determine which items are deductible charitable contributions. The $5,000 donation to the church is allowable. The artwork donated to the local art museum is deductible to its basis, $2,000. Although it is appreciated property, Smith held the property for only four months, making it short-term capital gain property. Donations of short-term capital gain property are deductible to the donor to the extent of his/her adjusted basis. The contribution to a needy family is not a deductible contribution, as it was not made to a qualifying organization. Choice "a" is incorrect. This choice excludes the donation of the artwork to the art museum. Choice "c" is incorrect. This choice erroneously includes the donation of the artwork at the art's fair market value. Choice "d" is incorrect. This choice includes all three contributions. It erroneously includes the artwork at its fair market value as well as including the donation to the needy family, which is not a deductible donation.

CPA-01922

Type1 M/C

A-D

Corr Ans: B

PM

CQ #5

R 2-01

2. CPA-01922 ARE R02 #1

Page 19

Carroll, an unmarried taxpayer with an adjusted gross income of $100,000, incurred and paid the following unreimbursed medical expenses for the year: Doctor bills resulting from a serious fall Cosmetic surgery that was necessary to correct a congenital deformity $5,000 15,000

Carroll had no medical insurance. For regular income tax purposes, what was Carroll's maximum allowable medical expense deduction, after the applicable threshold limitation, for the year? a. b. c. d. $0 $12,500 $15,000 $20,000

CPA-01922 Explanation Choice "b" is correct. Both medical expenses are deductible. The cosmetic surgery is not elective, since it was necessary to correct a congenital deformity. Doctor Bills Surgery $ 5,000 $15,000 2

000 = $27.200 to refund the overpayment to Easel.000 and is within the allowable amount. any amounts received by an employee from the employer must be reported by the employer as part of wages on the employee's W-2 for the year (and subject to income tax withholding requirements).G. Rule: Under a nonaccountable plan (i. Under the plan. The limit is 30% of the taxpayer's AGI (30% × $90. has elected to reimburse employees for business expenses under a nonaccountable plan. Under a nonaccountable plan. had $90. CPA-01928 Type1 M/C A-D Corr Ans: D PM R 2-01 4. the car mileage expenses and the reimbursement to the company) are considered miscellaneous itemized deductions and are subject to the 2% AGI limitation. The FMV of the property is $25.500 Choices "a". What amount should be reported in Mel's gross income for the year? a.. CPA-01926 Type1 M/C A-D Corr Ans: A PM CQ #9 R 2-01 3. $4. and "d" are incorrect. CPA-01926 ARE R01 #1 Page 24 Taylor. $25.800 CPA-01928 Explanation Choice "d" is correct. However. c. expenses are not reported to the employer). the $4.200 $3. the IRS standard mileage rate at the time. Mel.I. remember that the question specifically states that the plan is nonaccountable.500> $12.800 will be included as part of Mel's taxable wages on Mel's W-2). Mel encloses a check for $1.e. 3 . The land's fair market value was $25. During 20X4. d. The gross amount received is reported as income. b.600 $4.800 ($400 per month x 12 months) must be reported as part of Mel's gross income for the year (in fact. c. Individual taxpayers may deduct the FMV of property donated to charity. Limitation ($100.000 × 7. What is the maximum amount of charitable contribution that Taylor may deduct as an itemized deduction for the land donation for 20X4? a.g. per the computation above.000 $14. b. an unmarried taxpayer. $0 $1. "c". Taylor purchased the land in 1994 as an investment for $14.000 <7. Note: The examiners have attempted to trick the candidate into thinking that this is in some way an accountable plan because they provided for a return of excess funds received to the employer.. d.000 in adjusted gross income for 20X4. CPA-01928 ARE R99 #3 Page 28 Easel Co. Easel does not require employees to provide proof of expenses and allows employees to keep any amount not spent.000 $0 CPA-01926 Explanation Choice "a" is correct.000). At the end of the year Mel informs Easel that the only business expense incurred was for business mileage of 12. Taylor donated land to a church and made no other contributions.000 at a rate of 30 cents per mile.000 $11. Rule: Any expenses taken against the gross amount received in a nonaccountable plan (e.000.Becker Professional Review 2K5 Exported Questions A. an Easel employee for a full year. gets $400 per month for business automobile expenses.5%) Deduction $20.000 on the day of the donation.

000 when it was contributed. $5. CPA-01934 Type1 M/C A-D Corr Ans: C PM CQ #7 R 2-01 6. This deduction is limited to 30% of adjusted gross income (AGI). an unmarried taxpayer. In this case. CPA-01934 ARE R98 #2 Page 22 Jackson owns two residences. CPA-01930 ARE R99 #8 Page 25 Stein. What is the amount of charitable contributions deductible on Stein's current year income tax return? a. Fair market value of appreciated long-term stock Less: Limitation AGI Times 30% Deduction limit Carryforward $80.000 $25. $17.200 in determining adjusted gross income. purchased seven years earlier for $17.000 in determining adjusted gross income. per the above rules.000 $1.000 CPA-01930 Explanation Choice "c" is correct. to a tax-exempt educational organization. d.200 $6. the taxpayer has the option to deduct long-term (i.000) and then further limited by the cost basis of the stock ($17. The second residence.000 $25. and "c" are incorrect.000 $24. The following expenses were incurred for the second residence in 1997: Mortgage interest Utilities Insurance $5..000. c. is the only residence that is subject to a mortgage.000 For regular income tax purposes. $11. had adjusted gross income of $80.30 (24. "b". d.2K5 Exported Questions Becker Professional Review Choices "a". b. and qualified to itemize deductions. Rule: For 50%-type charities only (which include tax-exempt educational organizations).200 as an itemized deduction. Stein had no charitable contribution carryovers and only made one contribution during the year.000 as an itemized deduction. c. 4 . this option would have given Stein a smaller deduction than that allowed under the above rule.000). The stock was valued at $25. CPA-01930 Type1 M/C A-D Corr Ans: C PM R 2-01 5.000 on Stein's current year income tax return. b.000 × .000) $ 1. A 5-year carryforward period applies.000 $21. Stein may deduct $24. what is the maximum amount allowable as a deduction for Jackson's second residence in 1997? a. Stein donated stock. which has never been used for rental purposes. $12.e. held longer then 12 months) capital gain appreciated property at the higher fair marker value (higher than cost basis) without paying capital gains tax on the appreciated portion. $6.000 Note: Stein could have elected to deduct the cost of the stock instead of the appreciated amount.000 for the year. but the deduction would have been limited to 50% of AGI ($40.

($150. The starting point for computing a casualty loss deduction cannot exceed the property's basis. d. furthermore. bringing this loss to $19. The deduction for personal residence interest is an itemized deduction. CPA-01936 ARE R97 #3 Page 27 In 1996.000 and it was destroyed by a tornado. here $150. $39. Wood's residence had an adjusted basis of $150.900 $19.000 − $130.900 CPA-01936 Explanation Choice "d" is correct.000. $20. Finally. The insurance cost is not deductible. the deduction for personal residence interest is an itemized deduction. An appraiser valued the decline in market value at $175. furthermore. each individual loss is reduced by $100.000 here.900.900. Choice "a" is incorrect. Wood received $130. c. The deduction for interest on home equity indebtedness is limited to interest on $100. In this problem we are not told whether the interest relates to acquisition indebtedness or home equity indebtedness. or $6. Casualty losses are reduced by the amount of any insurance recovery.000 = $13.000 from his insurance company for the property loss and did not elect to deduct the casualty loss in an earlier year. after the application of the threshold limitations? a. thus the only deductible amount here is for the mortgage interest. Wood's 1996 adjusted gross income was $60. In addition to the $100 per loss nondeductible portion of each separate casualty loss.900 $13. but this is unlikely to be a problem here even if the interest relates solely to home equity indebtedness. Choice "c" is incorrect. Choice "d" is incorrect. Note that property taxes (not present in this problem) are deductible.000 of indebtedness. Choice "b" is incorrect. CPA-01938 Type1 M/C A-D Corr Ans: B PM R 2-01 8. For a personal residence. CPA-01938 ARE R97 #4 Page 24 5 . Choice "b" is incorrect. b.000 − $100 − $6. the deduction for personal residence interest is an itemized deduction. What total amount can Wood deduct as a 1996 itemized deduction for casualty loss.000. furthermore.000. The utilities cost is not deductible. For a personal residence that is not used for rental purposes.) Choice "a" is incorrect.000 = $20.Becker Professional Review 2K5 Exported Questions CPA-01934 Explanation Choice "c" is correct. neither insurance costs nor utilities costs are deductible.000 and he did not have any casualty gains. reducing this loss to $20. except that the fair market value is limited to the property's basis. the remaining total amount of all casualty losses (here there is only one) are deductible only to the extent that the amount exceeds 10% of AGI. CPA-01936 Type1 M/C A-D Corr Ans: D PM CQ #10 R 2-01 7. Casualty losses are generally computed as the decline in fair market value. Next.000 $38. no deduction is allowed for utilities costs or insurance. The starting point for computing a casualty loss deduction cannot exceed the property's basis. there is an overall limitation that the remaining total amount of all casualty losses is deductible only to the extent that it exceeds 10% of AGI.000. Later that same year. $100 of each separate casualty loss is not deductible. This is because of the amount of interest and the fact that there is no debt associated with Jackson's other residence.

Choice "a" is incorrect.000 lodging and travel expenses are fully deductible. Choice "a" is incorrect.000 was within the taxpayer's limitation of $12. Choice "d" is incorrect. Grey incurred and paid the following unreimbursed expenses in relocating. Grey was permanently transferred to Florida by his employer.000 (30% of AGI of $40. $12. CPA-01949 Type1 M/C A-D Corr Ans: B PM CQ #2 R 2-01 9. to a local art museum. Choice "c" is incorrect. b. Deet had purchased the art work two years earlier for $2. Deet' s 1996 adjusted gross income was $40. The $1.000 1. What was the maximum amount of the charitable contribution allowable as an itemized deduction on Deet's 1996 income tax return? a. The total deductible amount is $2.500 donation is not deductible because it was made directly to the needy family rather than to a qualified organization. valued at $11.000 $1. The fair market value of the artwork could be deducted because it had been held for more than one year and that value fell within the 30% of AGI overall limitation for appreciated property.500 donation is not deductible because it was made directly to the needy family rather than to a qualified organization.800 $1. d. Choice "c" is incorrect. Choice "d" is incorrect. c. Costs of moving household furnishings and personal effects are fully deductible.000 CPA-01938 Explanation Choice "b" is correct.800).000 $2. a calendar year taxpayer.000 $3. On February 2. b.200 1. The $1.000) for donations of appreciated property. an unmarried taxpayer. a pre-move househunting trip is not deductible.500 $2.800 What amount was deductible as moving expense on Grey's 1994 tax return? CPA-01949 Explanation Choice "b" is correct. Lodging and travel expenses while moving Pre-move househunting costs Costs of moving household furnishings and personal effects a.000. Grey worked full-time for the entire year. the $11.800 expense of moving household furnishings and personal effects is fully deductible. was employed and resided in New York. The $1.800 $1. Lodging and travel expenses while moving are fully deductible. the fair market value of the artwork could be deducted because it had been held for more than one year and that value fell within the 30% of AGI overall limitation for appreciated property. CPA-01949 ARE May 95 #6 Page 13 Grey.500 substantiated cash donation directly to a needy family.000 + $1. qualified to itemize 1996 deductions. The $1.2K5 Exported Questions Becker Professional Review Deet.000 and he made a $1. CPA-01950 Type1 M/C A-D Corr Ans: C 6 PM R 2-01 . d. Furthermore.500 $11. $4. After 1993. The $1.000. Because the artwork had been held for more than one year. the fair market value could be deducted.500 donation is not deductible because it was made directly to the needy family rather than to a qualified organization. In 1994. Pre-move househunting costs are not deductible for tax years after 1993. c.800 ($1. Deet also donated art. 1994. In this case.

Since Matthews is a cash basis taxpayer.200 $1.000) plus the 1993 carry-over ($10. b. Choice "b" is incorrect.000 = $25. 7 .000) until she reaches the 1994 limit. Therefore. Moore is not limited to her 1993 charitable contribution carryover. CPA-01950 ARE May 95 #7 Page 25 Moore. Choice "b" is incorrect. Federal income tax withheld is not deductible in calculating federal income tax. $4. The contribution limit for a church is 50% of the contribution base (adjusted gross income in this case). is $1. the $300 state and local income taxes paid in 20X5 are not deductible until 20X5. therefore.000 $28. During 1994 she contributed $18. she can take all the 1994 contributions plus $7.Becker Professional Review 2K5 Exported Questions 10. c. so Matthews can deduct the $1. CPA-01951 Type1 M/C A-D Corr Ans: C PM R 2-01 11. The total amount of deductible taxes. Choice "d" is incorrect per the explanation above. Since Matthews is a cash basis taxpayer. Choice "a" is incorrect. Note: In 2004.000 charitable contribution carryover from her 1993 church contribution. Moore may use part of her 1993 charitable contribution carryover.000 $18.700 $2.900.000. b. The 20X4 state and local income tax paid in 20X5 is not deductible until 20X5 because she is a cash-basis taxpayer. Moore's contribution limit for 1994 is 50% × $50.000 CPA-01950 Explanation Choice "c" is correct. She had a $10. Against this limit she can take her 1994 contributions ($18.500 federal income tax withheld is not deductible in calculating federal income tax. What was the maximum amount of properly substantiated charitable contributions that Moore could claim as an itemized deduction for 1994? a. 20X4 20X4 federal income taxes withheld 20X4 state and local income taxes paid April 17.000 to her church. CPA-01951 ARE May 95 #8 Page 21 Matthews was a cash basis taxpayer whose records showed the following: 20X4 state and local income taxes withheld 20X4 state estimated income taxes paid December 30.500 CPA-01951 Explanation Choice "c" is correct. She can also deduct the $400 in estimated tax liability she paid in 20X4. $10.000 total.000 of the carryover for a $25. Choice "a" is incorrect.000 $25. 20X5 $1. taxpayer's could claim either sales tax or state and local income tax.000 in adjusted gross income for 1994. State and local income taxes withheld from a cash-basis taxpayer are deductible in the year withheld.500 withheld. The $400 state estimated income taxes are deductible in 20X4 since the amount was paid in 20X4. had $50. d. Choice "d" is incorrect.500 300 What total amount was Matthews entitled to claim for taxes on her 20X4 Schedule A of Form 1040? a. a single taxpayer.900 $1. c. d. the $300 state and local income taxes paid in 20X5 are not deductible until 1995.500 400 2. The $2.

Medical costs. Frazer had no casualty gains during the year. The sum of all such casualty losses (there is only one in this case) is further reduced by 10% of the taxpayer's adjusted gross income for the year. c.000. Nonbusiness casualty losses.000. b. c. The amount of the casualty loss that is deductible on Frazer's tax return is $9. Medical costs. d. CPA-01953 ARE May 95 #10 In 1994. The casualty loss is measured by the difference in the property's value before ($130. nonbusiness casualty losses. Medical costs. What amount of the fire loss was Frazer entitled to claim as an itemized deduction on her 1994 tax return? a b. CPA-01954 Type1 M/C A-D Corr Ans: A Page 17 PM R 2-01 13. This loss is reduced by $100 per casualty to $9. Charitable contributions. Frazer's 1994 adjusted gross income was $70.900. Charitable contributions are subject to the phase out of the amount of certain itemized deductions for high-income individuals. nonbusiness casualty losses.000) and after (zero) the casualty. The casualty loss must be reduced by the $120. nonbusiness casualty losses. Choice "c" is incorrect. The Whites itemized their deductions on Schedule A for 1994.000 insurance recovery to $10.000 for the destruction of her home. Joan Frazer's residence was totally destroyed by fire. $2. Their 1994 adjusted gross income was $100.2K5 Exported Questions Becker Professional Review CPA-01953 Type1 M/C A-D Corr Ans: A Page 27 PM R 2-01 12. Medical costs. married and filing joint income tax returns. derive their entire income from the operation of their retail stationery shop.000. CPA-01956 ARE May 95 #12 Tom and Sally White.000 = $2.900 − $7.500 $8. and investment interest deductions are not subject to the phase out of the amount of certain itemized deductions for highincome individuals. CPA-01954 ARE May 95 #11 Which items are subject to the phase out of the amount of certain itemized deductions that may be claimed by high-income individuals? a. in other words. and investment interest deductions are not subject to the phase out of the amount of certain itemized deductions for highincome individuals.000 CPA-01953 Explanation Choice "a" is correct.900 $8. That is 10% × $70. The property had an adjusted basis and a fair market value of $130. CPA-01956 Type1 M/C A-D Corr Ans: A Page 20 PM R 2-01 14.000 before the fire. The following unreimbursed cash expenditures were among those made by the Whites during 1994: 8 . Investment interest deductions. Choice "b" is incorrect. Choice "d" is incorrect.000 = $7. Frazer received insurance reimbursement of $120.000. d. $130. CPA-01954 Explanation Choice "a" is correct.000. and investment interest deductions are not subject to the phase out of the amount of certain itemized deductions for highincome individuals.600 $10.900. During 1994.

when the meals and lodging are merely incident to that care is a deductible medical expense. Val earned $35. CPA-01963 ARE May 94 #7 (Adapted) For 2005. Fully deductible as an itemized deduction. The cost of a special school for a handicapped person in an institution primarily for the availability of medical care.600 $8. Choice "a" is incorrect. with meals and lodging furnished as necessary incidents to that care $ 600 8. what amount may the Whites claim in their 1994 return as qualifying medical expenses? a. Not deductible. Repair and maintenance of medical devices for a disabled dependent child are deductible medical expenses. One-half deductible from gross income in arriving at adjusted gross income. Repair and maintenance of medical devices for a disabled dependent child are deductible medical expenses. b.Becker Professional Review 2K5 Exported Questions Repair and maintenance of motorized wheelchair for physically handicapped dependent child Tuition.000 in wages and was covered by his employer's qualified pension plan.000 in alimony 9 . Choice "d" is incorrect. Self-employment tax is partially deductible to arrive at adjusted gross income.000 $600 $0 CPA-01956 Explanation Choice "a" is correct. Choice "b" is incorrect. One-half of the self-employment tax is deductible to arrive at adjusted gross income. Pat was unemployed and received $5. CPA-01960 ARE May 94 #6 Page 13 The self-employment tax is: a. d $8. and lodging at special school for physically handicapped dependent child in an institution primarily for the availability of medical care. CPA-01960 Explanation Choice "c" is correct.000 Without regard to the adjusted gross income percentage threshold. CPA-01960 Type1 M/C A-D Corr Ans: C PM CQ #3 R 2-01 15. Self-employment tax is not deductible in determining self-employment income. when the meals and lodging are merely incident to that care ($8.000) is also a deductible medical expense. The cost of a special school for a handicapped person in an institution primarily for the availability of medical care. when the meals and lodging are merely incident to that care is also a deductible medical expense. Val and Pat White filed a joint return. Self-employment tax is partially deductible to arrive at adjusted gross income. Choice "b" is incorrect. The cost of a special school for a handicapped person in an institution primarily for the availability of medical care. b. c. Fully deductible in determining net income from self-employment. Choice "c" is incorrect. Choice "d" is incorrect. c. CPA-01963 Type1 M/C A-D Corr Ans: A Page 5 PM CQ #1 R 2-01 16. meals. d. Repair and maintenance of medical devices for a disabled dependent child ($600) are deductible medical expenses.

d. For a spouse who is not an active participant. Employee business expenses. d. but is married to someone who is. both incurred and paid in 1994. Not limited. the deductible portion of the contribution is phased out.000 to an IRA account. the phase out range begins at $150. can be claimed as an itemized deduction subject to the two percent-of-adjusted-gross-income floor? a.000 ($35.000 $4. The allowable IRA deduction on their 2005 joint tax return is: a.2K5 Exported Questions Becker Professional Review payments for the first 4 months of the year before remarrying. Employee's unreimbursed moving expense. For a spouse who is an active participant. b. Choice "d" is incorrect. The $2.000 was a pre-2002 rule for IRA contribution limits for individuals and is a distractor in this case. Employee's unreimbursed business car expense.000. taxpayers can contribute and deduct up to $4. 10 . c. including unreimbursed car expense. the full deduction is allowed if the earned income of the couple is below the phaseout ranges (as is in this case).000) which is below both phaseout ranges. Limited to the taxpayer's 1993 net investment income. Limited to the taxpayer's 1993 interest income. Self-employed health insurance. the phase out range in 2005 begins at $70. Choice "b" is incorrect. $8. and alimony is considered earned income for IRA purposes.000 deduction. so each spouse receives the full $4. b. CPA-01973 ARE May 94 #9 Page 28 Which expense. One-half of the self-employment tax. However. CPA-01968 Explanation Choice "c" is correct. c. The earned income for IRA purposes here is $40.000. In 2005. When a taxpayer or taxpayer's spouse is an active participant in a pension plan at work. The couple had no other income. provided the couple's combined earned income is at least $8. c. CPA-01968 Type1 M/C A-D Corr Ans: C PM CQ #8 R 2-01 17.000 per year to an IRA. CPA-01968 ARE May 94 #8 Page 23 The 1993 deduction by an individual taxpayer for interest on investment indebtedness is: a. d. even if Pat had no earned income. CPA-01973 Type1 M/C A-D Corr Ans: A PM CQ #11 R 2-01 18. a spouse with no earned income can deduct $4.000 $2.000 + $5. The deduction for interest expense on investment indebtedness is limited to net investment income (investment income less investment expenses).000 $0 CPA-01963 Explanation Choice "a" is correct.000. Pat's alimony is deemed "earned income" for the IRA contributions. CPA-01973 Explanation Choice "a" is correct. Each contributed $4. b. are deductible as itemized deductions subject to the 2% floor. Limited to the investment interest paid in 1993.000. Choice "c" is incorrect. For couples filing a joint return where at least one spouse is an active participant in a retirement plan.

At the time of the loan. not as an itemized deduction.000 1. b. The limit is $100. CPA-01979 Explanation Choice "b" is correct. Mortgages of up to $1. b.000 to buy. The following information pertains to interest paid in 1993: Mortgage interest Interest on room construction loan Auto loan interest a. In 1993 they borrowed $15. Self-employed health insurance is deductible. Personal interest is not deductible (after 1990). build. how much interest is deductible. Interest paid on debt secured by a home mortgage is deductible. Choice "c" is incorrect.500 500 For 1993. but it is deduction to arrive at adjusted gross income. Deductible personal interest. Choice "a" is incorrect.000 to buy. the Philips paid $50.Becker Professional Review 2K5 Exported Questions Choice "b" is incorrect. Choice "a" is incorrect.500 $19. 11 . 1990. CPA-01986 ARE May 94 #11 On January 2. CPA-01979 Type1 M/C A-D Corr Ans: B Page 22 PM R 2-01 19. Interest on auto loans (consumer interest) is not deductible. $17. but not as an itemized deduction subject to the 2% floor. One-half of the self-employment tax is deductible. or substantially improve a home allow for the full deduction of interest.000. Interest paid on a debt secured by a home mortgage is not classified as investment interest. build. or improve the home. CPA-01979 ARE May 94 #10 The Browns borrowed $20. It is also called consumer interest.000.000 $17. Interest paid on a debt secured by a home mortgage is classified as deductible qualified residence interest. Choice "d" is incorrect. prior to any itemized deduction limitations? CPA-01986 Explanation Choice "c" is correct.000 secured by their home. not as an itemized deduction. c.000.500 $18. Nondeductible interest.000 auto loan. the fair market value of their home was $400. and used the cash to add a new room to their residence. d. to pay their son's college tuition. Deductible qualified residence interest. d. or substantially improve a home allow for the full deduction of interest. The Browns would be able to deduct the interest paid as an itemized deduction.000. Choice "d" is incorrect. secured by their home.000 $17. The employee's unreimbursed moving expense is deductible. build. The interest on the loan qualifies as: a. Mortgages of up to $1. and it was unencumbered by other debt. That same year they took out a $5. Choice "c" is incorrect. CPA-01986 Type1 M/C A-D Corr Ans: C Page 22 PM R 2-01 20. Investment interest expense.000 mortgage to purchase a home. c.000 cash and obtained a $200. but it is a deduction to arrive at adjusted gross income.000 of mortgage interest since the loan was not to buy.

000 $3. casualty. The greater of 3% of the excess of adjusted gross income over the applicable amount or 80% of certain itemized deductions. Wells recovered $1.500 $1.000 to buy. c. or substantially improve a home allow for the full deduction of interest. The lesser of 3% of the excess of adjusted gross income over the applicable amount or 80% of certain itemized deductions. The lesser of 3% of the excess of adjusted gross income over the applicable amount or 80% of all itemized deductions. Qualified medical expenses must be reduced by insurance reimbursement ($2. CPA-02001 ARE May 94 #13 In 1993. gambling losses.500 = $1. Insurance against loss of income is not payment for medical care and therefore is not deductible. After the application of any other limitation. Mortgages of up to $1. what amount could be claimed on Wells' 1993 income tax return for medical expenses? a. If AGI exceeds the threshold limits. Dole's adjusted gross income exceeds $500.000 2. Interest on auto loans (consumer interest) is not deductible.000 500 In 1993. d. Choice "b" is incorrect. The greater of 3% of the excess of adjusted gross income over the applicable amount or 80% of all itemized deductions. 12 . Prescription drugs are considered medical care. b. and investment interest) by 3% of AGI in excess of that threshold. Insurance against loss of income is not payment for medical care and therefore is not deductible. Wells paid the following expenses: Premiums on an insurance policy against loss of earnings due to sickness or accident Physical therapy after spinal surgery Premium on an insurance policy that covers reimbursement for the cost of prescription drugs $3. CPA-01996 Type1 M/C A-D Corr Ans: A Page 17 PM R 2-01 21.000).500 of the $2. Disregarding the adjusted gross income percentage threshold. Choice "d" is incorrect. taxpayers must reduce itemized deductions (other than medical. CPA-02001 Type1 M/C A-D Corr Ans: C Page 20 PM R 2-01 22. d. The maximum reduction is 80% of those otherwise allowable itemized deductions. $4. Medical expenses include physical therapy (professional medical services) and insurance premiums providing reimbursement for medical care. Interest on auto loans (consumer interest) is not deductible.000 $500 CPA-02001 Explanation Choice "c" is correct. Medical expenses include physical therapy (professional medical services) and insurance premiums providing reimbursement for medical care. build. Choice "a" is incorrect. CPA-01996 ARE May 94 #12 For 19X3.000. theft.000 that she paid for physical therapy through insurance reimbursement from a group medical policy paid for by her employer. CPA-01996 Explanation Choice "a" is correct. itemized deductions are reduced by: a.000 + $500 − $1. c. b.2K5 Exported Questions Becker Professional Review Choice "b" is incorrect.000.

earned income is also reduced by ½ the selfemployment tax. CPA-02004 Type1 M/C A-D Corr Ans: A PM R 2-01 25. CPA-02003 Explanation Choice "d" is correct. b. For Keogh plans. Self-employment tax and one-half of the deductible Keogh contribution.Becker Professional Review 2K5 Exported Questions Choice "d" is incorrect. Choice "b" is incorrect. c. Alimony payment. CPA-02003 Type1 M/C A-D Corr Ans: D PM R 2-01 24. Personal casualty loss. "earned income" is defined as net self-employment earnings reduced by the: a. Personal casualty losses are deductible from adjusted gross income as itemized deductions. For Keogh plans. d. Choice "c" is incorrect. CPA-02002 Type1 M/C A-D Corr Ans: A PM R 2-01 23. CPA-02002 PII Nov 93 #27 Page 3 Which allowable deduction can be claimed in arriving at an individual's adjusted gross income? a. For Keogh plans. earned income is reduced by ½ the self-employment tax. a sole proprietor with no employees. and unreimbursed business expenses of outside salespersons are all deductible from AGI as itemized deductions. Choice "c" is incorrect. has a Keogh profit-sharing plan to which he may contribute and deduct 25% of his annual earned income. Choice "b" is incorrect. Choice "a" is incorrect. Deductible Keogh contribution and one-half of the self-employment tax. b. Choice "d" is incorrect. CPA-02003 PII Nov 93 #28 (Adapted) Page 14 Davis. Unreimbursed business expense of an outside salesperson. Charitable contributions are deductible from adjusted gross income as itemized deductions. For this purpose. Alimony payments are deductible to arrive at adjusted gross income (AGI). For Keogh plans. Charitable contributions. d. Self-employment tax. Medical expenses include physical therapy (professional medical services) and insurance premiums providing reimbursement for medical care. Deductible Keogh contribution. CPA-02004 PII Nov 93 #30 (Adapted) Page 30 13 . earned income is defined as net self-employment earnings reduced by the amount of the allowable Keogh deduction and ½ the self-employment tax. c. CPA-02002 Explanation Choice "a" is correct. Charitable contribution. earned income is reduced by ½ the self-employment tax and the full amount of the deductible Keogh contribution. Unreimbursed business expenses of outside salespersons are deductible from adjusted gross income as itemized deductions. personal casualty losses. not the entire tax.

CPA-02005 Type1 M/C A-D Corr Ans: C PM R 2-01 26. In addition.000). c. had adjusted gross income of $60. b. Choice "d" is incorrect. The used clothing donated to the Salvation Army is deductible at its $600 fair market value. the art object deduction is only the $400 excess paid over fair market value.200 $5. Charitable contributions.000. 14 . Choice "a" is incorrect.000 is less than $30. c. The following additional information is available for 1992: Cash contribution to church Purchase of art object at church bazaar (with a fair market value of $800 on the date of purchase) Donation of used clothing to Salvation Army (fair value evidenced by receipt received) $4. b.5% AGI floor. Tax return preparation fee is a miscellaneous itemized deduction subject to the 2% adjusted gross income (AGI) floor. but instead are subject to a 7. Charitable contributions are not subject to the 2% AGI floor. not the $1.000 cash contribution to the church is deductible. Note that the total contributions deduction is below the 50% of adjusted gross income ceiling (50% × $60. Choice "d" is incorrect.000 = $30. or on investments are deductible as an itemized deduction not subject to the 2% adjusted gross income (AGI) floor. second home. Medical expense. Choice "b" is incorrect. d. Relative to the purchase of the art object at the church bazaar.400 CPA-02005 Explanation Choice "c" is correct. The art object deduction is not its fair market value of $800. The total deduction is $5. Choice "b" is incorrect. Choice "c" is incorrect.000 1.000 in 1992. CPA-02004 Explanation Choice "a" is correct. since $5. who itemizes deductions. Medical expenses are itemized deductions not subject to the 2% adjusted gross income (AGI) floor. only the excess paid over fair market value ($1. The used clothing donation to the Salvation Army is deductible at its fair market value of $600. The used clothing donated to the Salvation Army is deductible at its $600 fair market value. The $4.000 $4. Tax return preparation fee.000 + $400 + $600). $5.200 600 What is the maximum amount Spencer can claim as a deduction for charitable contributions in 1992? a. CPA-02005 PII Nov 93 #31 Page 24 Spencer.400 $5.000 ($4.200 paid. Interest expense. Interest expense on a home mortgage. but the $400 excess paid over its fair market value.2K5 Exported Questions Becker Professional Review Which itemized deduction is included in the category of unreimbursed expenses that are deductible only to the extent that the aggregate amount of such expenses exceeds 2% of the taxpayer's adjusted gross income? a. d.200 − $800 = $400) is deductible.

000 in his 1993 income tax return. and should file an amended 1992 income tax return in 1993. Farb should deduct it in that year. a cash basis individual taxpayer. Farb should deduct $3. CPA-02007 Explanation Choice "a" is correct.000 invoice for personal property taxes. are carried back 2 years and forward 20 years. Choice "a" is incorrect. This is true even though the $8. not charitable contributions. d. Farb should not deduct any amount in his 1992 income tax return and should deduct $3. Believing the amount to be overstated by $5.000 in property taxes in 1992. Farb paid the invoiced amount under protest and immediately started legal action to recover the overstatement.Becker Professional Review 2K5 Exported Questions CPA-02006 Type1 M/C A-D Corr Ans: C PM R 2-01 27.000 refund as income in his 1993 income tax return. Do not net the refund against the amount paid and deduct the net amount in 1992. Farb should deduct $8. Neither carried back nor carried forward. CPA-02006 PII Nov 93 #32 (Adapted) Page 26 Charitable contributions subject to the 50-percent limit that are not fully deductible in the year made may be: a.000 in property taxes in 1992. d. Choice "b" is incorrect. b. Carried forward indefinitely until fully deducted. Net operating losses. Do not net the refund against the amount paid and deduct the net amount in 1993. Since Farb paid $8. This is true even though the $8. Charitable contributions subject to the 50% limit that are not fully deductible in the year made may be carried forward. In November 1993. Farb should report the $5. c.000 was paid under protest. b. not charitable contributions. Farb should deduct it in that year. Carried back two years or carried forward twenty years. Since Farb paid $8.000 was paid under protest. Which of the following statements is correct regarding the deductibility of the property taxes? a. Individual capital losses. Farb should not deduct any amount in his 1992 income tax return when originally filed. CPA-02009 PII Nov 93 #35 Page 13 15 . c. received an $8. CPA-02006 Explanation Choice "c" is correct.000 refund.000.000 in his 1992 income tax return. CPA-02007 Type1 M/C A-D Corr Ans: A PM CQ #6 R 2-01 28. and he received a $5. Farb itemizes his deductions on his tax returns. Choice "b" is incorrect. CPA-02009 Type1 M/C A-D Corr Ans: A PM R 2-01 29. Choice "d" is incorrect. Farb should deduct it in that year.000 refund as income in 1993 since Farb itemizes deductions and would have received a tax benefit from deducting the $8.000 in property taxes in 1992. Carried forward five years. There is no need to wait and file an amended 1992 return in 1993. Farb.000 paid in 1992. Charitable contributions subject to the 50% limit that are not fully deductible in the year made may be carried forward five years. Choice "c" is incorrect. are carried forward indefinitely until used up (or taxpayer's death). CPA-02007 PII Nov 93 #33 Page 21 In 1992. Under the tax benefit rule. Since Farb paid $8. Choice "d" is incorrect.000 in his 1992 income tax return and should report the $5. the matter was resolved in Farb's favor.

Barlow moved from Chicago to Miami to start a new job. an individual must be age 65 or older or blind by the end of the tax year. b. incurring costs of $1.700 $3. b.500 in temporary living expenses. A capital expenditure for the improvement of a home qualifies as a medical expense if it is directly related to the prescribed medical care. Barlow was not reimbursed for any of these expenses.200 to move household goods and $2.000 $85. He or she does not have to support a dependent child or aged parent. c.000 Widening doorways to accommodate Drake's wheelchair (the improvement did not increase the value of his home) $100. In order to qualify for the additional standard deduction. d. a disabled taxpayer. it is deductible to the 16 . made the following home improvements: Cost Pool installation. What amount should Barlow deduct as itemized deduction for moving expense? a. c. what maximum amount would be allowable as a medical expense deduction in the current year? a.000 $3. there is no deduction for temporary living expenses. d. CPA-02011 PII Nov 91 #21 Page 16 Which of the following requirements must be met in order for a single individual to qualify for the additional standard deduction? Must support dependent child or aged parent Yes No Yes No Must be age 65 or older or blind Yes No No Yes a.000 CPA-04724 Explanation Choice "b" is correct. CPA-02011 Explanation Choice "d" is correct.700 CPA-02009 Explanation Choice "a" is correct. For years after 1993. $0 $2. not as an itemized deduction.2K5 Exported Questions Becker Professional Review In 19X4. Drake.000 $75. However. d. which qualified as a medical expense and increased the value of the home by $25. CPA-04724 Type1 M/C A-D Corr Ans: B PM R 2-01 31.000 For regular income tax purposes and without regard to the adjusted gross income percentage threshold limitation.000 $10. c. and the direct moving expenses (such as the costs to move the goods and the costs to move the taxpayer's family from the old to the new location) are deductible before adjusted gross income.000 10. CPA-02011 Type1 M/C A-D Corr Ans: D PM CQ #4 R 2-01 30. b. $110. CPA-04724 Released 2005 Page 20 In the current year.

Drake may only deduct $75. The surgery is not deductible because elective cosmetic surgery is not done to improve or maintain health. the entire $10. Thus. Premiums on disabilities policies are not deductible since payments under the policy are made to replace lost income.000 is deductible. b. the difference between the cost of improvement ($100. it is only deductible to the extent that the expenditure exceeds the increase in value of the home.500 CPA-04757 Explanation Choice "d" is correct. the full cost of home-related capital expenditures to enable a physically handicapped individual to live independently and productively qualifies as a medical expense.500 $7. therefore.Becker Professional Review 2K5 Exported Questions extent that the expenditure exceeds the increase in value of the home. Premiums on disabilities policies are not deductible since payments under the policy are made to replace lost income.000) and the contact lenses ($500) are deductible medical expenses. Drake may only deduct $75. Premiums on disabilities policies are not deductible since payments under the policy are made to replace lost income.000) and the increase in market value ($25.000) of the home.500 $5. Choice "b" is incorrect. Choice "a" is incorrect. Choice "a" is incorrect. not to pay for medical expenses. CPA-04757 Released 2005 Page 20 Smith paid the following unreimbursed medical expenses: Dentist and eye doctor fees Contact lenses Facial cosmetic surgery to improve Smith's personal appearance (surgery is unrelated to personal injury or congenital deformity) Premium on disability insurance policy to pay him if he is injured and unable to work $5.000.000 and the full cost of home-related capital expenditures to enable a physically handicapped individual to live independently and productively ($10. In addition. The widening of hallways qualifies as this type of expense and. CPA-04876 Regulation Online Quiz Page 1 . The surgery is not deductible because elective cosmetic surgery is not done to improve or maintain health. CPA-04876 Type1 M/C A-D Corr Ans: A 17 QZ#1 R 2-01 33. d. to the capital improvement expenditure of $75.500 $15. Choice "c" is incorrect. therefore. not to pay for medical expenses. $17.000 500 10.000. Both the capital improvement expenditure of $75.000 is deductible. the entire $10. CPA-04757 Type1 M/C A-D Corr Ans: D PM R 2-01 32. The doctor fees ($5. the full cost of home-related capital expenditures to enable a physically handicapped individual to live independently and productively qualifies as a medical expense. Choice "c" is incorrect. not to pay for medical expenses. c.000 What is the total amount of Smith's tax-deductible medical expenses before the adjusted gross income limitation? a.000) qualify as medical expenses. the difference between the cost of improvement ($100. In addition. Choice "d" is incorrect.000) of the home. The surgery is not deductible because elective cosmetic surgery is not done to improve or maintain health.000.000) and the increase in market value ($25. Although a capital expenditure for the improvement of a home qualifies as a medical expense. Thus.000 2. The widening of hallways qualifies as this type of expense and.

Choice "b" is incorrect. This answer is the total deductible medical expenses.5% threshold.000 3.875. equals $425. Choice "b" is incorrect. Qualified medical expenses are $2. Choice "d" is incorrect.300 CPA-04878 Explanation Choice "a" is correct. This answer is the threshold.5% threshold.2K5 Exported Questions Becker Professional Review Jeffrey. Total allowable gross expenditures of $5. which should then be compared to the qualified expenses in order to figure the amount to be deducted on Schedule A.875. 24. he would be able to take his contribution carryover from 2003 ($5. The son's physical therapy is also a deductible expenditure. This is the maximum allowed.875 $5.5% of the taxpayer's adjusted gross income. b. had $55. Jeffrey's contribution limit for 2004 would be $55.000 charitable contribution carryover from his 2003 church contribution. 18 . CPA-04878 Regulation Online Quiz Page 1 In 2004. Choice "c" is incorrect. b. 7. required surgery. He had a $5.000 for physical therapy for their son. health club memberships and unnecessary medical expenditures. however. etc. Andradis' face lift Physical therapy for their dependent son's soccer injury Massage therapy fees at Mr. The Andradis' AGI is $65. Jeffrey is not limited to only his carryover contributions. a single taxpayer.000 500 The Andradis' adjusted gross income for 2004 was $65. and the $2.500. What amount could be claimed on the Andradis' 2004 tax return for medical expenses? a.000 CPA-04876 Explanation Choice "a" is correct.500 19.) Non-deductible expenses are such things as elective surgeries.000 × 50% = $27. Andradis' health club obtained because he enjoys massages $ $ $ $ 2. Jeffrey is able to take his carryover contributions from 2003 as well. however. CPA-04878 Type1 M/C A-D Corr Ans: A QZ#2 R 2-01 34. c. prescriptions. c.300 for their daughter's prescriptions and $3. d. $425 $2. the Andradis' paid the following expenses: Unreimbursed costs for prescription drugs required for their dependent daughter's medical condition Mrs.5% of that is $4. Against that limit. The contribution limit for a church is 50% of the contribution base (adjusted gross income in this case).300 does not take into account the 7.500 27. Deductible medical expenses are those expenses that are "necessary" (such as doctors.300 less the threshold of $4. the answer does not take into account the 7.500 to his church.000) and the current year's contributions ($19.000.500 5. Jeffrey cannot deduct more than he actually contributed. Deductible medical expenses are limited to the amount that exceeds 7. During 2004 he contributed $19. d. What was the maximum amount of properly substantiated charitable contributions that Jeffrey could claim as an itemized deduction for 2004? a. Choice "c" is incorrect.300 $4.300 4. Choice "d" is incorrect.000.500) for a total of $24.500.000 in adjusted gross income for 2004.

CPA-04881 Explanation Choice "d" is correct.200 $2. b.700 Choice "a" is incorrect.500 $8. and medical expenses in excess of 7.000 $1. Choices "a". Passive activity losses. Deductible contributions to individual retirement accounts. the Stevenson's are filing married filing joint. This answer includes the interest. state taxes paid.200 $2. Stevenson's first wife Child support paid for Mr. This answer includes only the interest paid on the mortgage and the state taxes. "b".000 $5. $7. and "c" are incorrect. and medical expenses (to the extent they do not exceed 10% of AGI). state taxes paid and the child support. Individual taxpayer net operating losses. Deductible medical expenses. Additional information is as follows: Interest paid on their home mortgage State taxes paid Medical expenses in excess of 7. and their adjusted gross income was $58.300 $13. Deductible contributions to individual retirement accounts are not an adjustment or preference in calculating a taxpayer's alternative minimum taxable income.Becker Professional Review 2K5 Exported Questions CPA-04879 Type1 M/C A-D Corr Ans: B QZ#3 R 2-01 35.700 $12. b.000 $1.200 $8.100 What amount may the Stevenson's claim as itemized deductions on their 2004 Schedule A? CPA-04879 Explanation Choice "b" is correct. Child support is neither an adjustment nor an itemized deduction. Home mortgage interest State taxes paid Medical expenses Total itemized deductions $5. Choice "c" is incorrect. This is the total of all items listed. The medical expenses in excess of 7. c. Interest on a home mortgage. It does not include the medical expenses (as is proper) and should not include the child support.5% AGI are itemized deductions reported on Schedule A. Stevenson's daughter a. and child support) should not be included. d. passive activity losses.500 $4. 19 . alimony.5% AGI are also deductible on Schedule A. CPA-04879 Regulation Online Quiz Page 1 In 2004.5% AGI Deductible contributions to IRAs Alimony paid to Mr. three of which (the IRA contributions. c. CPA-04881 Type1 M/C A-D Corr Ans: D QZ#4 R 2-01 36. d.800 $5. They are an adjustment in calculating adjusted gross income for regular (not alternative minimum) tax purposes. Choice "d" is incorrect.000 $5.250. Contributions to IRAs and alimony paid are adjustments to gross income to arrive at AGI. CPA-04881 Regulation Online Quiz Page 1 Which of the following is not an adjustment or preference to arrive at alternative minimum taxable income? a. Adjustments to arrive at AMTI include individual net operating losses.

They also believe they will be eligible to claim a tax credit for these contributions. "c". CPA-04883 Explanation Choice "a" is correct. This is two years from the date the last tax was paid but the claim must be filed by the later of this date and three years from the date the return was filed. Educator expenses. Stephen's. and two years from the time the tax was paid would be December 31. CPA-04885 Type1 M/C A-D Corr Ans: A QZ#7 R 2-01 39. This date is three years from the date the 2000 tax return was due. Marsh filed her 2000 individual income tax return on February 15. school. The return was due on April 15. 2001. CPA-04884 Type1 M/C A-D Corr Ans: B QZ#6 R 2-01 38.000 in wages from his teaching job. Deductible Contribution Yes Yes No No Claim Credit Yes No Yes No 20 . Seth and Sheila intend to file a joint return. 2004. 2004. A taxpayer can file a claim for refund by the later of three years from the time the return was filed or two years from the time the tax was paid. December 31. c. d. they received $500 in interest income and $50 in prize winnings from a local radio contest. she discovered that she had not taken a properly substantiated charitable contribution that would have reduced her total tax by $250 on her 2000 tax return. 2002 (all withholding is deemed paid ratably over the year so the last dollars would be deemed paid December 31. 2000). He is covered by the university's pension plan. and "d" are incorrect. December 31. April 15. Each of these items is an adjustment to gross income to arrive at adjusted gross income. 2003. Which of the following is correct? a. Choices "a". Self-employed FICA (50%).2K5 Exported Questions Becker Professional Review CPA-04883 Type1 M/C A-D Corr Ans: A QZ#5 R 2-01 37. Three years from the time the return was filed is February 15. The later date is February 15. 2002. b. In addition to Seth's income. whichever is later. Sales tax paid. Choice "c" is incorrect. b. 2004. Each would like to make a deductible contribution to an individual retirement account for 2004. February 15. 2004. During January 2002. 2001. Sheila is a volunteer at their son. Self-employed health insurance. Sales taxes paid or state income taxes are deductible at the option of the taxpayer on Schedule A as an itemized deduction. d. This date is three years from the date the last tax was paid. CPA-04885 Regulation Online Quiz Page 1 For 2004. By what date must she file her amended return to claim a refund of the tax paid? a. Seth expects to earn $35. CPA-04884 Explanation Choice "b" is correct. d. CPA-04883 Regulation Online Quiz Page 1 Ms. b. CPA-04884 Regulation Online Quiz Page 1 Which of the following is not an adjustment to arrive at adjusted gross income? a. Choice "b" is incorrect. All her tax was paid during the year through withholding. c. c. Choice "d" is incorrect.

400 $450.Becker Professional Review 2K5 Exported Questions CPA-04885 Explanation Choice "a" is correct.000. CPA-04887 Explanation Choice "a" is correct. The fair market value determined by an appraiser shortly before the hurricane was $450. Earned income credit. Expense of breaking lease. "b". In addition.000 21 . the income limitation is not exceeded.000 $142. CPA-04886 Type1 M/C A-D Corr Ans: C QZ#8 R 2-01 40. Cost of moving household goods. the Tarbet's residence was destroyed by a hurricane. What total amount can Tarbet deduct as a 2004 casualty loss itemized deduction. In addition. d. the taxpayer can receive a refund of those amounts regardless of the income tax liability being reduced to zero. In November 2004. Tarbet received $300. The costs associated with breaking an existing lease are not deductible as moving expenses. CPA-04887 Type1 M/C A-D Corr Ans: A QZ#9 R 2-01 41. d. Choices "b". c. The Tarbet's basis in the property was $150.000. Excess social security paid. c.000 from the insurance company. The Retirement savings contribution credit is a non-refundable credit. Child tax credit. if excess social security is paid. All moving expenses must be offset with employer reimbursement amounts prior to claiming any deduction. thus. Additional requirements of length of employment apply and may require adjustment of a previously claimed adjustment if they are not met. CPA-04887 Regulation Online Quiz Page 1 Which of the following is not a refundable tax credit? a. Transportation. and "d" are all allowable moving expenses. Choices "a". Although Seth is covered by a plan. CPA-04888 Type1 M/C A-D Corr Ans: A QZ#10 R 2-01 42.000 and they did not have any casualty gains during 2004. "c". the second factor. after the application of the threshold limitations? a. both Seth's and Sheila's contributions should be deductible. both should qualify for the credit. CPA-04886 Explanation Choice "c" is correct. Cost of hotel during drive to new home. Retirement savings contribution credit. CPA-04886 Regulation Online Quiz Page 1 Which of the following items are not allowable as adjustments for moving expenses without regard to employer provided benefits or other limitations? a. b. b. b. CPA-04888 Regulation Online Quiz Page 1 During 2004. Tarbet's adjusted gross income was $75. $0 $75. c. and "d" are incorrect based upon the above explanation. depending upon the taxpayer's income levels. d. The EIC and child tax credit could result in a refunded amount beyond the actual tax liability.

State income taxes. Kevin's participation in his employer's pension plan does not limit the deductibility of his IRA contribution. Alimony paid. The couple had $1. b. thus it is treated as zero (100) 0 ($7.000 of other taxable interest income. and "c" are incorrect. Alimony paid (not received). Although Kelly had no compensation. Choice "a" is incorrect.000 to an Individual Retirement Account. provided their combined earnings exceed the contribution amount.000 for Kelly. two conditions must be present: (1) the income limits are exceeded and (2) the taxpayer or spouse actively participates in a qualified retirement plan.500) 0 CPA-04889 Type1 M/C A-D Corr Ans: D Page 0 R 2-01 43. Kevin and Kelly intend to file a joint return. $3. CPA-04889 Regulation Online Quiz Alternative a. Which of the following is not an adjustment to arrive at adjusted gross income? CPA-04889 Explanation Choice "d" is correct.000.2K5 Exported Questions Becker Professional Review CPA-04888 Explanation Choice "a" is correct.000. "b". Kelly can contribute and deduct her contribution. The income limit for married filing joint for 2004 begins at $60. $0. however. Choice "c" is incorrect. State income taxes are an itemized deduction reported on Schedule A. must be met in order for contributions to be non-deductible. however. moving expenses.000 in wages and is covered by his employer's pension plan. Kevin will earn $50. CPA-04890 Regulation Online Quiz Alternative For 2004. The maximum deduction for an IRA is limited to the lesser of $3. Each contributed $3. and selfemployment taxes are all adjustments to gross income to arrive at adjusted gross income. Kelly is a stay-at-home mom and volunteered for the local Red Cross.000 for Kevin. Kevin is also allowed a contribution and deduction.000.negative. c. Choices "a". Kelly is also allowed a contribution and deduction. CPA-04890 Type1 M/C A-D Corr Ans: B Page 0 R 2-01 44.000 (in 2004) or the individual's compensation. Both tests. Self-employment taxes. CPA-04890 Explanation Choice "b" is correct.000 ($300. $3. For contributions to IRAs to be non-deductible. Kevin can contribute and deduct his contribution. Because Kevin and Kelly's income is below that threshold. 22 . c. d. the income limit and participation in a qualified plan. The calculation for the deduction is as follows: Smaller loss (lesser of cost or decrease in FMV) Less: Insurance Recovery Taxpayer's Loss Less: Floor Amount of $100 Eligible Loss Less: 10% of AGI Deductible Loss $150. Moving expenses. the maximum contribution for married couples filing jointly is $6. b. Choice "d" is incorrect.000) ($150. d.000). The allowable IRA deduction on their 2004 joint tax return will be: a. $6.

150) Taxable income Tax $75. c.500 less $5. Int. Riggle. but only two personal exemptions are subtracted. CPA-04892 Type1 M/C A-D Corr Ans: A Page 0 R 2-01 46.050 CPA-04891 Explanation Choice "b" is correct.421 The medical expenses are limited to the amount that exceeds 7. Total itemized deductions equal $16. RE Tax State Tax Exemptions ($9. b.050 × 3 = $9.625. Choice "c" is incorrect. Following is additional information: Deductible medical expenses (before application of any limitation) Home mortgage interest Real estate taxes on principal residence State income taxes paid Standard deduction Personal exemption (per person) The Miller's wish to minimize their income tax. thus.578 $7.878 $8. CPA-04891 Regulation Online Quiz Alternative Mr. CPA-04892 Regulation Online Quiz Alternative For 2004.625 $49.000 $1.000 ($1. one for each spouse and one for their dependent child ($3.421 $7.000 .500 $4. instead of the itemized deductions is subtracted from AGI. In addition.875) ($8.000 = $5. $7. Miller. she had the following credits Child tax credit Retirement plan contribution credit 23 $1. $6.000) $58.500.Becker Professional Review 2K5 Exported Questions CPA-04891 Type1 M/C A-D Corr Ans: B Page 0 R 2-01 45. They have adjusted gross income of $75. The Miller's tax is calculated as follows: AGI Itemized Ded: Medical Mort.5% of AGI. Ms. Choice "d" is incorrect.500) ($4. The Miller's are entitled to three exemptions. This is the result if the standard deduction. the choice must be made as to whether the itemized deductions exceed the standard deduction.000 $2. $7. a single mother with one 5-year-old child. had taxable income of $13. will file a joint tax return in 2004.453 $7. This is the result if all itemized deductions are taken as indicated above. 7. The problem states that the Miller's wish to minimize their tax.000 and are in the 15% tax bracket.475 × 15% tax rate $ 7.000) ($2.5% of 75. a married couple with one dependent child.625 = $1. d.875 deductible medical. This is the result if the entire amount of the medical expenses. and Mrs.500 is subtracted from AGI with the remainder of the above calculation the same.375.000 and was in the 15% tax bracket.000 $9.500 $3.150).500 $8. Choice "a" is incorrect. What is the Miller's 2004 income tax? a. which exceeds the standard deduction of $9.

Choice "d" is incorrect. The Marions were insured for and received $200.000. The calculation for the deductible casualty loss would be: Smaller loss of lost cost or decreased FMV Less: Insurance recovery Taxpayer's loss Less: $100 reduction per occurrence Eligible loss Less: 10% of AGI Deductible loss $250.000. Mr. and "d" are incorrect. Retirement plan contribution credit. Marion's principal residence burned in an accidental fire started with an electrical short. The majority of credits are not refundable. Riggle would like to reduce her tax due with the above credits. $100.000. CPA-04892 Explanation Choice "a" is correct. This is the result if the FMV ($350. c. Choices "b". The Marion's 2004 adjusted gross income is $150. "c". & Mrs. b. The structure and all contents were a total loss. CPA-04893 Type1 M/C A-D Corr Ans: B Page 0 R 2-01 47. None of the above. $0 $34. b. Tax Calculations and Credits CPA-02012 Type1 M/C A-D Corr Ans: C PM CQ #13 R 2-02 48.900 CPA-04893 Explanation Choice "b" is correct. Lifetime learning credit.000) 50.000) $ 34. Choice "c" is incorrect. meaning once the taxpayer's liability is reduced to zero.000 in total for the structure and contents. What is the amount of the Marion's deductible casualty loss? a. if remaining would allow her to receive a refund once her tax due was reduced to zero? a. Ms. the remaining credits must be carried forward or back (depending upon the credit). The child tax credit (not the dependent care credit) is one of the refundable credits. d. d. Which of the above credits.900 $100.000 (100) 49.000 $134. CPA-02012 May 94 #17 Page 34 24 .000 On her 2004 tax return. CPA-04893 Regulation Online Quiz Alternative During 2004. The fair market value of the home and the contents before the fire was $350.2K5 Exported Questions Becker Professional Review Lifetime learning credit $1.000) is used in the above calculation as opposed to the lesser of the decreased FMV or the lost cost. c. The retirement plan contribution credit and the lifetime learning credit are not refundable credits.900 (15.900 Choice "a" is incorrect.000 is the difference between the fair market value of the Marion's property and contents and their cost basis. Child tax credit. The Marions are entitled to a casualty loss deduction as calculated above. This amount is irrelevant in calculating their deductible casualty loss for tax purposes.000 (200. The Marion's cost for the home and contents was $250.

Choice "d" is incorrect. Choice "c" is incorrect. Eligible taxpayers can get advance payments from their employers because the credit is assured.000) are eligible. is in the 15% tax bracket. d.000 3.500)* 25 .000 Mr. The expenses ($8. CPA-02014 PII Nov 93 #38 (Adapted) Page 32 Poole.000 of total expenses are not eligible.000 $11.000 $1. CPA-02014 Type1 M/C A-D Corr Ans: C PM R 2-02 50.000 (6. c. and Mrs.845 $1. b. The earned income credit is refundable. CPA-02012 Explanation Choice "c" is correct. Choice "a" is incorrect.000 of the $16. b.160 $5.000 Poole wishes to minimize his income tax.000 + $3. b. d.000 8.575 $1.Becker Professional Review 2K5 Exported Questions Which of the following credits can result in a refund even if the individual had no income tax liability? a. Elderly and permanently and totally disabled credit. what amount of the above expenses are qualifying expenses for the adoption credit? a. Child and dependent care credit. CPA-02013 PII Nov 93 #34 (Adapted) Child's medical expenses Legal expenses Agency fee Page 40 $5. The following information applies to Poole: Medical expenses Standard deduction Personal exemption a. $3. The adoption fees would be qualifying expenses for the tax credit (medical expenses do not qualify). He had 2002 adjusted gross income of $20. What is Poole's 2002 total income tax? CPA-02014 Explanation Choice "c" is correct. Sloan incurred the following expenses during the year when they adopted a child: Without regard to the limitation of the credit. $5. Earned income credit. Poole's total income tax for 2002 would be calculated as follows: Adjusted gross income (AGI) Itemized deductions $20. Credit for prior year minimum tax. $16.700 3.000 $10. 45 years old and unmarried. CPA-02013 Type1 M/C A-D Corr Ans: B PM CQ #12 R 2-02 49.000. c.000 4. d.000 CPA-02013 Explanation Choice "b" is correct. Medical expenses are not eligible for the credit.350 $8. c.

000).000) and miscellaneous deductions that exceed 2% of adjusted gross income ($2.000 AGI).2K5 Exported Questions Becker Professional Review Personal exemption Taxable income Tax rate x .500 (3.700 standard deduction.15 Total income tax 13.5% × $20.500 itemized deductions ($8. a single taxpayer. This is increased by state and local taxes paid ($5. CPA-02019 Type1 M/C A-D Corr Ans: B Page 50 PM CQ #16 R 2-03 52.000 medical expenses less 7. Deduct $6. Mills had no tax preferences. d.Other Taxes CPA-02015 Type1 M/C A-D Corr Ans: C Page 49 PM CQ #15 R 2-03 51.000 adjusted gross income) since it is larger than the $4. Choice "b" is incorrect.000.000 6.000) for a total of $77. Individual Taxation . Miscellaneous deductions that exceed 2% of AGI must be added back to Mills' taxable income in calculating alternative minimum taxable income. Choice "a" is incorrect. had $70.5% × $20. Deduct itemized deductions and the personal exemption from adjusted gross income to arrive at the taxable income.000 in taxable income before personal exemptions. Choice "d" is incorrect.500 itemized deduction ($8.000) $10. c. The home mortgage interest on a loan to acquire the residence ($6.500). Choice "d" is incorrect. $72.000.000) does not increase alternative minimum taxable income.000 What amount did Mills report as alternative minimum taxable income before the AMT exemption? CPA-02015 Explanation Choice "c" is correct.000 medical expenses by 7.5% of the adjusted gross income ($8. Reduce the $8.575 * Larger of $4. Choice "a" is incorrect.000 medical expenses less 7. Don Mills. Mills' alternative minimum taxable income starts with his taxable income ($70.000 − $1. not $8.000 $77. b. Home mortgage interest is not added back to Mills' taxable income to calculated alternative minimum taxable income. Choice "b" is incorrect. State and local income taxes must be added back to Mills' taxable income in calculating alternative minimum taxable income. CPA-02019 ARE May 95 #18 Tax exempt interest from private activity bonds issued during 1994 Alternative minimum tax preferences include: Charitable contributions of appreciated capital gain property 26 .500 $ 1.000 $75.000 $5.000 2.500 = $6.700 standard deduction or $6.500 in itemized deductions. Deduct $6.000 $83. CPA-02015 ARE May 95 #17 In 1994. His itemized deductions were as follows: State and local income taxes Home mortgage interest on loan to acquire residence Miscellaneous deductions that exceed 2% of adjusted gross income a.

CPA-02025 PII Nov 93 #37 Page 45 The alternative minimum tax (AMT) is computed as the: a. On April 15. CPA-02023 Explanation Choice "d" is correct. By December 31. c. Excess of the regular tax over the tentative AMT. The concept is the same as deferred taxes for financial accounting purposes. CPA-02025 Type1 M/C A-D Corr Ans: B PM R 2-03 54. The alternative minimum tax (AMT) is the excess of the tentative AMT over the regular tax. b. not the other way around. CPA-02084 ARE R98 #4 (Adapted) Page 52 Krete.000 in federal income taxes and Krete had made no estimated tax payments. 27 . Forward indefinitely. depreciation. Choice "d" is incorrect. not the sum of the tentative AMT plus the regular tax. The credit for prior year alternative minimum tax liability may be carried: Forward for a maximum of 5 years. c. c. 2002. The alternative minimum tax (AMT) is the excess of the tentative AMT over the regular tax. The alternative minimum tax (AMT) is computed as the excess of tentative AMT over the regular tax. The tentative AMT plus the regular tax. Excess of the tentative AMT over the regular tax. The alternative minimum tax (AMT) is the excess of the tentative AMT over the regular tax. CPA-02025 Explanation Choice "b" is correct. an unmarried taxpayer with income exclusively from wages. Individual Taxation . not the lesser of AMT or regular tax. b. Tax exempt interest from private activity bonds and accelerated depletion. Back to the 3 preceding years. d. Yes Yes No No Yes No Yes No CPA-02019 Explanation Choice "b" is correct. CPA-02023 Type1 M/C A-D Corr Ans: D Page 49 PM CQ #14 R 2-03 53. Lesser of the tentative AMT or the regular tax.Becker Professional Review 2K5 Exported Questions a. CPA-02023 ARE May 94 #16 a. filed her initial income tax return for the 2002 calendar year. b. Alternative minimum tax (AMT) paid can be claimed as a credit against other years if the tax was paid on items that increased AMT that year but will reverse in later years. Choice "c" is incorrect. Charitable contributions of appreciated capital gain property are not alternative minimum tax preferences. The credit is carried forward indefinitely. d. Back to the 3 preceding years or carried forward for a maximum of 5 years. d.Other Items CPA-02084 Type1 M/C A-D Corr Ans: A PM CQ #18 R 2-04 55. Krete's employer had withheld $16. Choice "a" is incorrect. or amortization are alternative minimum tax preference items.

there is no penalty for underpayment of estimated taxes. II only. c. Choice "c" is incorrect. Payment of 90% of the tax on the return for the current year avoids the penalty for underpayment of estimated tax.000. Choice "d" is incorrect. there is no penalty for underpayment of estimated taxes. Choice "b" is incorrect. b. c. Krete's 2002 income tax liability was $16. 2003. 90% of the tax on the return for the current year paid in four equal installments.500 CPA-02084 Explanation Choice "a" is correct. Krete timely filed an extension request to file her individual tax return and paid $300 of additional taxes. but this is a separate penalty. II. or II. CPA-02098 ARE May 95 #19 (Adapted) Page 52 Chris Baker's adjusted gross income on her 2004 tax return was $160. The penalty for underpayment of estimated taxes is not assessed on the full amount of the income tax liability. a. d. only the unpaid amount after withholdings to the extent it exceeds $1. 1139 1045 1040X 843 28 . CPA-02103 ARE May 95 #20 A claim for refund of erroneously paid income taxes. must be submitted on Form: a. d. or payment of 110% of the prior year's tax liability avoids the penalty for underpayment of estimated tax. If the balance of tax due after withholdings is not over $1. 110% of prior year's tax liability paid in four equal installments.500 when she timely filed her return on April 30. I. Both. CPA-02103 Type1 M/C A-D Corr Ans: C Page 51 PM R 2-04 57. $0 $200 $500 $16. Provided the taxes due after withholdings were not over $1. The amount covered a 12-month period. I only. This $200 would be subject to a failure to pay penalty. Note that there would be a failure to pay penalty on the $200 that was not paid until April 30. CPA-02098 Type1 M/C A-D Corr Ans: C PM R 2-04 56.000.2K5 Exported Questions Becker Professional Review 2003.000. filed by an individual before the statute of limitations expires. and paid the remaining income tax liability balance. CPA-02098 Explanation Choice "c" is correct.000. there is no penalty for underpayment of estimated taxes. What amount would be subject to the penalty for the underpayment of estimated taxes? a. b. For the 2005 tax year. Both I and II. b. c. d. but if the balance due after withholdings is not over $1. Payment of 110% of the prior year's tax liability avoids the penalty for underpayment of estimated tax. Baker may avoid the penalty for the underpayment of estimated tax if the timely estimated tax payments equal the required annual amount of: I.000. Neither I nor II.

c. II only. Choice "b" is incorrect. An individual submits a claim for refund of erroneously paid income taxes on Form 1040X. 1995. CPA-04751 Released 2005 Page 52 A CPA's adjusted gross income (AGI) for the preceding 12-month tax year exceeds $150. the latest date the IRS can assess tax is 3 years from the date the return is due.Becker Professional Review 2K5 Exported Questions CPA-02103 Explanation Choice "c" is correct. 1996. d. b. CPA-02107 Type1 M/C A-D Corr Ans: C Page 51 PM CQ #17 R 2-04 58. The taxpayer neither committed fraud nor omitted amounts in excess of 25% of gross income on the tax return. March 20. Choice "a" is incorrect. When the return is filed early. CPA-04751 Explanation Choice "a" is correct. or the prior year method (100% of last year's tax) unless the taxpayer's adjusted gross income exceeds $150. the taxpayer in this example can use the annualized method. Form 1045 is used for a quick refund of individual income taxes due to the carry back of a net operating loss. April 15. not for refund of erroneously paid income tax. and "d" are incorrect per the above explanation. Form 1139 is used for refund of corporate. Both I and II. The seasonal method is not permitted. Neither I nor II. March 20. b.000. income taxes. What is the latest date that the Internal Revenue Service can assess tax and assert a notice of deficiency? a. The seasonal method. In computing the amount of estimated payments due. 1996. Choices "b". 1996. CPA-04751 Type1 M/C A-D Corr Ans: A PM R 2-04 59. a. CPA-02107 Explanation Choice "c" is correct. d. an individual taxpayer may choose between the annualized method (90% of current year's tax). 1993. The annualization method. I only. April 15. Which of the following methods is (are) available to the CPA to compute the required annual payment of estimated tax for the current year in order to make timely estimated tax payments and avoid the underpayment of estimated tax penalty? I. II. 1995. Form 843 is used to request a refund of taxes other than income tax. c.000 then they must use 110% of last year's tax. April 15. Therefore. not individual. Choice "d" is incorrect. CPA-02107 ARE May 94 #18 A calendar-year taxpayer files an individual tax return for 1992 on March 20. "c". 29 .

Sign up to vote on this title
UsefulNot useful

Master Your Semester with Scribd & The New York Times

Special offer: Get 4 months of Scribd and The New York Times for just $1.87 per week!

Master Your Semester with a Special Offer from Scribd & The New York Times