QUESTION 1
Robby owns a small condo close to the beach. Through the year, the home was used as given-
- Rented out for fair rent 36 days (rental income net, $10,800)
- Used for personal vacations 18 days
The expenses relating to this home were as given-
- Mortgage interest $20,000
- Property taxes 7,000
- Utilities and phone 2,500
- Insurance 5,000
- Depreciation on structure 6,000
Evaluate the amount and character of Robby's deductions for this vacation home considering the cost allocation method that the IRS prefers is used.
1. ___ Robby's deduction for AGI is -
2. ___ The amount that Robby can take as an itemized deduction is -
A. $9,000
B. $24,337
C. $27,000
D. $0
E. $18,000
F. $16,200
G. $10,800
H. None of the other answers is correct
I. $40,500
QUESTION 2
Karen is single and is an active participant in her employer retirement plan. She contributed $5,500, the greatest amount allowable, to an individual retirement account (IRA). For each of the subsequent, select the best answer-
1. ___ She is early on in her career and had AGI of $50,000. She expects that when she retires she can be in a higher tax bracket than right now.
2. ___ She is early in her career and had AGI of $65,000. She expects that when she retires she may be in a lower tax bracket than right now.
3. ___ She is early on in her career and had AGI of $80,000. She expects that when she retires she may be in a higher tax bracket than right now.
4. ___ She is in her peak career earning years and had AGI of $350,000. She expects that when she retires she may be in a lower tax bracket than right now.
A. Add $3,300 to a deductible traditional IRA & $2,200 to a Roth IRA
B. Add $2,200 to a deductible traditional IRA & $3,300 to a Roth IRA
C. Add $5,500 to a Roth IRA
D. Add $5,500 to a deductible traditional IRA.
E. Add $5,500 to a non-deductible traditional IRA or, perhaps, pass up the IRA and invest the $5,500 in solid growth stocks that she can purchase and hold for the long-term.
F. None of the other answers is correct
QUESTION 3
Before considering any of the subsequent, Jack's AGI was $80,000. As an employee, Jack incurred the subsequent expenses-
- Transportation, $18,000
- Meals and entertainment, $12,000
Jack's employer reimbursed $21,000 of the $36,000 expenses incurred. Jack was required to give the employer a full accounting, but the reimbursement did not identify which expense was being reimbursed. And, in the event that the reimbursement exceeded the expense incurred, Jack could have to repay the overpayment. Compute the amount and character (i.e., for AGI or ID) of Jack's deduction? Be sure your answers reflect the %-of-AGI limit, if applicable.
1. ____ Deduction for AGI
2. ____ Itemized deduction (after consideration of the %-of-AGI limit)
A. $30,000
B. $28,400
C. $5,600
D. $27,980
E. $7,200
F. None of the other answers is correct
G. $21,000
H. $0