Tax Exam 2 UPDATED ACTUAL QUESTIONS AND CORRECT
Answers
Rental or royalty expenses are deductible "for" AGI. True
Self-employed taxpayers can choose between claiming False
a deduction or a credit for the employer portion of self-
employment taxes paid.
To qualify as a charitable deduction the donation must False
be made by cash or by check.
Taxpayers generally deduct the lesser of their standard False
deduction or their itemized deductions.
Taxpayers traveling for the primary purpose of True
receiving essential and deductible medical care may
deduct the cost of travel.
When selling stocks, which method of calculating basis Specific identification
provides the greatest opportunity for minimizing gains
or increasing losses?
A) LIFO
B) FIFO
C) Weighted average
D) Specific identification
E) None of the choices are correct
The maximum amount of net capital losses individual $3,000
taxpayers may deduct against their ordinary income per
year is:
A) $3,000.
B) $5,000.
C) Zero, losses are not deductible.
D) There is no maximum. All losses are allowed to be
deducted.
E) None of the choices are correct.
Generally, interest income is taxed at preferential False
capital gains rates and dividend income is taxed at
ordinary rates.
Two advantages of investing in capital assets are (1) True
gains are generally deferred and (2) gains are generally
taxed at preferential rates.
A passive activity is any activity that involves a trade or True
business or rental activity in which the taxpayer does
not materially participate.
Answers
Rental or royalty expenses are deductible "for" AGI. True
Self-employed taxpayers can choose between claiming False
a deduction or a credit for the employer portion of self-
employment taxes paid.
To qualify as a charitable deduction the donation must False
be made by cash or by check.
Taxpayers generally deduct the lesser of their standard False
deduction or their itemized deductions.
Taxpayers traveling for the primary purpose of True
receiving essential and deductible medical care may
deduct the cost of travel.
When selling stocks, which method of calculating basis Specific identification
provides the greatest opportunity for minimizing gains
or increasing losses?
A) LIFO
B) FIFO
C) Weighted average
D) Specific identification
E) None of the choices are correct
The maximum amount of net capital losses individual $3,000
taxpayers may deduct against their ordinary income per
year is:
A) $3,000.
B) $5,000.
C) Zero, losses are not deductible.
D) There is no maximum. All losses are allowed to be
deducted.
E) None of the choices are correct.
Generally, interest income is taxed at preferential False
capital gains rates and dividend income is taxed at
ordinary rates.
Two advantages of investing in capital assets are (1) True
gains are generally deferred and (2) gains are generally
taxed at preferential rates.
A passive activity is any activity that involves a trade or True
business or rental activity in which the taxpayer does
not materially participate.
