acct 553 week 5 homework
WEEK 5
1. Question : (TCO E) For federal tax purposes, royalty income that is not derived in the ordinary course of a business is classified as:
: portfolio income.
active income.
passive income.
None of the above
2. Question : (TCO F) When comparing corporate and individual taxation, the following statement is true:
Unlike individual taxpayer, corporate may not have a long-term capital loss carryforward.
Both types of taxpayers have percentage limitations on the charitable contribution deduction, coupled with a carryover of the excess contribution.
All taxpayers may carry net operating losses back two years, forward 20 years.
All of the above
3. Question : (TCO H) Al and Amy file a joint return for the 2007 tax year. Their adjusted gross income is $80,000. They had net investment income of $7,000. In 2007, they had the following interest expenses:
Personal credit card interest: $4,000
Home mortgage interest: $8,000
Investment interest (on loans used to buy stocks): $10,000
What is the interest deduction for Al and Amy for the 2007 tax year?
: $8,000
$15,000
$12,000
$18,000
4. Question : (TCO B) Charitable contribution deductions for cash donations made by individuals to public charities are limited to:
Student Answer: 50% of AGI.
40% of AGI.
30% of AGI.
20% of AGI.
5. Question : (TCO A) The following taxes were paid by Tim:
Real estate taxes on his home: $1,000
State income taxes: $900
State gasoline tax (personal use of automobile): $150
In itemizing his deductions, what is the amount that Tim may claim as a deduction for taxes?
: $2,000
$3,050
$0
$1,900
6. Question : (TCO F) Hoover, Inc. had gross receipts from operations of $230,000, operating and other expenses of $210,000, and dividends received from a 55 percent-owned domestic corporation of $120,000. Hoover’s tax position for the year is:
: $20,000 taxable income.
$44,000 net income.
$140,000 taxable income.
$80,000 net operating loss.
7. Question : (TCO G) All of the outstanding stock of a closely held C corporation is owned equally by Evelyn Humo and Steve Bufusno. In 2011, the corporation generates taxable income of $20,000 from its active business activities. In addition, it earns $20,000 of interest from investments and incurs a $40,000 loss from a passive activity.
How much income does the C corporation report for 2011?
$10,000 of portfolio income
$0
$20,000 of portfolio income
None of the above
8. Question : (TCO G) Bob, who is single, has $90,000 of salary, $25,000 of income from a limited partnership, and a $30,000 passive loss from a real estate rental activity in which he actively participates. His modified adjusted gross income is $90,000. Of the $30,000 loss, how much is deductible?
$30,000
$10,000
$25,000
$0
9. Question : (TCO F) Jen owns a sole proprietorship, and Steve is the sole shareholder of a C (regular) corporation. Each business sustained a $14,000 operating loss and a $3,000 capital loss for the year. Evaluate how these losses will affect the taxable income of the two owners?
10. Question : (TCO G) Briefly (1) define and (2) discuss the purpose and impact of each of the following:
a. net operating loss
b. at-risk rules
c. tax shelter
