Question

Which item is ADDED to the original basis to arrive at the adjusted basis?

1 Discounts, rebates, or reimbursements of the purchase price.

2 The cost of capital improvements.

3 Insurance reimbursements for property damage.

4 Any tax credits received through ownership of the asset.

Joseph purchased a home for $275,000. Legal fees for the purchase were $500 and recording fees were $280. Later, he added a room for $25,000. During a storm, he suffered damage and spent $1,000 on repairs to restore the property. Two months later, he received a check from his insurance company for $500 for the storm damage. Which of the following is true?

1 His basis is still $275,780, the cost of the house, along with the legal and recording fees.

2 His basis is $300,000, because of the room addition.

3 His basis is $301,280. Legal and recording fees, the cost of the room addition, and the cost of repairs are added to the purchase price. The insurance payment is deducted from the basis. 4 His basis is $301,780 because insurance proceeds do not affect basis.

Which of the following is INCORRECT about property received as a gift?

1 The basis for depreciation is generally the donor's adjusted basis.

2If gift tax was paid on the gift, this will increase the basis.

3 The basis when the gift is sold at a loss is always the FMV at the time the gift was given.

4 When selling a gift, it is important to know the donor's adjusted basis, the FMV at the time of the gift, and whether gift tax was paid.

Which of the following is NOT a requirement for a taxpayer to claim the Retirement Savings Contributions Credit (Saver's Credit)?

1 The taxpayer must be 18 years old by the end of the tax year.

2 The taxpayer may not be a full-time student during any part of five calendar months of the year.

3 The taxpayer must have made only after-tax contributions to a qualified retirement account during the year.

4 The taxpayer's MAGI may not exceed the limit for the taxpayer's filing status.

Jennifer Winters bought her new home for $210,000, plus $600 in legal fees, and $4,100 in other closing costs. The basis of her home is:

$205,300

$210,600

$214,100

$214,700

Which of the following statements about the Nonbusiness Energy Property Credit is FALSE?

1 Taxpayers who claim this credit must file Form 1040.

2 Taxpayers may claim the credit for qualifying improvements made to a rented property as long as it is a primary residence.

3 Taxpayers may only claim the credit for improvements made to their primary residence. Improvements made to other buildings the taxpayer owns do not qualify.

4 There is a maximum lifetime limit of $500 for all property to which the credit is applied.

In July, Elias purchased a new computer system for his business for $3,800. What is the total depreciation for the first year, if he opts out of special depreciation?

$380

$760

$1,900

$2,280

Olga (20) is a full-time student eligible to be claimed as a dependent on her mother's return. This year, Olga incurred $2,000 in education expenses for her tuition. If Olga's mother chooses not to claim Olga's exemption, which of the following is true regarding Olga's return?

1 Olga may claim an education credit or tuition and fees deduction, and may also claim her own dependency exemption.

2 Olga may claim an education credit or tuition and fees deduction, but may not claim her own dependency exemption.

3 Olga may claim an education credit, but may not claim the tuition and fees deduction or her own dependency exemption.

4Olga may not claim an education credit, tuition and fees deduction, or her own exemption.

In July, Elias purchased a new computer system for his business for $3,800. What is the total depreciation for the first year, if he claims special depreciation?

1 $380

2 $760

3 $1,900

4 $2,280

Ken and Laura, married and filing jointly, owned and lived in their home for ten years. In 2016, they sold their home at a long-term gain of $580,000. How much of the long-term gain can they exclude from income on their return?

$150,000

$250,000

$500,000

$550,000

Jim's Form W-2 income is $32,500, and his wife, Louise, received unemployment compensation of $12,800 for the year. They will file a joint return. The couple has two children: Tina (17) received a Form W-2 with $3,000 income, and Brian (15) had interest income of $2,000. Jim and Louise will claim both children's exemptions on their return. Additionally, they have decided to file Form 8814, Parent's Election to Report Child's Interest and Dividends. For the purposes of the Premium Tax Credit, what is the tax family's household income?

1 $35,000

2 $45,300

3 $47,300

4 $50,300

To qualify for the American Opportunity Tax Credit, the student must be enrolled:

1 At least part-time.

2 At least full-time.

3 At least half-time for one academic period during the year.

4 For a minimum of nine credit hours (or course units) during the year.

If shares of stock were purchased on April 8, 2016, when is the last day the stock could be sold and the gain or loss still receive short-term treatment?

April 7, 2017.

April 8, 2017.

April 9, 2017.

December 31, 2017.

On November 11, 2016, Vanessa purchased 80 shares of JEP stock for $2,200. On November 10, 2017, she sold the 80 shares for $1,600. She did not repurchase substantially identical stock within 30 days. Therefore, Vanessa has:

A short-term loss of $600.

A short-term gain of $600.

A long-term loss of $600.

A long-term gain of $600.

John was gifted 10 shares of stock with a basis of $100 and a FMV of $150 on the date of the gift. If he later sells the stock for $200, what is his gain?

$0

$50

$100

$200

Martha inherited a cottage from her father with a basis of $50,000 and a FMV of $78,000. When Martha died, her son, John, inherited the cottage, now worth $110,000. Which of the following statements is true?

Martha's basis was $78,000 and John's basis is $110,000.

Martha's basis was $50,000 and John's basis is $78,000.

Martha's basis and John's basis remain at the original basis of $50,000.

If John sells the property, his basis is $110,000, but his basis for depreciation is $50,000.

What is property called that is owned primarily for potential increase in value, even though some income may be generated?

Personal-use property.

Business-use property.

Investment-use property

Stock-in-trade.

Which of the following is NOT a limitation on the Child Tax Credit?

The credit may not be more than $1,000 per qualifying child under age 17.

The credit may not exceed the total tax due (reduced by certain other credits).

The credit must be reduced for an MFJ couple if their AGI exceeds $110,000.

The total credit claimed may not exceed $2,000 ($1,000 per child for up to two children).

William bought a new home and decided to convert his original home into a rental. At the time it was rented, the adjusted basis of the rental home was $125,000, including a land value of $20,000. The FMV was $250,000, including a land value of $40,000. He advertised the house for rent on June 1, 2017, and it was rented June 15, 2017. What is the depreciation for the first year?

$2,069

$2,463

$4,137

$4,925

The basis of inherited property is generally _____.

1 The same as the basis for the decedent.

2 The original basis plus gift tax paid on the decedent's final return.

3 The FMV when sold at a loss, and the decedent's basis when sold at a gain.

4 The FMV value of the time the decedent passed away.

Answer 1

Answers : -

1) 3. Insurance reimbursement for property damage.

2) 2. His basis is $300,000 because of the room addition.

3) 1. The basis for depreciation is generally the donor's adjusted basis.

4) 3.The tax payer must have made only after tax contributions to a qualified retirement account during the year

5) 4. $214,700

6) 4. There is a maximum life time limit of $500 for all property to which the credit is applied.

7) 3. $760

8) 4. Ogla may not claim an education credit, tuition and fees deduction and her own exemption.

9) 3. $1,900

10) 2. $250,000

11) $47,300

12) 1. At least part time.

13) 4. December 31,2017

14) 1. A short term loss of $600.

15) 2. $50

16) 1. Martha basis was $78,000 and John's basis is $110,000

17) 3. Investment use property

18) 1. The credit may not be more than $1,000 per qualifying child under age 17

19) $2,463

20) 4. The FMV value of the time the decedent passed away.