Question 26. Investment expenses are a misce

29 Jun Question 26. Investment expenses are a misce

QuestionQuestion
26. Investment expenses are a misce
26. Investment expenses are a miscellaneous itemized deduction subject to the 2% AGI limitation.

True False

27. Mr. Johnson borrowed money to buy Chicago municipal bonds. This year, he paid $2,000 of interest

on his loan and earned $3,500 of interest income from the bonds. None of the interest expense is

deductible.

True False

28. An owner of undeveloped land held for investment must capitalize the property taxes paid on the land

each year.

True False

29. Investment interest expense is a miscellaneous itemized deduction subject to the 2% AGI limitation.

True False

30. Mr. Moyer owns residential rental property. This year, he received $7,000 revenue from the tenants and

incurred $14,900 rental expenses. Mr. Moyer must include $7,000 in gross income and is allowed only

$7,000 of above-the-line deductions for the expenses.

True False

31. Ruth Darma is a shareholder who is not involved in the day-to-day activities of an S corporation. Her

interest in the business is a passive activity.

True False

32. Mr. Gray recognized a $60,000 loss on sale of his entire interest in a passive activity. He had a $52,000

passive activity loss carryforward from prior years. Mr. Gray can deduct the $52,000 loss in the year of

sale.

True False

33. Material participation in a business activity means that the individual is involved in the day-to-day

operations on a regular, continuous, and substantial basis.

True False

34. An inter vivos transfer is a gratuitous transfer of property by an individual that occurs at death.

True False

35. All gratuitous transfers of property are subject to gift tax.

True False

36. This year, Mr. Chester gave $50,000 to an old friend who has no legal obligation to repay the money. The

entire $50,000 is a taxable gift.

True False

37. Gift tax is based on the donor’s adjusted tax basis in the transferred property.

True False

38. The kiddie tax limits the tax savings from a transfer of income-producing property to a minor child by

taxing a portion of such income at the parent’s marginal tax rate.

True False

39. The federal taxable estate of a decedent can exceed the value of the probate estate.

True False

40. A beneficiary’s basis of inherited property equals the decedent’s adjusted basis immediately prior to

death.

True False

41. As a general tax planning rule, an individual should sell assets that have declined in value prior to death

and keep appreciated property to transfer to his heirs at his death.

True False

42. Life insurance proceeds are includible in the taxable estate of the decedent if the decedent was the owner

of the policy.

True False