25 May Question 1. If a taxpayer can satisfy the three-out-of-five year presumption test associated with hobby losses, then expenses from the activity can be deducted in excess of the gross incom
Question
1. If a taxpayer can satisfy the three-out-of-five year presumption test associated with hobby losses, then expenses from the activity can be deducted in excess of the gross income from the activity.
a. True
b. False
2. If an activity involves horses, a profit in at least two of seven consecutive years meets the presumptive rule of § 183.
a. True
b. False
3. A hobby activity can result in all of the hobby income being included in AGI and no deductions being allowed.
a. True
b. False
4. If an item such as property taxes and home mortgage interest exceed the income from a hobby, the excess amount of this item over the hobby income canbe deducted if the taxpayer itemizes deductions.
a. True
b. False
.
5. Hobby activity expenses are deductible fromAGI to the extent of hobby income. Such expenses not in excess of hobby income are notsubject to the 2% of AGI floor.
a. True
b. False
.
6. Martha rents partof her personal residence in the summer for 3 weeks for $3,000. Anne rents allof her personal residence for one week in December for $2,500. Anne is notrequired to include the $2,500 in her gross income whereas Martha is required to include the $3,000 in her gross income.
a. True
b. False
7. If a vacation home is rented for less than 15 days during a year, the only expenses that can be deducted are mortgage interest, property taxes, and personal casualty losses.
a. True
b. False
8. If a vacation home is classified as primarily rental use, a deduction for all of the rental expenses is allowed.
a. True
b. False
9. If a vacation home is classified as primarily personal use (i.e., rented for fewer than 15 days), none of the related expenses can be deducted.
a. True
b. False
.
10.The portion of property tax on a vacation home that is attributable to personal use is an itemized deduction.
a. True
b. False
11.If a vacation home is classified as primarily personal use, part of the maintenance and utility expenses can be allocated and deducted as a rental expense.
a. True
b. False
12.A vacation home at the beach which is rented for 200 days and used personally for 16 days is classified in the personal/rental use category.
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