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Exam 6: Individual for Agi Deductions

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Question 61

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During 2019, Jacob, a 19-year-old full-time student, earned $4,500 during the year and was not eligible to participate in an employer-sponsored retirement plan.The general limit for deductible contributions during 2019 is $6,000.How much of a tax-deductible contribution can Jacob make to an IRA?

A) $0 (Full-time students are not allowed to participate in IRAs)
B) $500
C) $4,500
D) $6,000

E) All of the above
F) C) and D)

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Question 62

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A self-employed taxpayer reports home office expenses as for AGI deductions while home office expenses for employees are nondeductible.

A) True
B) False

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Question 63

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For married taxpayers filing separately, excess business losses are defined as aggregate business deductions over the sum of aggregate business gross income or gain of the taxpayer plus $255,000.

Alfredo is self-employed and he uses a room in his home as his principal place of business.He meets clients there and doesn't use the room for any other purpose.The size of his home office is 600 square feet.The size of his entire home is 3,000 square feet.During the current year, Alfredo received $10,000 of gross income from his business activities and he reports $7,500 of business expenses unrelated to his home office.For his entire home, he reported $10,000 of mortgage interest, $2,000 of property taxes, $2,500 of home operating expenses, and $4,500 of depreciation expense.What amount of home office expenses is Alfredo allowed to deduct in the current year? Indicate the amount and type of expenses he must carry over to next year, if any.

In 2019, Tyson (age 22)earned $3,500 from his part-time job and he reported $15,000 of interest income (unearned income).Assuming he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution Tyson can make in 2019?

Mason paid $4,100 of interest on a loan that paid tuition for him to attend a private university this year.How much of this payment can Mason deduct as interest expense on an educational loan if he files single and reports modified AGI of $90,000?

Bryan, who is 45 years old, had some surprise medical expenses during the year.To pay for these expenses (which were claimed as itemized deductions on his tax return) , he received a $20,000 distribution from his traditional IRA (he has only made deductible contributions to the IRA) .Assuming his marginal ordinary income tax rate is 15 percent, what amount of taxes and/or early distribution penalties will Bryan be required to pay on this distribution?

Rental or royalty expenses are deductible "for" AGI.

Don owns a condominium near Orlando, California.This year, he incurs the following expenses in connection with his condo: $\begin{array}{llcc} \text { Insurance} & \$1,300 \\ \text { Mortgage interest} &10,000\\ \text {Property taxes } &3,000\\ \text {Repairs and maintenance } &900\\ \text { Utilities } &2,200\\ \text { Depreciation } &12,000\\\end{array}$ During the year, Don rented the condo for 70 days and he received $17,400 of rental receipts.He did not use the condo at all for personal purposes during the year.Don is considered to be an active participant in the property.Don's AGI from all sources other than the rental property is $140,000.Don does not have passive income from any other sources.What is Don's AGI?

Which of the following statements regarding limitations on the deductibility of home office expenses of self-employed taxpayers is correct?

This fall Millie finally repaid her student loan.She originally borrowed the money to pay tuition several years ago when she attended State University (a qualified educational institution) .This year Millie paid a total of $2,400 of interest on the loan.If Millie files single and reports $75,000 of income and no other items of income or expense, how much of the interest can she deduct?