INCOME TAX CHAPTER 8 NEEDS
ADJUSTMENT 2026 – QUESTIONS AND
CORRECT ANSWERS | A+ STUDY GUIDE |
EXAM PRACTICE QUESTIONS
84. In 2005, Victor acquires an Andy Warhol painting for $32,000. During
the current year he donates the painting to the city museum. Its fair market
value at the date of the contribution is $38,000. If Victor's adjusted gross
income is
$66,000 and he elects to reduce the contribution to its basis, his deductible
contribution is
a. $18,000
b. $19,800
c. $32,000
d. $33,000
e. $38,000 - CORRECT ANSWER-C
85. Hugh donates investment real estate to Habitat for Humanity. The
property cost him $10,000 six years ago. The fair market value of the
property at the date of the contribution is $18,000. Hugh's AGI is $80,000.
What is the maximum amount Hugh can deduct as a charitable
contribution?
a. $ - 0 -
b. $ 5,000
c. $10,000
,d. $18,000
e. $24,000 - CORRECT ANSWER-D
86. Moran pays the following expenses during the current year:
Subscription to Time magazine $ 80
Dues paid to professional organizations 300
Attorney's fee for tax advice related to his divorce 200
Life insurance premiums 600
Valid business entertainment 500
Fees for investment advise to acquire taxable securities 300
If Moran itemizes his deductions and his adjusted gross income is $35,000,
what is his allowable deduction for the above expenses?
a. $ - 0 -
b. $ 350
c. $ 700
d. $1,050
e. $1,300 - CORRECT ANSWER-B
87. Julius is an employee of a large consulting firm. During the year he
incurs the following expenses in his job, none of which are reimbursed by
his employer. Julius's adjusted gross income is $100,000 before
considering these expenses.
Commuting between his home and office $3,000
Local travel to and from his office to visit clients $4,000
,Local travel to and from his home to visit clients $3,000
Legitimate business entertainment of clients $8,000
Hotels accommodations while on business travel $3,000
Meals while away from home on business travel $2,000 Subscription fees
for publications directly related to his employment $1,000 Cost of
professional wardrobe $7,000
What is Julius's miscellaneous itemized deduction?
a. $14,000
b. $16,000
c. $21,000
d. $22,000
e. None of the above - CORRECT ANSWER-A
88. Toby, a single taxpayer with no dependents, is an employee of a large
consulting firm. During the year he incurs the following business expenses
that are not reimbursed by his employer:
Business entertainment and other meals $3,400 Transportation and
lodging 4,200
Toby's AGI is $100,000 and is in the 28% marginal tax rate. In addition to
the expenditures described above, his only other qualified itemized
deductions are home mortgage interest of $6,000 and property taxes of
$2,000. What is the after-tax cost to Toby of his unreimbursed employee
business expenses?
a. $ - 0 -
b. $5,600
, c. $6,088
d. $6,508
e. $7,600 - CORRECT ANSWER-D
89. Cecelia is a loan officer for The Hibernia Street Bank. Her adjusted
gross income for the current year is
$85,000.Cecelia incurs the following unreimbursed expenses during the
current year:
Dues to loan officer association $ 520
Subscriptions to professional journals 475
Parking at work 2,260
Entertaining clients 850
Business clothes 1,400
Tax return preparation fee 950
Legal fees related to tax issue on a prior year tax return 1,650
Safe deposit box rental 80
Investment fees 640
What is Cecelia's allowable miscellaneous itemized deduction?
a. $1,390
b. $3,040
c. $4,740
d. $7,265
e. $8,965 - CORRECT ANSWER-B
ADJUSTMENT 2026 – QUESTIONS AND
CORRECT ANSWERS | A+ STUDY GUIDE |
EXAM PRACTICE QUESTIONS
84. In 2005, Victor acquires an Andy Warhol painting for $32,000. During
the current year he donates the painting to the city museum. Its fair market
value at the date of the contribution is $38,000. If Victor's adjusted gross
income is
$66,000 and he elects to reduce the contribution to its basis, his deductible
contribution is
a. $18,000
b. $19,800
c. $32,000
d. $33,000
e. $38,000 - CORRECT ANSWER-C
85. Hugh donates investment real estate to Habitat for Humanity. The
property cost him $10,000 six years ago. The fair market value of the
property at the date of the contribution is $18,000. Hugh's AGI is $80,000.
What is the maximum amount Hugh can deduct as a charitable
contribution?
a. $ - 0 -
b. $ 5,000
c. $10,000
,d. $18,000
e. $24,000 - CORRECT ANSWER-D
86. Moran pays the following expenses during the current year:
Subscription to Time magazine $ 80
Dues paid to professional organizations 300
Attorney's fee for tax advice related to his divorce 200
Life insurance premiums 600
Valid business entertainment 500
Fees for investment advise to acquire taxable securities 300
If Moran itemizes his deductions and his adjusted gross income is $35,000,
what is his allowable deduction for the above expenses?
a. $ - 0 -
b. $ 350
c. $ 700
d. $1,050
e. $1,300 - CORRECT ANSWER-B
87. Julius is an employee of a large consulting firm. During the year he
incurs the following expenses in his job, none of which are reimbursed by
his employer. Julius's adjusted gross income is $100,000 before
considering these expenses.
Commuting between his home and office $3,000
Local travel to and from his office to visit clients $4,000
,Local travel to and from his home to visit clients $3,000
Legitimate business entertainment of clients $8,000
Hotels accommodations while on business travel $3,000
Meals while away from home on business travel $2,000 Subscription fees
for publications directly related to his employment $1,000 Cost of
professional wardrobe $7,000
What is Julius's miscellaneous itemized deduction?
a. $14,000
b. $16,000
c. $21,000
d. $22,000
e. None of the above - CORRECT ANSWER-A
88. Toby, a single taxpayer with no dependents, is an employee of a large
consulting firm. During the year he incurs the following business expenses
that are not reimbursed by his employer:
Business entertainment and other meals $3,400 Transportation and
lodging 4,200
Toby's AGI is $100,000 and is in the 28% marginal tax rate. In addition to
the expenditures described above, his only other qualified itemized
deductions are home mortgage interest of $6,000 and property taxes of
$2,000. What is the after-tax cost to Toby of his unreimbursed employee
business expenses?
a. $ - 0 -
b. $5,600
, c. $6,088
d. $6,508
e. $7,600 - CORRECT ANSWER-D
89. Cecelia is a loan officer for The Hibernia Street Bank. Her adjusted
gross income for the current year is
$85,000.Cecelia incurs the following unreimbursed expenses during the
current year:
Dues to loan officer association $ 520
Subscriptions to professional journals 475
Parking at work 2,260
Entertaining clients 850
Business clothes 1,400
Tax return preparation fee 950
Legal fees related to tax issue on a prior year tax return 1,650
Safe deposit box rental 80
Investment fees 640
What is Cecelia's allowable miscellaneous itemized deduction?
a. $1,390
b. $3,040
c. $4,740
d. $7,265
e. $8,965 - CORRECT ANSWER-B
