CPA REG REVIEW
A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is
sudden, unexpected, or unusual. Deductible casualty losses may result from earthquakes, tornadoes,
floods, fires, vandalism, auto accidents, etc. However, a loss due to the accidental breakage of
household articles such as glassware or china under normal conditions is not a casualty loss. Neither is a
loss due to damage caused by a family pet. - ✔✔Alex and Myra Burg, married and filing joint income tax
returns, derive their entire income from the operation of their retail candy shop. Their 2019 adjusted
gross income was $50,000. The Burgs itemized their deductions on Schedule A for 2019. The following
unreimbursed cash expenditures were among those made by the Burgs during 2019:
Repair of glass vase accidentally broken in home by dog; vase cost $500 in 2014; fair value $600 before
accident and $200 after accident $90
Without regard to the $100 "floor" and the adjusted gross income percentage threshold, what amount
should the Burgs deduct for the casualty loss in their itemized deductions on Schedule A for 2019?
A. $0
B. $ 90
C. $300
D. $400
A
A self-employed individual must file an income tax return if net earnings from self-employment are $400
or more. - ✔✔Ray Birch, age 60, is single with no dependents. Birch's only income is from his occupation
as a self-employed plumber. Birch must file a return for 2019 if his net earnings from self-employment
are at least
A. $ 400
B. $ 950
C. $4,050
D. $6,100
A
,Beginning in 2018, theft losses are not deductible for individuals because they are not attributable to a
federally declared disaster. - ✔✔Frank Lyon was held up and robbed of $800 cash in June 2019. One
month later, Frank had $2,000 cash stolen from him by his housekeeper. Frank's adjusted gross income
for 2019 was $10,000. How much was deductible by Frank for theft losses in 2019?
A. $0
B. $1,600
C. $1,700
D. $1,800
A
Correct! Although there is a consumer to consumer sale of a PMSI in consumer goods, in this case, in
addition to the automatic perfection, the creditor filed a financing statement. Even without actual
knowledge, the public filing puts Lutz on notice of Dix's interest. - ✔✔Foxx purchased a stereo for
personal use from Dix Audio, a retail seller of appliances. Foxx paid 30% of the $600 sales price and
agreed to pay the balance in 12 equal principal payments plus interest. Foxx executed a security
agreement giving Dix a security interest in the stereo. Dix properly filed a financing statement
immediately. After making six payments, Foxx defaulted.
If, after making the third installment payment, Foxx sold the stereo to Lutz for personal use, who would
have a superior interest in the stereo,assuming Lutz lacked knowledge of Dix's security interest?
A. Dix, since it filed a financing statement
B. Dix, since more than 30% of the purchase price had been paid
C. Lutz, since title passed from Foxx to Lutz
D. Lutz, since Lutz purchased without knowledge of Dix's security interest and for personal use
A
Correct! Beginning in 2018, moving expenses are not deductible. - ✔✔James, a calendar-year taxpayer,
was employed and resided in Boston. On February 4, 2019, James was permanently transferred to
Florida by his employer. James worked full-time for the entire year. In 2019, James incurred and paid the
following unreimbursed expenses in relocating:
,Lodging and travel expenses while moving $1,000
Meals while in route to Florida 300
Cost of insuring household goods and personal effects during move 200
Cost of shipping household pets to new home 100
Costs of moving household furnishings and personal effects 3,000
What amount was deductible as moving expenses on James's 2019 tax return?
A. $0
B. $4,500
C. $4,300
D. $4,000
A
Correct! Curt's adjustments consist of the $600 of excess depreciation and the personal property taxes
of $2,500, a total of $3,100. - ✔✔When determining his federal income tax, Curt had the following items
for 2019:
Itemized deduction for personal property taxes 2,500
Charitable contribution of capital gain property 1,500
Net long-term capital gain 1,000
Excess of MACRS depreciation on personal property over depreciation computed using the 150%
declining-balance method 600
Tax-exempt interest from City of Chicago general obligation bonds 400
, What is the total amount of adjustments to taxable income for purposes of computing Curt's alternative
minimum tax for 2019?
A. $3,100
B. $7,250
C. $7,200
D. $7,800
A
Correct! For purposes of computing an individual's AMT, no deduction is allowed for personal, state, and
local taxes, and home mortgage interest if the loan proceeds were not used to buy, build, or
substantially improve the home. Additionally, unreimbursed medical expenses are allowed only to the
extent in excess of 10% of adjusted gross income. Here, Robert's allowable itemized deductions for AMT
purposes consist of medical expenses of $12,000 − (10% × $100,000) = $2,000, qualified mortgage
interest of $10,000, and charitable contributions of $5,000, resulting in a total of $17,000. - ✔✔For
2019, Robert had adjusted gross income of $100,000 and potential itemized deductions as follows:
Medical expenses (before percentage limitations) $12,000
State income taxes 4,000
Real estate taxes 3,500
Qualified housing and residence mortgage interest 10,000
Home equity mortgage interest (used to consolidate personal debts) 4,500
Charitable contributions (cash) 5,000
What are Robert's itemized deductions that are allowable for alternative minimum tax purposes?
A. $17,000
B. $19,500
A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is
sudden, unexpected, or unusual. Deductible casualty losses may result from earthquakes, tornadoes,
floods, fires, vandalism, auto accidents, etc. However, a loss due to the accidental breakage of
household articles such as glassware or china under normal conditions is not a casualty loss. Neither is a
loss due to damage caused by a family pet. - ✔✔Alex and Myra Burg, married and filing joint income tax
returns, derive their entire income from the operation of their retail candy shop. Their 2019 adjusted
gross income was $50,000. The Burgs itemized their deductions on Schedule A for 2019. The following
unreimbursed cash expenditures were among those made by the Burgs during 2019:
Repair of glass vase accidentally broken in home by dog; vase cost $500 in 2014; fair value $600 before
accident and $200 after accident $90
Without regard to the $100 "floor" and the adjusted gross income percentage threshold, what amount
should the Burgs deduct for the casualty loss in their itemized deductions on Schedule A for 2019?
A. $0
B. $ 90
C. $300
D. $400
A
A self-employed individual must file an income tax return if net earnings from self-employment are $400
or more. - ✔✔Ray Birch, age 60, is single with no dependents. Birch's only income is from his occupation
as a self-employed plumber. Birch must file a return for 2019 if his net earnings from self-employment
are at least
A. $ 400
B. $ 950
C. $4,050
D. $6,100
A
,Beginning in 2018, theft losses are not deductible for individuals because they are not attributable to a
federally declared disaster. - ✔✔Frank Lyon was held up and robbed of $800 cash in June 2019. One
month later, Frank had $2,000 cash stolen from him by his housekeeper. Frank's adjusted gross income
for 2019 was $10,000. How much was deductible by Frank for theft losses in 2019?
A. $0
B. $1,600
C. $1,700
D. $1,800
A
Correct! Although there is a consumer to consumer sale of a PMSI in consumer goods, in this case, in
addition to the automatic perfection, the creditor filed a financing statement. Even without actual
knowledge, the public filing puts Lutz on notice of Dix's interest. - ✔✔Foxx purchased a stereo for
personal use from Dix Audio, a retail seller of appliances. Foxx paid 30% of the $600 sales price and
agreed to pay the balance in 12 equal principal payments plus interest. Foxx executed a security
agreement giving Dix a security interest in the stereo. Dix properly filed a financing statement
immediately. After making six payments, Foxx defaulted.
If, after making the third installment payment, Foxx sold the stereo to Lutz for personal use, who would
have a superior interest in the stereo,assuming Lutz lacked knowledge of Dix's security interest?
A. Dix, since it filed a financing statement
B. Dix, since more than 30% of the purchase price had been paid
C. Lutz, since title passed from Foxx to Lutz
D. Lutz, since Lutz purchased without knowledge of Dix's security interest and for personal use
A
Correct! Beginning in 2018, moving expenses are not deductible. - ✔✔James, a calendar-year taxpayer,
was employed and resided in Boston. On February 4, 2019, James was permanently transferred to
Florida by his employer. James worked full-time for the entire year. In 2019, James incurred and paid the
following unreimbursed expenses in relocating:
,Lodging and travel expenses while moving $1,000
Meals while in route to Florida 300
Cost of insuring household goods and personal effects during move 200
Cost of shipping household pets to new home 100
Costs of moving household furnishings and personal effects 3,000
What amount was deductible as moving expenses on James's 2019 tax return?
A. $0
B. $4,500
C. $4,300
D. $4,000
A
Correct! Curt's adjustments consist of the $600 of excess depreciation and the personal property taxes
of $2,500, a total of $3,100. - ✔✔When determining his federal income tax, Curt had the following items
for 2019:
Itemized deduction for personal property taxes 2,500
Charitable contribution of capital gain property 1,500
Net long-term capital gain 1,000
Excess of MACRS depreciation on personal property over depreciation computed using the 150%
declining-balance method 600
Tax-exempt interest from City of Chicago general obligation bonds 400
, What is the total amount of adjustments to taxable income for purposes of computing Curt's alternative
minimum tax for 2019?
A. $3,100
B. $7,250
C. $7,200
D. $7,800
A
Correct! For purposes of computing an individual's AMT, no deduction is allowed for personal, state, and
local taxes, and home mortgage interest if the loan proceeds were not used to buy, build, or
substantially improve the home. Additionally, unreimbursed medical expenses are allowed only to the
extent in excess of 10% of adjusted gross income. Here, Robert's allowable itemized deductions for AMT
purposes consist of medical expenses of $12,000 − (10% × $100,000) = $2,000, qualified mortgage
interest of $10,000, and charitable contributions of $5,000, resulting in a total of $17,000. - ✔✔For
2019, Robert had adjusted gross income of $100,000 and potential itemized deductions as follows:
Medical expenses (before percentage limitations) $12,000
State income taxes 4,000
Real estate taxes 3,500
Qualified housing and residence mortgage interest 10,000
Home equity mortgage interest (used to consolidate personal debts) 4,500
Charitable contributions (cash) 5,000
What are Robert's itemized deductions that are allowable for alternative minimum tax purposes?
A. $17,000
B. $19,500
