HRB 27 LATEST EXAMS UPDATED QUESTIONS AND
ANSWERS SURE A+
✔✔Why is it important to distinguish qualified home mortgage interest from personal
interest? - ✔✔Mortgage Interest is deductible, Personal Interest is not. (12.20)
✔✔Is the cost of items purchased to benefit a charitable organization deductible, for
example, ballet tickets to raise money for a non-profit hospital? - ✔✔Only the amount
paid in excess of the value of the item is deductible. (12.27)
✔✔A taxpayer wrote a check for a $500 donation to his mosque. Is his cancelled check
sufficient documentation to support his deduction? - ✔✔No. Donations of $250 or more
must have written substantiation from the donee. (12.29)
✔✔Are scholarships and fellowships taxable? - ✔✔• If a W-2 is received it is FULLY
taxable.
• Amounts to Non-degree candidates are FULLY taxable and reported on Line 7 marked
"SCH"
• Amounts to Degree candidates spent for qualified expenses are NOT taxable. (18.5)
✔✔Under what circumstances are gross gambling winnings taxable? - ✔✔Always.
Gambling losses may be deductible up to the amount of winnings. (13.18)
✔✔What document will the taxpayer receive from their employer reporting their
disability pension? - ✔✔1099-R (18.8)
✔✔How can a disability pension qualify as earned income for the EIC? We've learned
pensions are not earned income. - ✔✔Before the taxpayer reaches minimum retirement
age, it's considered earned income (18.11)
✔✔On what form are social security benefits reported to the recipient? - ✔✔SSA-1099
(10.4)
, ✔✔What form is used to report pension income to the recipient? - ✔✔1099-R (10.9)
✔✔What pensions are fully taxable? - ✔✔Those to which the taxpayer DID NOT make
after-tax contributions or from which all pre-tax amounts have been recovered in
previous years. (10.8)
✔✔Under what circumstances would a pension be partly taxable? - ✔✔When it's funded
through employer plans to which the employee contributed some after-tax money.
(10.9)
✔✔What traditional IRA distributions are fully taxable? - ✔✔Any deductible
contributions. (10.16)
✔✔When would a traditional IRA distribution be partly taxable? - ✔✔If nondeductible
contributions had been made, Form 8606 is used to compute the taxable portion.
(10.16)
✔✔Where is income tax withheld from a pension or IRA distribution reported on the tax
return? - ✔✔Form 1040 Line 61 (10.10)
✔✔What does it mean to depreciate an asset? - ✔✔To reduce the basis of a business
asset allowing for the reasonable wearing out over a period of years. (16.1)
✔✔What kind of property is depreciable? - ✔✔Business-use property with a useful life
of more than one year. (16.2)
✔✔Ho do we determine the MACRS recovery period of a piece of personal property? -
✔✔By using the Table of Asset Class Lives and Recovery Periods (16.3)
✔✔For MACRS purposes, we need to divide real property into two categories. What are
they? - ✔✔Residential and Nonresidential (16.7)
✔✔How is residential real property, such as a rental house or apartment building,
depreciated under MACRS? - ✔✔Using a straight-line method over 27½ years.
✔✔What are some examples of listed property? - ✔✔• Most passenger automobiles
under 6,000 pounds and any property used for transportation.
• Property used for entertainment, recreation or amusement.
• Computers and related equipment unless used exclusively at a business.
• Cellular phones.
(16.17)
✔✔What kinds of property are not depreciable? - ✔✔• Personal-use assets
ANSWERS SURE A+
✔✔Why is it important to distinguish qualified home mortgage interest from personal
interest? - ✔✔Mortgage Interest is deductible, Personal Interest is not. (12.20)
✔✔Is the cost of items purchased to benefit a charitable organization deductible, for
example, ballet tickets to raise money for a non-profit hospital? - ✔✔Only the amount
paid in excess of the value of the item is deductible. (12.27)
✔✔A taxpayer wrote a check for a $500 donation to his mosque. Is his cancelled check
sufficient documentation to support his deduction? - ✔✔No. Donations of $250 or more
must have written substantiation from the donee. (12.29)
✔✔Are scholarships and fellowships taxable? - ✔✔• If a W-2 is received it is FULLY
taxable.
• Amounts to Non-degree candidates are FULLY taxable and reported on Line 7 marked
"SCH"
• Amounts to Degree candidates spent for qualified expenses are NOT taxable. (18.5)
✔✔Under what circumstances are gross gambling winnings taxable? - ✔✔Always.
Gambling losses may be deductible up to the amount of winnings. (13.18)
✔✔What document will the taxpayer receive from their employer reporting their
disability pension? - ✔✔1099-R (18.8)
✔✔How can a disability pension qualify as earned income for the EIC? We've learned
pensions are not earned income. - ✔✔Before the taxpayer reaches minimum retirement
age, it's considered earned income (18.11)
✔✔On what form are social security benefits reported to the recipient? - ✔✔SSA-1099
(10.4)
, ✔✔What form is used to report pension income to the recipient? - ✔✔1099-R (10.9)
✔✔What pensions are fully taxable? - ✔✔Those to which the taxpayer DID NOT make
after-tax contributions or from which all pre-tax amounts have been recovered in
previous years. (10.8)
✔✔Under what circumstances would a pension be partly taxable? - ✔✔When it's funded
through employer plans to which the employee contributed some after-tax money.
(10.9)
✔✔What traditional IRA distributions are fully taxable? - ✔✔Any deductible
contributions. (10.16)
✔✔When would a traditional IRA distribution be partly taxable? - ✔✔If nondeductible
contributions had been made, Form 8606 is used to compute the taxable portion.
(10.16)
✔✔Where is income tax withheld from a pension or IRA distribution reported on the tax
return? - ✔✔Form 1040 Line 61 (10.10)
✔✔What does it mean to depreciate an asset? - ✔✔To reduce the basis of a business
asset allowing for the reasonable wearing out over a period of years. (16.1)
✔✔What kind of property is depreciable? - ✔✔Business-use property with a useful life
of more than one year. (16.2)
✔✔Ho do we determine the MACRS recovery period of a piece of personal property? -
✔✔By using the Table of Asset Class Lives and Recovery Periods (16.3)
✔✔For MACRS purposes, we need to divide real property into two categories. What are
they? - ✔✔Residential and Nonresidential (16.7)
✔✔How is residential real property, such as a rental house or apartment building,
depreciated under MACRS? - ✔✔Using a straight-line method over 27½ years.
✔✔What are some examples of listed property? - ✔✔• Most passenger automobiles
under 6,000 pounds and any property used for transportation.
• Property used for entertainment, recreation or amusement.
• Computers and related equipment unless used exclusively at a business.
• Cellular phones.
(16.17)
✔✔What kinds of property are not depreciable? - ✔✔• Personal-use assets
