TAX3704
TAX3704 EXAM PACK 2024
Nicole has a weekend home on Pecan Island that she purchased in 2013 for $250,000. Recently, the
home was appraised at $260,000. After the appraisal, a hurricane hit Pecan Island, severely damaging
Nicole's home. An appraisal placed the value of the home at $140,000 after the hurricane. Because of its
prohibitive cost, Nicole had no hurricane insurance. Before any reductions or limitations, Nicole's
casualty loss amount is
A) $140,000
B) $120,000
C) $0
D) $10,000 - (answers)B) $120,000
Charles is a self-employed CPA who maintains a qualifying office in his home. Charles has $110,000 gross
income from his practice and incurs $88,000 in salaries, supplies, computer services, etc. Charles's
mortgage interest and real estate taxes allocable to the office total $10,000. Other expenses total
$14,000 and consist of depreciation, utilities, insurance, and maintenance. What is Charles' total home
office expense deduction?
A) $22,000
B) $14,000
C) $10,000
D) $24,000 - (answers)A) $22,000
$110,000 - $88,000 = $22,000
All of the following may deduct education expenses except:
A) Marvin is a high school teacher who incurs expenses for education courses to meet new course
requirements to maintain his job.
B) Hope is a business executive who incurs expenses to pursue an MBA degree.
, TAX3704
C) Richard is a self-employed dentist who incurs expenses to attend a convention on new techniques in
oral surgery.
D) Paige is an accountant who incurs expenses to take a CPA exam review course. - (answers)D) Paige is
an accountant who incurs expenses to take a CPA exam review course.
The following individuals maintained offices in their home:
(1) Dr. Austin is a self-employed surgeon who performs surgery at four hospitals. He uses his home for
administrative duties as he does not have an office in any of the hospitals.
(2) June, who is a self-employed plumber, earns her living in her customer's homes. She maintains an
office at home where she bills clients and does other paperwork related to her plumbing business.
(3) Cassie, who is an employee of Montgomery Electrical, is provided an office at the work but does
significant administrative work at home. Her employer does not require her to do extra work but she
feels it is necessary in order to properly do her job.
Who is entitled to a home office deduction?
A) Dr. Austin and June
B) Dr. Austin
C) Cassie and June
D) All of the taxpayers are entitled to a deduction - (answers)A) Dr. Austin and June
Lucia owns 100 shares of Cronco Inc. which she purchased on December 1 of last year for $10,000. The
stock is not Sec. 1244 stock. On July 1 of the current year, Lucia receives notice from the bankruptcy
court that Conco Inc. has been liquidated, and there are no assets remaining for shareholders. As a
result, Lucia will have
A) a short-term capital loss of $10,000
B) an ordinary loss of $10,000
C) a long-term capital loss of $10,000
D) no loss allowed - (answers)C) a long-term capital loss of $10,000
TAX3704 EXAM PACK 2024
Nicole has a weekend home on Pecan Island that she purchased in 2013 for $250,000. Recently, the
home was appraised at $260,000. After the appraisal, a hurricane hit Pecan Island, severely damaging
Nicole's home. An appraisal placed the value of the home at $140,000 after the hurricane. Because of its
prohibitive cost, Nicole had no hurricane insurance. Before any reductions or limitations, Nicole's
casualty loss amount is
A) $140,000
B) $120,000
C) $0
D) $10,000 - (answers)B) $120,000
Charles is a self-employed CPA who maintains a qualifying office in his home. Charles has $110,000 gross
income from his practice and incurs $88,000 in salaries, supplies, computer services, etc. Charles's
mortgage interest and real estate taxes allocable to the office total $10,000. Other expenses total
$14,000 and consist of depreciation, utilities, insurance, and maintenance. What is Charles' total home
office expense deduction?
A) $22,000
B) $14,000
C) $10,000
D) $24,000 - (answers)A) $22,000
$110,000 - $88,000 = $22,000
All of the following may deduct education expenses except:
A) Marvin is a high school teacher who incurs expenses for education courses to meet new course
requirements to maintain his job.
B) Hope is a business executive who incurs expenses to pursue an MBA degree.
, TAX3704
C) Richard is a self-employed dentist who incurs expenses to attend a convention on new techniques in
oral surgery.
D) Paige is an accountant who incurs expenses to take a CPA exam review course. - (answers)D) Paige is
an accountant who incurs expenses to take a CPA exam review course.
The following individuals maintained offices in their home:
(1) Dr. Austin is a self-employed surgeon who performs surgery at four hospitals. He uses his home for
administrative duties as he does not have an office in any of the hospitals.
(2) June, who is a self-employed plumber, earns her living in her customer's homes. She maintains an
office at home where she bills clients and does other paperwork related to her plumbing business.
(3) Cassie, who is an employee of Montgomery Electrical, is provided an office at the work but does
significant administrative work at home. Her employer does not require her to do extra work but she
feels it is necessary in order to properly do her job.
Who is entitled to a home office deduction?
A) Dr. Austin and June
B) Dr. Austin
C) Cassie and June
D) All of the taxpayers are entitled to a deduction - (answers)A) Dr. Austin and June
Lucia owns 100 shares of Cronco Inc. which she purchased on December 1 of last year for $10,000. The
stock is not Sec. 1244 stock. On July 1 of the current year, Lucia receives notice from the bankruptcy
court that Conco Inc. has been liquidated, and there are no assets remaining for shareholders. As a
result, Lucia will have
A) a short-term capital loss of $10,000
B) an ordinary loss of $10,000
C) a long-term capital loss of $10,000
D) no loss allowed - (answers)C) a long-term capital loss of $10,000
