ACCT 425 EXAM 3 QUESTIONS & ANSWERS
Can only offset passive income - Answer -Passive Losses
Can offset other income on a tax return - Answer -Non-Passive Losses
What is the maximum loss on rental property per year - Answer -$25,000
How many days does a property need to be rented or available for rent in order to be
reported? - Answer -15
Must exceed 10% of adjusted AGI for the year to be deductible on schedule A - Answer
-Medical Expenses
Does not have to be prescribed in order to be deductible for medical expenses -
Answer -Smoking cessation machine and insulin
Are Wheelchairs, crutches, oxygen tanks, and CPAP machines deductible - Answer -
Yes
May be partially deductible for medical - Answer -Household Improvements ( handicap
accessible ramps, etc. )
Is It Deductible?
Personal Interest? - Answer -No
Is It Deductible?
Qualified Education Loan Interest? - Answer -Yes, up to $2,500, FOR AGI
Is It Deductible?
Qualified Residence Interest? - Answer -Yes, May deduct interest on loan secured by
first OR second home. Up to $1 million of aquisition indebtedness. Up to $100,000 of
home equity loan interest
Is It Deductible?
Investment Interest Expense? - Answer -Yes, limited to the amount of net investment
income. Interest disallowed carried forward and treated as investment interest expense
in the succeeding year
Can Charitable Contributions be deductible to Qualified Organizations? - Answer -Yes
, Is a deduction allowed for amounts paid to an organization which has a substantial part
of its activities the carrying on of propaganda or otherwise attempting to influence
legislation - Answer -No
Are gifts made to individuals deductible? - Answer -No
How is a charitable donation valued, i.e. property - Answer -Fair Market Value at the
time of the contribution
How do you handle donations of stock to charitable organizations? - Answer -Fair
Market Value
Subject to the 2% itemized misc deductions. - Answer -Employee Business Expenses,
Unreimbersed Employee Expenses, Job-Seeking Expenses, Work Clothes and
Uniforms, Tax Counsel and Return Preparer Fees.
Not subject to the 2% itemized misc deductions - Answer -Gambling winnings extent to
gambling losses, and hobbies
Education expenses for self employed individuals are deductible for or from AGI? -
Answer -FOR
Education expenses for employees are deductible for or from AGI? - Answer -FROM
a) How old can you be to be eligible for a credit when placing children in daycare?
b) Is there an age limit for special needs kids or adults - Answer -a) 13 or under
b) No
a) How does the Child Tax Credit work?
b) What are the age restrictions? - Answer -a) Taxpayers are allowed a credit of $1,000
per child under the age of 17. Phase out for higher incomes
B) Under 17
The American Opportunity Tax Credit provides a maximum of $_____________ per
student - Answer -2500
The Lifetime Learning Credit provides a maximum of $____________ per student -
Answer -2000
Only applies when the American Opportunity Tax Credit is not claimed - Answer -
Lifetime Learning Credit
A ___________ is subtracted from your income tax liability, up to the total amount you
owe. Cannot reduce your tax balance beyond zero. - Answer -Nonrefundable Tax
Credit
Can only offset passive income - Answer -Passive Losses
Can offset other income on a tax return - Answer -Non-Passive Losses
What is the maximum loss on rental property per year - Answer -$25,000
How many days does a property need to be rented or available for rent in order to be
reported? - Answer -15
Must exceed 10% of adjusted AGI for the year to be deductible on schedule A - Answer
-Medical Expenses
Does not have to be prescribed in order to be deductible for medical expenses -
Answer -Smoking cessation machine and insulin
Are Wheelchairs, crutches, oxygen tanks, and CPAP machines deductible - Answer -
Yes
May be partially deductible for medical - Answer -Household Improvements ( handicap
accessible ramps, etc. )
Is It Deductible?
Personal Interest? - Answer -No
Is It Deductible?
Qualified Education Loan Interest? - Answer -Yes, up to $2,500, FOR AGI
Is It Deductible?
Qualified Residence Interest? - Answer -Yes, May deduct interest on loan secured by
first OR second home. Up to $1 million of aquisition indebtedness. Up to $100,000 of
home equity loan interest
Is It Deductible?
Investment Interest Expense? - Answer -Yes, limited to the amount of net investment
income. Interest disallowed carried forward and treated as investment interest expense
in the succeeding year
Can Charitable Contributions be deductible to Qualified Organizations? - Answer -Yes
, Is a deduction allowed for amounts paid to an organization which has a substantial part
of its activities the carrying on of propaganda or otherwise attempting to influence
legislation - Answer -No
Are gifts made to individuals deductible? - Answer -No
How is a charitable donation valued, i.e. property - Answer -Fair Market Value at the
time of the contribution
How do you handle donations of stock to charitable organizations? - Answer -Fair
Market Value
Subject to the 2% itemized misc deductions. - Answer -Employee Business Expenses,
Unreimbersed Employee Expenses, Job-Seeking Expenses, Work Clothes and
Uniforms, Tax Counsel and Return Preparer Fees.
Not subject to the 2% itemized misc deductions - Answer -Gambling winnings extent to
gambling losses, and hobbies
Education expenses for self employed individuals are deductible for or from AGI? -
Answer -FOR
Education expenses for employees are deductible for or from AGI? - Answer -FROM
a) How old can you be to be eligible for a credit when placing children in daycare?
b) Is there an age limit for special needs kids or adults - Answer -a) 13 or under
b) No
a) How does the Child Tax Credit work?
b) What are the age restrictions? - Answer -a) Taxpayers are allowed a credit of $1,000
per child under the age of 17. Phase out for higher incomes
B) Under 17
The American Opportunity Tax Credit provides a maximum of $_____________ per
student - Answer -2500
The Lifetime Learning Credit provides a maximum of $____________ per student -
Answer -2000
Only applies when the American Opportunity Tax Credit is not claimed - Answer -
Lifetime Learning Credit
A ___________ is subtracted from your income tax liability, up to the total amount you
owe. Cannot reduce your tax balance beyond zero. - Answer -Nonrefundable Tax
Credit
