Area IV: Individual Taxation

Which of the following items is EXCLUDED from gross income for federal income tax purposes?

Taxpayer A, a single individual, has Adjusted Gross Income (AGI) of $150,000. A actively participates in a rental real estate activity that produced a $20,000 loss for the current year. A has no other passive income. How much of the rental loss can A deduct against ordinary income this year?

In Year 1, Taxpayer T had a net short-term capital loss of $2,000 and a net long-term capital loss of $4,000. T had no capital gains. What amount of capital loss can T deduct in Year 1, and what is the carryforward?

Which of the following is a 'refundable' tax credit?

A taxpayer had the following income in the current year: Salary $50,000; Partnership Income (active) $10,000; Interest Income $2,000. The taxpayer also had a $5,000 loss from a rental real estate activity in which they actively participated (AGI is well below phase-out limits). What is the taxpayer's Adjusted Gross Income (AGI)?

A taxpayer operates a consulting business as a sole proprietorship. In the current year, the business had net income of $100,000. The taxpayer paid $6,000 for health insurance for themselves and their family. How is the health insurance payment treated for tax purposes?

Taxpayer B, a single individual, died on January 15, Year 1. The executor of B's estate elects a fiscal year ending October 31. When is the final individual income tax return (Form 1040) for B due (assuming no extension)?

Which of the following is a requirement for a payment to be classified as alimony for a divorce agreement executed in Year 1 (post-2018)?

A taxpayer received a gift of $15,000 cash from a friend and inherited $50,000 cash from an aunt in the current year. How much of these amounts must be included in the taxpayer's gross income?

A taxpayer is a 10% partner in a partnership. The partnership incurred a $100,000 ordinary loss for the year. The taxpayer's adjusted basis in the partnership interest at the end of the year (before loss) was $8,000. The taxpayer's at-risk amount was $6,000. The taxpayer materially participates in the partnership. What amount of loss can the taxpayer deduct on their individual return?

A taxpayer had the following in the current year: Wages $40,000; Net Short-Term Capital Gain $2,000; Net Long-Term Capital Gain $5,000. What is the taxpayer's total taxable capital gain included in Adjusted Gross Income?

A taxpayer had $50,000 of wages and $3,000 of gambling winnings. They had $4,000 of gambling losses. They itemize deductions. What is the impact on taxable income?

Which of the following is deductible as a medical expense on Schedule A (subject to the 7.5% AGI floor)?

A taxpayer sold their principal residence for $600,000. They purchased it 5 years ago for $200,000 and have lived in it ever since. They are single. What is the taxable gain?

Which of the following is an 'above-the-line' deduction (Adjustment to Income) for an individual taxpayer?

Taxpayer M, age 50, withdrew $10,000 from a traditional IRA in the current year to pay for unreimbursed medical expenses that exceeded 7.5% of AGI. M has not met any other exception. What is the tax treatment?

A taxpayer is a 'Specified Service Trade or Business' (SSTB) with taxable income of $500,000 (Married Filing Jointly). The threshold for the QBI deduction phase-out is $383,900 - $483,900 (hypothetical range for the year). What is the taxpayer's QBI deduction?

A taxpayer purchased a bond for $900 (face value $1,000) in the secondary market. The bond has $100 of market discount. The taxpayer does NOT elect to include market discount in income currently. Two years later, the taxpayer sells the bond for $950. At the time of sale, accrued market discount is $30. What is the character of the $50 gain?

A taxpayer operates an illegal drug trafficking business. Which of the following expenses are deductible for tax purposes?

An employee receives $150,000 of group-term life insurance coverage from their employer. The policy is non-discriminatory. The IRS Uniform Premium table cost is $0.10 per $1,000 of coverage per month. How much annual income must the employee include in gross income?

In Year 1, a taxpayer itemized deductions and deducted $5,000 of state income taxes. The total itemized deductions exceeded the standard deduction by $200. In Year 2, the taxpayer received a $500 refund of the Year 1 state income taxes. How much of the refund is taxable in Year 2?

A single taxpayer sold their principal residence for a $400,000 gain. They had owned and lived in the home for only 12 months due to a job transfer to a different state (a qualified unforeseen circumstance). What is the maximum exclusion allowed?

A self-employed taxpayer had net earnings from self-employment of $100,000. They paid $12,000 in health insurance premiums for themselves and their family. They were not eligible to participate in any subsidized health plan maintained by an employer of their spouse. How is the $12,000 treated?

A taxpayer donated a painting to a public charity (museum) which displayed it. The taxpayer had owned the painting for 5 years. Cost basis was $10,000; FMV was $50,000. The taxpayer's AGI is $100,000. What is the maximum charitable contribution deduction allowed for the current year?

A married couple filing jointly paid the following taxes in the current year: State income tax $8,000; Real estate tax on primary home $5,000; Personal property tax on cars $1,000. What is their itemized deduction for taxes (SALT)?

A taxpayer has $50,000 of salary, $10,000 of passive income from a rental activity, and $25,000 of passive losses from a limited partnership interest. The taxpayer also has $5,000 of active business income. How much of the passive loss is deductible in the current year?

A single taxpayer has Adjusted Gross Income (AGI) of $140,000. They actively participate in a rental real estate activity that generated a $20,000 loss. How much of this loss is deductible in the current year?

A taxpayer has a $10,000 loss from a rental real estate activity in which they actively participate. Their Modified AGI is $130,000. What is the allowable deduction under the 'Mom and Pop' exception?

A taxpayer's spouse died in Year 1. The taxpayer has a dependent child who lives with them. The taxpayer did not remarry. What is the taxpayer's filing status for Year 3?

Which of the following credits is refundable?

A taxpayer has Net Investment Income (NII) of $50,000 and Modified AGI of $220,000. The filing status is Single (Threshold $200,000). What is the Net Investment Income Tax (NIIT) liability?

Which of the following is an adjustment (add-back) for Alternative Minimum Tax (AMT) purposes for an individual?

A taxpayer purchased a bond for $900 (Face Value $1,000) on the secondary market. The bond has 5 years to maturity. The taxpayer elects to amortize the market discount. How is the amortization treated?

A taxpayer has a $5,000 short-term capital loss, a $2,000 short-term capital gain, and a $10,000 long-term capital gain. What is the net capital gain/loss and its character?

A taxpayer receives a non-qualified stock option (NQSO) with a readily ascertainable fair market value at the grant date. When is the income recognized?

A taxpayer's student loan interest for the year was $3,000. The taxpayer is single with Modified AGI of $60,000 (below the phase-out range). What is the maximum student loan interest deduction?

A taxpayer has a Qualified Business Income (QBI) of $100,000 from a sole proprietorship. The taxpayer is single with taxable income of $150,000. What is the QBI deduction?

A taxpayer sold stock for $10,000 that was purchased two years ago for $6,000. The taxpayer is in the 37% ordinary income tax bracket and the 20% long-term capital gains bracket. What is the tax liability on this sale?

Regarding the Net Investment Income Tax (NIIT) under IRC §1411, which of the following items is included in 'Net Investment Income'?

A taxpayer, age 45, is a single filer with high income. Which of the following itemized deductions is subject to a 'floor' based on Adjusted Gross Income (AGI) in the current tax year?

In Year 1, a taxpayer exercised Incentive Stock Options (ISOs) to purchase 1,000 shares of stock. The exercise price was $10 per share, and the fair market value (FMV) on the exercise date was $25 per share. The taxpayer held the stock through the end of the year. What is the tax consequence for Year 1?

A self-employed taxpayer had net earnings from self-employment of $100,000. The self-employment tax liability was approximately $14,130. Which of the following describes the income tax deduction available to the taxpayer regarding this tax?

Under the Qualified Business Income (QBI) deduction (IRC §199A), which of the following businesses is considered a 'Specified Service Trade or Business' (SSTB) where the deduction may be limited or disallowed at higher income levels?

A taxpayer has a $10,000 passive activity loss from a rental real estate activity in the current year. The taxpayer is an active participant in the rental activity and has Modified Adjusted Gross Income (MAGI) of $130,000. What amount of the loss can be deducted against ordinary income in the current year?

Regarding the Child Tax Credit (CTC) for tax years 2018-2025, which of the following statements is correct regarding the refundable portion (Additional Child Tax Credit)?

A taxpayer receives a refund of $1,000 in Year 2 for state income taxes paid in Year 1. In Year 1, the taxpayer claimed the standard deduction. How much of the refund is taxable in Year 2?

A taxpayer has $5,000 of investment interest expense in the current year. The taxpayer has $3,000 of interest income and $2,000 of qualified dividends. The taxpayer does NOT elect to treat the qualified dividends as investment income. What is the investment interest expense deduction?

Which of the following statements is correct regarding the 'at-risk' rules for loss limitations?

A taxpayer sells a personal residence for $600,000. They bought it 3 years ago for $200,000 and have lived in it as their primary residence for the entire time. They are single. What is the recognized gain?

A taxpayer has a $3,000 short-term capital loss and a $2,000 long-term capital gain in the current year. The taxpayer also has $50,000 of ordinary income. What is the taxpayer's Adjusted Gross Income (AGI)?

A taxpayer contributes property with a basis of $10,000 and a fair market value of $15,000 to a qualified charitable organization. The property is tangible personal property that the charity puts to an 'unrelated use' (sells immediately). What is the deductible amount?

A taxpayer has a home office that is used exclusively and regularly as the principal place of business. The gross income from the business is $10,000. Direct expenses of the business (supplies, etc.) are $6,000. Allocable home expenses (mortgage interest, taxes, utilities, depreciation) total $5,000. What is the home office deduction allowed?

Which of the following credits is a 'refundable' tax credit?

A taxpayer holds a $10,000 bond issued by the City of New York. The bond pays $500 of interest in the current year. The taxpayer also sells the bond for a $200 gain. What are the federal tax consequences?

A taxpayer has a Net Operating Loss (NOL) in 2024. Which of the following statements is correct regarding the carryover of this NOL?

Which of the following is a requirement for a valid 'Incentive Stock Option' (ISO)?

An employer provides group-term life insurance to an employee with a coverage amount of $90,000. The plan is non-discriminatory. The IRS uniform premium cost is $0.10 per $1,000 of coverage per month. How much must be included in the employee's gross income for the year?

In Year 1, a taxpayer paid $4,000 in state income taxes and deducted them as an itemized deduction. The taxpayer's total itemized deductions exceeded the standard deduction by $1,000. In Year 2, the taxpayer received a $1,500 refund of the state income taxes paid in Year 1. How much of the refund is taxable in Year 2?

A self-employed taxpayer had net earnings from self-employment of $100,000. The self-employment tax liability is $14,130. What is the taxpayer's adjusted gross income (AGI) adjustment for this tax?

A taxpayer has Adjusted Gross Income (AGI) of $100,000. During the year, the taxpayer donated a piece of artwork to a public charity (a museum) that will display the art. The taxpayer had held the art for 5 years. The art had a basis of $10,000 and a Fair Market Value (FMV) of $40,000. What is the maximum charitable contribution deduction allowed for the current year?

Regarding the Qualified Business Income (QBI) deduction under IRC §199A, which of the following is considered a 'Specified Service Trade or Business' (SSTB) where the deduction may be limited or disallowed for high-income taxpayers?

A taxpayer has a $20,000 loss from a rental real estate activity in which they actively participate. The taxpayer's Modified Adjusted Gross Income (MAGI) is $130,000. How much of the loss can be deducted against ordinary income in the current year?

A single taxpayer provides more than half the support for a parent who lives in a nursing home. The parent received $3,000 in taxable interest income and $8,000 in non-taxable Social Security benefits. The parent has no other income. Can the taxpayer claim the parent as a dependent?

Which of the following tax credits is fully or partially REFUNDABLE?

A taxpayer had the following income and losses for the year: Salary $50,000; Passive Activity Income $10,000; Passive Activity Loss ($15,000); Active Business Loss ($5,000). What is the taxpayer's Adjusted Gross Income (AGI)?

A taxpayer is a cash-basis sole proprietor. In Year 1, the taxpayer performed services for a client and sent a bill for $5,000. In Year 2, the client disputed the bill and paid only $2,000. The taxpayer accepted this as full payment. What is the bad debt deduction for the taxpayer in Year 2?

Which of the following items is an adjustment (add-back) for the Individual Alternative Minimum Tax (AMT)?

A taxpayer sells a personal residence for $600,000. They bought it 3 years ago for $200,000 and lived in it for the entire period. They are single. What is the recognized gain?

A taxpayer received a $5,000 state income tax refund in Year 2 for taxes paid in Year 1. In Year 1, the taxpayer took the standard deduction. How much of the refund is taxable in Year 2?

Which of the following credits can result in a refund even if the taxpayer has no income tax liability?

A taxpayer has a $3,000 short-term capital loss carryover from the prior year. In the current year, the taxpayer has a $12,000 long-term capital gain and a $15,000 short-term capital loss. What is the taxpayer's deductible capital loss for the current year?

A taxpayer's home was destroyed by a federally declared disaster. The adjusted basis was $200,000. The FMV before the disaster was $300,000, and $0 after. Insurance paid $250,000. What is the deductible casualty loss (before AGI limitations)?

Which of the following is TRUE regarding the 'at-risk' limitation for losses?

Which of the following is a requirement for a 'Qualified Stock Option' (Incentive Stock Option - ISO)?