a. $0.

b. $5,000.

c. $12,000.

d. $17,000.

e. None of
the above.

____ 102. Patrick and Leah are married and
together have AGI of $100,000 in 2006. They have three dependents and file a
joint return. They pay $3,000 for a high deductible health insurance policy and
contribute $2,400 to a qualified Health Savings Account. During the year, they
paid the following amounts for medical care: $8,200 in doctor and dentist bills
and hospital expenses, and $2,500 for prescribed medicine and drugs. In
December 2006, they received an insurance reimbursement of $3,400 for
hospitalization. They expect to receive an additional reimbursement of $1,700
in January 2007. Determine the maximum deduction allowable for medical expenses
in 2006.

a. $1,100.

b. $2,800.

c. $5,200.

d. $10,300.

e. None of
the above.

____ 103. Wayne developed heart problems and was
unable to climb the stairs to reach his second-floor bedroom. His physician
advised him to add a first-floor bedroom to his home. The cost of constructing
the room was $42,000. The increase in the value of the residence as a result of
the room addition was determined to be $18,000. In addition, Wayne paid the
contractor $7,500 to construct an entrance ramp to his home and $10,500 to
widen the hallways to accommodate his wheelchair. Wayne’s AGI for the year was
$120,000. How much of these expenditures can Wayne deduct as a medical expense?

a. $15,000.

b. $24,000.

c. $33,000.

d. $60,000.

e. None of
the above.

____ 104. Tom is advised by his family physician
that he needs back surgery to correct a problem from his last back surgery.
Since Tom is in a wheel chair, he needs his wife, Jean, to accompany him on his
trip to Rochester, Minnesota, for in-patient treatment at the Mayo Clinic which
specializes in this type of surgery. Tom incurred the following costs:

Round-trip airfare ($350 each) $ 700

Jean’s hotel in Rochester for four nights ($95 per night) 380

Jean’s meals while in Rochester 105

Tom’s medical treatment 3,500

Tom’s prescription medicine 600

Compute Tom’s medical expenses for the trip (subject to the
7.5% floor).

a. $4,000.

b. $5,000.

c. $5,180.

d. $5,285.

e. None of
the above.

____ 105. Your friend Scotty informs you that he
received a “tax-free” reimbursement in 2006 of some medical expenses
he paid in 2005. Which of the following statements best explains why Scotty is
not required to report the reimbursement in gross income?

a. Scotty
itemized deductions in 2005.

b. Scotty
did not itemize deductions in 2005.

c. Scotty
itemized deductions in 2006.

d. Scotty
did not itemize deductions in 2006.

e. Scotty
itemized deductions in 2006 but not in 2005.

____ 106. In 2006, Boris pays a $3,800 premium for
high-deductible medical insurance for himself and his family. In addition, he
contributes $3,400 to a Health Savings Account. Which of the following
statements is true?

a. If Boris
is self-employed, he may deduct $7,200 as a deduction for AGI.

b. If Boris
is self-employed, he may deduct $3,400 as a deduction for AGI and may include
the $3,800 premium when calculating his medical expense deduction.

c. If Boris
is an employee, he may deduct $7,200 as a deduction for AGI.

d. If Boris
is an employee, he may include $7,200 when calculating his medical expense deduction.

e. None of
the above.

____ 107. During 2006, Ellen paid the following
taxes:

Taxes on residence (for the period from March 1 through
August 31, 2006) $8,832

State motor vehicle tax (based on the value of the personal
use automobile) 330

State sales tax 3,800

State income tax 3,450

Ellen sold her personal residence on May 30, 2006, under an
agreement in which the real estate taxes were not prorated between the buyer
and the seller. What amount qualifies as a deduction from AGI for 2006 for
Ellen?

a. $12,962.

b. $11,900.

c. $8,450.

d. $4,650.

e. None of
the above.

____ 108. Ron and Tom are equal owners in Robin
Corporation. On July 1, 2006, each loans the corporation $20,000 at annual
interest of 10%. Ron and Tom are brothers. Both shareholders are on the cash
method of accounting, while Robin Corporation is on the accrual method. All
parties use the calendar year for tax purposes. On June 30, 2007, Robin repays
the loans of $40,000 together with the specified interest of $4,000. How much of
the interest can Robin Corporation deduct in 2006?

a. $0.

b. $1,000.

c. $2,000.

d. $4,000.

e. None of
the above.

____ 109. Tony is married and files a joint tax
return for 2006. He has investment interest expense of $95,000 for a loan made
to him in 2006 to purchase a parcel of unimproved land. His income from
investments [dividends (not qualified) and interest] totaled $18,000. After
reducing his miscellaneous deductions by the applicable 2% floor, the
deductible portion amounted to $2,800. In addition to $1,400 of investment
expenses included in miscellaneous deductions, Tony paid $3,600 of real estate
taxes on the unimproved land. Tony also has a $4,500 net long-term capital gain
from the sale of another parcel of unimproved land. Calculate Tony’s maximum
investment interest deduction for 2006.

a. $95,000.

b. $18,000.

c. $17,500.

d. $13,000.

e. None of
the above.

____ 110. In 2006, Terry pays $10,000 to become a
charter member of Mammoth University’s Athletic Council. The membership ensures
that Terry will receive choice seating at all of Mammoth’s home basketball
games. Also in 2006, Terry pays $1,200 (the regular retail price) for season
tickets for himself and his wife. For these items, how much qualifies as a
charitable contribution?

a. $6,000.

b. $6,800.

c. $8,000.

d. $10,000.

e. None of
the above.

____ 111. Andrea, who lives in Ohio, volunteered
to travel to Arizona in February to work on a home-building project for Habitat
for Humanity (a qualified charitable organization). She was in Arizona for
three weeks. She normally makes $600 per week as a carpenter’s assistant and
plans to deduct $1,800 as a charitable contribution. In addition, she incurred
the following costs in connection with the trip: $700 for transportation, $820
for lodging, and $340 for meals. What is Andrea’s deduction associated with
this charitable activity?

a. $700.

b. $1,040.

c. $1,520.

d. $1,860.

e. $3,660.

____ 112. Rosie owned stock in Acme Corporation
that she donated to a university (a qualified charitable organization) on
September 6, 2006. What is the amount of Rosie’s charitable contribution
deduction assuming that she had purchased the stock for $20,100 on October 22,
2005, and the stock had a value of $28,200 when she made the donation?

a. $8,100.

b. $20,100.

c. $24,150.

d. $28,200.

e. None of
the above.

____ 113. Jennifer, a calendar year taxpayer, made
the following donations to qualified charitable organizations in 2006:

Basis Fair Market
Value

Cash donation to Ohio State University $40,000 $
40,000

Unimproved land to the city of Columbus, Ohio 80,000 240,000

The land had been held as an investment and was acquired 3
years ago. Shortly after receipt, the city of Columbus sold the land for
$240,000. Jennifer’s AGI is $400,000. The allowable charitable contribution
deduction is:

a. $84,000
if the reduced deduction election is not made.

b. $112,000
if the reduced deduction election is not made.

c. $160,000
if the reduced deduction election is not made.

d. $200,000
if the reduced deduction election is made.

e. None of
the above.

____ 114. During 2006, Ralph made the following
contributions to the University of Oregon (a qualified charitable
organization):

Cash $63,000

Stock in Raptor, Inc. (a publicly traded corporation) 94,500

Ralph acquired the stock in Raptor, Inc., as an investment
fourteen months ago at a cost of $42,000. Ralph’s AGI for 2006 is $189,000.
What is Ralph’s charitable contribution deduction for 2006?

a. $56,700.

b. $63,000.

c. $94,500.

d. $157,500.

e. None of
the above.

____ 115. In 2006, Kipp invested $65,000 for a 30%
interest in a partnership conducting a passive activity. The partnership
reported losses of $200,000 in 2006 and $100,000 in 2007, Kipp’s share being
$60,000 in 2006 and $30,000 in 2007. How much of the losses from the
partnership can Kipp deduct assuming he owns no other investments?

a. $0 in
2006, $30,000 in 2007.

b. $60,000
in 2006, $30,000 in 2007.

c. $60,000
in 2006, $5,000 in 2007.

d. $60,000
in 2006, $0 in 2007.

e. None of
the above.

____ 116. Carl, a physician, earns $200,000 from
his medical practice in the current year. He receives $45,000 in dividends and
interest during the year as well as $5,000 of income from a passive activity.
In addition, he incurs a loss of $50,000 from an investment in a passive
activity. What is Carl’s AGI for the current year after considering the passive
investment?

a. $195,000.

b. $200,000.

c. $240,000.

d. $245,000.

e. None of
the above.

____ 117. Nell sells a passive activity with an
adjusted basis of $45,000 for $105,000. Suspended losses attributable to this
property total $45,000. The total gain and the taxable gain are:

a. $60,000
total gain; $105,000 taxable gain.

b. $10,000
total gain; $15,000 taxable gain.

c. $60,000
total gain; $0 taxable gain.

d. $60,000
total gain; $15,000 taxable gain.

e. None of
the above.

____ 118. Matt has three passive activities and
has at-risk amounts in excess of $100,000 for each. During the year, the activities
produced the following income (losses).

Activity A ($30,000)

Activity B (20,000)

Activity C 25,000

Net passive loss ($25,000)

Matt’s suspended losses are as follows:

a. $25,000
is allocated to C; $0 to A and B.

b. $12,500
is allocated to A; $12,500 to B.

c. $15,000
is allocated to A; $10,000 to B.

d. $8,333 is
allocated to A, B, and C.

e. None of
the above.

____ 119. In the current year, Crow Corporation, a
closely held C corporation that is not a personal service corporation, has
$100,000 of passive losses, $80,000 of active business income, and $20,000 of
portfolio income. How much of the passive loss may Crow deduct in the current
year?

a. $0

b. $20,000.

c. $80,000.

d. $100,000.

e. None of
the above.

____ 120. White Corporation, a personal service
corporation, has $150,000 of passive losses, $120,000 of active businessincome,
and $30,000 of portfolio income. How much of the passive loss may White
Corporation deduct?

a. $0.

b. $30,000.

c. $120,000.

d. $150,000.

e. None of
the above.