Question : 21. Under a defined contribution plan, the contribution made behalf of : 1313530

21. Under a defined contribution plan, the contribution made on behalf of the employee is determined using a formula dependent on the employee’s current compensation.

a. True

b. False

22. If a Section 401(k) plan allows an employee to choose between a direct payment of compensation in cash or a contribution to the retirement plan, the plan is not a “qualified” plan.

a. True

b. False

23. In order for a pension plan to be considered a “qualified” retirement plan, the plan must satisfy certain minimum vesting requirements.

a. True

b. False

24. If an employer makes a contribution to a qualified retirement plan on behalf of an employee, the amount is currently deductible by the employer, and the employee must include the amount in gross income at the time the contribution is made.

a. True

b. False

25. In a distribution rollover from an IRA, the recipient must contribute 80 percent of the distributed amount to the new trustee in order for the rollover to be tax free.

a. True

b. False

26. Lester rents his vacation home for 6 months and lives in the home during the other 6 months of 2014. The gross rental income from the home is $4,500. For the entire year, real estate taxes are $800, interest is $3,000, utilities and maintenance expenses are $2,200, and depreciation expense on the entire home would be $4,000. What is Lester’s allowable net loss from renting his vacation home?

a. $5,500 loss

b. $3,000 loss

c. $500 loss

d. $250 loss

e. None of the above

27. Bill is the owner of a house with two identical apartments. He resides in one apartment and rents the other apartment to a tenant. The tenant made timely monthly rental payments of $550 per month for the months of January through December, 2014. The following expenses were incurred on the entire building: 

Utilities$3,800

Maintenance and repairs$ 900

Insurance on building$ 500

In addition, depreciation allocable to the rented apartment is $1,500. What amount should Bill report as net rental income for 2014?

a. $0

b. $100 loss

c. $2,500

d. $3,250

e. None of the above

28. Mort is the owner of an apartment building containing ten identical apartments. Mort resides in one apartment and rents out the remaining units. For 2014, the following information is available: 

Gross rents$21,600

Utilities for total building$ 2,500

Maintenance and repairs (rental apartments only)$ 1,050

Advertising for vacant apartments$ 300

Depreciation of building (all ten units)$ 5,000

What amount should Mort report as net rental income for 2014?

a. $12,750

b. $13,350

c. $13,500

d. $13,635

e. None of the above

29. Donald owns a two-family home. He rents out the first floor and resides on the second floor. The following expenses attributable to the total building were incurred by Donald for the year ended December 31, 2014: 

Real estate taxes$ 1,800

Mortgage interest$ 1,600

Utilities$ 1,200

Repairs (first floor)$ 700

Painting (second floor)$ 400

In addition, the depreciation attributable to the entire building would be $2,000. What is the total amount of the expenses that Donald can deduct on Schedule E of Form 1040 (before any limitations)?

a. $3,300

b. $3,850

c. $4,000

d. $4,200

e. None of the above

30. The expenses associated with the rental of a residence used for both personal and rental purposes are subject to three possible tax treatments. Which of the following is not included as one of the three?

a. If a residence is rented for fewer than 15 days during the year the rental period is disregarded and the residence is regarded as a personal residence for tax purposes.

b. If the residence is rented for 15 days or more and is used for personal purposes for not more than 14 days or 10 percent of the days rented, whichever is greater, the residence is treated as rental property.

c. If the residence is rented for 15 days or more and is used for personal purposes for not more than 14 days or 10 percent of the days rented, whichever is greater, the residence is treated as a personal residence for tax purposes.

d. If the residence is rented for 15 days or more and is used for personal purposes for more than 14 days or 10 percent of the days rented, whichever is greater, allocable rental expenses are allowed only to the extent of rental income.