Question :
31. Patrick owns a home the beach in Daytona. He lives : 1313531
31. Patrick owns a home on the beach in Daytona. He lives in the house for most of the year but leaves town during the big motor sports race that comes through every year. During that time, he rents his home out for 3 weeks to race fans for $5,000. Which of the following is true?
a. Because Patrick rents the house for such a short period of time, the rental income is not taxable but he may deduct a percentage of expenses such as utilities and depreciation on the home.
b. Patrick did not rent the house for a long enough period of time to deduct a percentage of expenses such as utilities and depreciation on the home. The rental income he receives is taxable.
c. Because Patrick rented the home for more than 14 days, he must report the income. He is also allowed to deduct a percentage of expenses such as utilities and depreciation to the extent of the income.
d. If you live in your house for more than 50 percent of the year, then it is treated as a personal residence and you cannot deduct any expenses such as utilities and depreciation on the home.
e. None of the above is true.
32. Nancy has active modified adjusted gross income before passive losses of $125,000. She has a loss of $10,000 on a rental property she actively manages. How much of the loss is she allowed to deduct against the $125,000 of other income?
a. None
b. $2,500
c. $5,000
d. $10,000
33. Ned has active modified adjusted gross income before passive losses of $160,000. He has a loss of $15,000 on rental property he actively manages. How much of the loss is he allowed to deduct against his other income?
a. None
b. $10,000
c. $15,000
d. $5,000
34. Norm is a real estate professional with a real estate trade or business as defined in the tax law. He has $150,000 of business income and $50,000 of losses from actively managed real estate rentals. How much of the $50,000 in losses is he allowed to claim on his tax return?
a. $25,000
b. None
c. $50,000
d. $20,000
35. Arnold purchased interests in two limited partnerships 6 years ago. During 2014, Arnold had income of $22,000 from one of the partnerships. He had a loss from the other partnership of $32,000, salary income of $35,000, and dividend income of $2,000. What is the amount of net passive losses that Arnold may deduct for 2014?
a. $0
b. $2,000
c. $8,000
d. $10,000
e. None of the above
36. Thelma works at a liquor store in 2014 and makes $45,000. She also has dividend income of $12,000 and interest income of $1,000. She owns a beach house that gives her $11,000 in net rental income and she owns a stake in a limited partnership that generates a $15,000 loss. What is her adjusted gross income in 2014?
a. $58,000
b. $45,000
c. $69,000
d. $57,000
e. $54,000
37. Warren invested in a limited partnership tax shelter in 2001. During 2014, his losses from the partnership amount to $100,000. If Warren has no passive income, what is the amount of Warren’s deduction for passive losses for 2014?
a. $0
b. $10,000
c. $20,000
d. $40,000
e. None of the above
38. Carey, a single taxpayer, purchased a rental house in 2014, which he actively manages. During 2014, Carey had a loss of $14,000 from the rental house. If Carey’s adjusted gross income for 2014 is $144,000 before the rental loss, what is the amount of Carey’s allowable deduction for the rental activity for 2014?
a. $0
b. $3,000
c. $6,000
d. $14,000
e. None of the above
39. Arnold purchased two rental properties 6 years ago. He actively participates in their management. During 2014, Arnold had income of $22,000 from one of the rentals. He had a loss from the other rental of $32,000, as well as salary income of $35,000, and dividend income of $2,000. What is Arnold’s net passive income or loss deduction?
a. $8,000 net loss
b. $10,000 net loss
c. $22,000 net loss
d. $32,000 net loss
e. None of the above
40. Choose the correct statement. Passive losses
a. May not be used to offset passive income.
b. May be used to offset portfolio income.
c. Often result from the rental of real estate.
d. If unused, are lost forever.
