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1. On Form 1040, deductions for adjusted gross income include the amounts paid for all of the following except


A) alimony. B) moving expenses.

C) home mortgage interest. D) student loan interest.


2. Donald sells stock with an adjusted basis of $38,000 to his son, Kiefer, for its fair market value of $30,000. Kiefer sells the stock three years later for $32,000. Kiefer will recognize a gain on the subsequent sale of


A) ($8,000). B) $2,000. C) ($6,000). D) $-0-.


3. Wayne and Maria purchase a home on April 1 of the current year. To obtain a thirty-year mortgage, they are required to pay $7,200 in points at closing. Charging points is a customary business practice in the area. In addition, they pay $4,400 of interest during the year. What is their current year deduction related to their home?


A) $4,580 B) $4,400 C) $11,600 D) $7,200

4. This year, Marcia, who is single, finished graduate school and began repaying her student loan. The proceeds of the loan were used to pay her qualified higher education expenses. She has not received any type of educational assistance or scholarships. The amount of interest paid during the year amounted to $3,000. What is the amount and classification of her student loan interest deduction if her AGI is $63,000?


A) $3,000 for AGI B) $2,000 for AGI C) $500 for AGI D) $2,500 for AGI


5. Wang, an employee of Skye Architects, incurred the following unreimbursed expenses this year:

Subscription to architectural journals $800

Dues to Professional Architecture Society 400

Tax return preparation 600

Investment advice 500


Wang’s AGI is $75,000. What is his net deduction for miscellaneous itemized deductions?


A) $800 B) $1,500 C) $1,900 D) $0


6. Ted pays $2,100 interest on his automobile loan, $120 interest on a loan to purchase a computer for personal use, $630 interest on credit cards, and $1,100 investment interest expense. Ted has net investment income of $850. Ted’s deductible interest is


A) $850. B) $3,200. C) $1,100. D) $2,950.


7. Grace has AGI of $60,000 in 2012 and 2013. She makes cash contributions to public charities of $34,000 in 2012 and $31,000 in 2013. Grace’s charitable contribution carryover to 2014 is


A) $0. B) $1,000. C) $5,000. D) $4,000.


8. Which of the following is not required substantiation for a noncash charitable contribution?


A) date and location of property donated

B) method used to determine the donated property’s fair market value

C) name and address of charitable organization

D) use of donation by charitable organization


9. Liz, who is single, lives in a single family home and owns a second single family home that she rented for the entire year at a fair rental rate. Liz had the following items of income and expense during the current year.


Gross salary and commissions from Ace Corporation $50,000
Rent received from tenant in Liz’s rental house 13,000
Dividends received on her portfolio of stocks 5,000



Unreimbursed professional dues 200
Subscriptions to newsletters recommending stocks 900
Taxes, interest and repair expenses on rental house 3,500
Depreciation expense on rental house 2,300


What is her adjusted gross income for the year?


A) $62,200 B) $52,700 C) $61,100 D) $68,000


10. Generally, deductions for adjusted gross income on an individual’s tax return include all the following types of expenses except those


A) incurred in a trade or business.

B) incurred in the production of royalty income.

C) incurred in the production of rent income.

D) incurred in gambling activities.


11. During the current year, Martin purchases undeveloped land as an investment. Martin intends to rent the land as pastureland and hopefully sell it later for a profit. In the current year, Martin receives no rent but he does pay taxes of $2,800, mortgage interest of $900 and liability insurance of $500. How much of these expenses can Martin deduct (before any limitations) on his current tax return?


A) $0 B) $4,200 C) $1,400 D) $3,700


12. Jason sells stock with an adjusted basis of $66,000 to JJ Inc., his 60% owned corporation, for its fair market value of $60,000. JJ Inc. sells the stock three years later for $67,000. JJ Inc.’s recognized gain or loss on the sale will be


A) $-0-. B) $4,000. C) $1,000. D) ($3,000).