Quiz Of The Week: Deductions For AGI

2.

Generally, deductions for AGI on an individual’s tax return include all the following types of expenses except:

Those incurred in a trade or business
Those incurred in gambling activities
Those incurred in the production of rent income
Those incurred in the production of royalty income

Correct Answer

A. Those incurred in gambling activities

Explanation

Gambling activities are deducted on Schedule A (Form 1040). A tax¬payer may deduct gambling losses suffered in the tax year (but only to the extent of that year’s gambling gains) as miscellaneous itemized deductions not subject to the two percent of AGI floor. The more common “for AGI” deductions include expenses incurred in a taxpayer’s trade or business and expenses from the production of rent or royalty income.

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3.

Which of the following expenses is deductible for AGI?

Expenses related to personal stock market investment activity
Contributions to a Roth IRA
Moving expenses
Non-reimbursed employee business expenses

Correct Answer

A. Moving expenses

Explanation

Moving expenses. “Non-business” investment expenses are deductible only as an itemized deduction on Schedule A (Form 1040). The more common “for AGI” deductions include certain contributions to pensions, profit sharing and annuity plans for self-employed individuals; deductions for certain retirement savings, such as IRAs, allowed by IRC Section 219; deductions for payments of alimony; and the exclusion of expenses incurred by the taxpayer in connection with the performance of services as an employee, if the expenses are reimbursed and other conditions are satisfied. However, contributions to Roth IRAs are not deductible.

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4.

Which of the following is/are correct concerning the time test for deducting moving expenses? I. Self-employed individuals must work in the new location for 78 weeks during a two-year period. II. A transfer of the employee by the employer waives the time requirement.

Statement I is correct
Statement II is correct
Both statements are correct
Neither statement is correct

Correct Answer

A. Both statements are correct

Explanation

The taxpayer must meet either the 39-week or the 78-week test. In the 78-week test, the taxpayer must be a full-time employee or perform services as a self-employed individual on a full-time basis in the general location of his or her new principal place of work for at least 78 weeks during the 24-month period immediately following his or her arrival there. Thirty-nine of the 78 weeks must be during the 12-month period immediately following his or her arrival in the new area (the 39-week test). Failure to meet the 39- or 78-week test doesn’t bar the deduction if the failure was caused by death or disability, involuntary separation from employment other than for willful misconduct, or reassignment for the benefit of the employer (and is not initiated by the employee after getting full-time employment) if the taxpayer could reasonably have been expected to meet the test.

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5.

Mark and Cindy are married with salaries of $39,000 and $20,000, respectively. The AGI on their jointly filed tax return is $61,000. Both individuals are active participants in employer-provided qualified pension plans. What is the maximum amount each person may deduct for AGI with regard to Roth IRA contributions when the income limitation for a amrried individual filing jointly is $178,000 to 188,000?

Mark $0; Cindy $5,500
Mark $5,500; Cindy $5,500
Mark $5,500; Cindy $0
Mark $0; Cindy $0

Correct Answer

A. Mark $0; Cindy $0

Explanation

The limit for making contributions for a married individual filing jointly is $178,000 to $188,000, not for deductions.

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Quiz Of The Week: Deductions For Agi

Quiz Preview

Generally, deductions for AGI on an individual’s tax return include all the following types of expenses except:

Which of the following expenses is deductible for AGI?

Which of the following is/are correct concerning the time test for deducting moving expenses? I. Self-employed individuals must work in the new location for 78 weeks during a two-year period. II. A transfer of the employee by the employer waives the time requirement.