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2009 R-2 Class Questions Preview

2009 R-2 Class Questions Preview - Regulation 2 Class...

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Regulation 2 Class Questions 1 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. 1. CPA-01963 For 2008, Val and Pat White filed a joint return. Val earned $35,000 in wages and was covered by his employer's qualified pension plan. Pat was unemployed and received $5,000 in alimony payments for the first 4 months of the year before remarrying. The couple had no other income. Each contributed $5,000 to an IRA account. The allowable IRA deduction on their 2008 joint tax return is: a. $10,000 b. $5,000 c. $2,000 d. $0 CPA-01963 Choice "a" is correct. In 2008, taxpayers can contribute and deduct up to $5,000 per year to an IRA, and alimony is considered earned income for IRA purposes. For couples filing a joint return where at least one spouse is an active participant in a retirement plan, the deductible portion of the contribution is phased out. For a spouse who is an active participant, the phase out range in 2008 begins at $85,000. For a spouse who is not an active participant, but is married to someone who is, the phase out range begins at $159,000. The earned income for IRA purposes here is $40,000 ($35,000 + $5,000) which is below both phaseout ranges, so each spouse receives the full $4,000 deduction. Choice "b" is incorrect. Pat's alimony is deemed "earned income" for the IRA contributions. However, even if Pat had no earned income, a spouse with no earned income can deduct $5,000, provided the couple's combined earned income is at least $10,000. Choice "c" is incorrect. The $2,000 was a pre-2002 rule for IRA contribution limits for individuals and is a distractor in this case. Choice "d" is incorrect. When a taxpayer or taxpayer's spouse is an active participant in a pension plan at work, the full deduction is allowed if the earned income of the couple is below the phaseout ranges (as is in this case).
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Regulation 2 Class Questions 2 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. 2. CPA-01949 Grey, a calendar year taxpayer, was employed and resided in New York. On February 2, 20X1, Grey was permanently transferred to Florida by his employer. Grey worked full-time for the entire year. In 20X1, Grey incurred and paid the following unreimbursed expenses in relocating. Lodging and travel expenses while moving $1,000 Pre-move househunting costs 1,200 Costs of moving household furnishings and personal effects 1,800 What amount was deductible as moving expense on Grey's 20X1 tax return? CPA-01949 Choice "b" is correct. The $1,000 lodging and travel expenses are fully deductible. A pre-move househunting trip is not deductible. The $1,800 expense of moving household furnishings and personal effects is fully deductible. The total deductible amount is $2,800 ($1,000 + $1,800). Choice "a" is incorrect. Pre-move househunting costs are not deductible. Choice "c" is incorrect. Lodging and travel expenses while moving are fully deductible. Choice "d" is incorrect. Costs of moving household furnishings and personal effects are fully deductible.
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