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? a. $4,000 b. $2,800 c. $1,800 d. $1,000 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.
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2009 R-2 Class Questions Preview - Regulation 2 Class...

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