2014CompTopics07 - CCH Federal Taxation Comprehensive...

CCH Federal
Taxation
Comprehensive
Topics
2014
1. Practically all tax shelters were formed as limited partnerships.
*a. True
b. False
2. Portfolio income is interest, dividends, annuities, and royalties
derived in the ordinary course of a trade or business.
3. The passive loss limitations apply to individuals, closely held
corporations, and personal service corporations, but not to estates and
trusts.
4. A working interest which a taxpayer holds in oil and gas properties
is not subject to the passive activity rules.
5. An individual is allowed to avoid the passive loss limitations for
all rental real estate activities in which the individual actively
participates.
*a. True
b. False
6. All casualty and theft losses are deductible if incurred in a trade
or business or in connection with an investment.
7. A deduction resulting from the partial destruction of business
property is limited to the lesser of (1) the adjusted basis of the

casualty property, or (2) the decline in fair market value of the
casualty property.
8. If two or more net operating losses are carried back to a tax year,
they must be deducted in the order they were incurred.
9. The deduction for hobby expenses is not subject to the two-percent
floor on miscellaneous itemized deductions.
a. True
*b. False
10. Exclusive use of a portion of a home for business purposes is
required to qualify for a business use of home deduction.
11. An investor is not at risk for nonrecourse borrowings, stop-loss
arrangements, no-loss guarantees, or borrowings in which the lender has
an interest.
12. The gain from the sale of property that produces portfolio income
(e.g., stocks and bonds) is classified as passive income.
13. In determining whether a taxpayer materially participates, the
participation of a taxpayer's spouse will be taken into account.
*a. True
b. False
14. A business incurring a net operating loss in a taxable year can
carry the loss back two years and forward 15 years.

15. In determining whether an activity is engaged in for profit, a
reasonable expectation of profit is required.
16. Disaster area losses are carried forward for an additional five
years beyond ordinary casualty losses.
a. True
*b. False