CCH Federal Taxation Comprehensive Topics 2014 1. Practically all tax shelters were formed as limited partnerships. *a. Trueb. 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. Trueb. 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. Trueb. 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
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- Spring '14
- Dividends, Taxation in the United States, fair market value