FAC Tax Planning & Preparation 2

Question 1

A taxpayer converts a traditional IRA to a Roth IRA in 2024. How is the converted amount treated for tax purposes?

Accepted Answer

Included in gross income in the year of conversion

Answer

The converted amount is included in gross income in the year of conversion, subject to ordinary income tax rates.

Question 2

Which filing status generally results in the lowest tax liability for a qualifying taxpayer?

Accepted Answer

Qualifying Surviving Spouse

Answer

Qualifying Surviving Spouse status provides the same tax brackets as Married Filing Jointly, typically yielding the lowest rates.

Question 3

A self-employed individual pays $8,000 in self-employment tax. What amount is deductible on Form 1040?

Accepted Answer

$4,000

Answer

Self-employed taxpayers may deduct one-half (50%) of their self-employment tax, which equals $4,000 in this case.

Question 4

Under the passive activity loss rules, which of the following can offset passive losses without limitation?

Accepted Answer

Passive income from other passive activities

Answer

Passive losses may only offset passive income; income from other passive activities qualifies without the AGI phase-out limitations.

Question 5

A taxpayer sells their primary residence for a $300,000 gain. They are single and have lived there 3 of the last 5 years. How much gain is excluded?

Accepted Answer

$250,000

Answer

Single taxpayers may exclude up to $250,000 of gain on a primary residence if the ownership and use tests are met.

(FAC) Finance and Accounting Certification Practice Test