ch14 Student 1 In general terms the tax laws favor taxpayers who own their principal residence relative to taxpayers who rent it True False 2 Renting a residence may have nontax advantages over owning a home 3 A personal residence is not a capital asset 4 A taxpayer may be required to pay tax on a gain the taxpayer realizes when she sells her principal 5 For tax purposes a dwelling unit is a residence if the taxpayer s number of personal use days of the unit is True False True False residence True False more than ten days True False 6 When determining the number of days a taxpayer has rented a home during the year any days when the home is available for rent but not actually rented out counts as a day of rental use True False 7 When determining the number of days a taxpayer has rented a home during the year any days when the home is available for rent but not actually rented out counts as a day of personal use True False 8 Taxpayers meeting certain requirements may be allowed to exclude at least a portion of gain realized on the sale of a principal residence True False 9 The ownership test for excluding gain on the sale of a principal residence requires the taxpayer to have owned the property for three or more years during the five year period ending on the date of sale True False 10 A taxpayer who otherwise meets the ownership and use tests may not be allowed to exclude all of her realized gain if the taxpayer has nonqualified use of the home before selling True False 11 To be allowed to exclude gain on the sale of a principal residence the taxpayer selling the home must be using the home as a principal residence at the time of the sale True False 12 For determining whether a taxpayer qualifies to exclude gain on the sale of a principal residence the periods of ownership and use need not be continuous nor do they need to cover the same two year period True False 13 A married couple filing a joint tax return is eligible to exclude up to 500 000 of gain on the sale of a personal residence if both spouses meet the ownership test and at least one spouse meets the use test True False 14 A taxpayer can qualify for the home sale exclusion even if she has moved out of the home and is renting the home to another at the time of the sale True False 15 A taxpayer who sells a principal residence that has been used or is being used as a rental property will not be allowed to exclude the portion of the gain attributable to depreciation even if the taxpayer meets the ownership and use tests and the gain realized on the sale is lower than the maximum exclusion amount True False 16 At most a taxpayer is allowed to exclude gain on the sale of a principal residence once every five years True False 17 In certain circumstances a taxpayer who does not meet the ownership and use test may still be allowed to exclude the entire realized gain on the sale of a principal residence True False 18 The tax laws place a fixed dollar limit on the amount of qualified residence interest a taxpayer may deduct in a particular year True False 19 A taxpayer who rents out a home for at least one day and does not use a home for personal purposes for at least 15 days during the year is ineligible to deduct any qualified residence interest expense on a loan secured by the home True False 20 Jacoby purchases a home for 1 500 000 by making a 150 000 down payment and by borrowing the remaining 1 350 000 with a loan secured by the home Jacoby can deduct interest expense on 1 100 000 of the loan principal True False 21 For regular tax purposes a taxpayer may deduct interest expense on qualifying home equity indebtedness even if the taxpayer uses the loan proceeds for a purpose other than to improve the home True False 22 Subject to certain AGI restrictions taxpayers are allowed to deduct as qualified residence interest expense premiums paid on mortgage insurance True False 23 When a taxpayer finances her personal residence in general she may not deduct points paid for loan origination fees but she may deduct points paid as prepaid interest True False 24 A taxpayer who is financing his personal residence and who pays points on the loan in the form of prepaid interest generally must deduct the points over the life of the loan no matter whether the loan is an original loan or a refinance of an existing loan True False 25 The longer a taxpayer plans on living in a home without refinancing the more likely it is that paying points to receive a reduced interest rate on the loan makes economic sense True False 26 A taxpayer who purchases real property during the year is allowed to deduct the property taxes on that property for the entire year True False 27 Taxpayers are allowed to deduct real property taxes at the time they pay estimated taxes to an escrow account established by the lender for the taxpayer s property taxes True False 28 Taxpayers who purchased a home in 2008 and received the first time home buyer tax credit must with a few limited exceptions pay the credit back to the government in subsequent years True False 29 In certain circumstances a taxpayer could rent her personal residence at a profit and not pay any tax on the income True False 30 Taxpayers who use a vacation home for both personal and rental use generally must allocate expenses associated with the home to the personal use and the rental use True False 31 When allocating expenses of a vacation home between personal use and rental use the amount of depreciation expense allocated to the rental use is always the ratio of rental days over rental days plus personal use days True False 32 Expenses of a vacation home allocated to rental use are deductible for AGI True False True False 33 Compared to the Tax Court method of allocating expenses between rental use and personal use the IRS method tends to allocate more expenses to personal use than does the Tax Court method True False 34 Taxpayers renting a home would generally report the rental income and expenses on Schedule E 35 Jorge owns a home that he rents for 360 days and uses for personal purposes for five days Jorge is not required to allocate expenses associated with the home between rental and personal use True False 36 Jennifer owns a home that she rents for 364 days and uses for personal purposes for one day Jennifer is required to allocate expenses associated with the home between rental and personal use True False 37 A tax loss from a rental home is a passive activity loss True False 38 A self employed