____ 7. Which of the following is considered a 2% miscellaneous itemized deduction that is no longer deductible for 2018-2025?

a. State income tax withheld.

b. Interest expenses attributable to a mortgage on the taxpayer's principal residence.

c. Property taxes assessed on the taxpayer's residence.

d. Charitable contributions.

e. Employee business expenses not reimbursed by the employer.

____ 8. B, a bank president, is a weekend potter. He regularly sells his pots at crafts fairs and spends an average of ten hours a week either making or marketing pots. Although he has made around $300 profit per year for the last two years from pottery sales, he tells everyone that he would do it for free. This year he had a $1,500 net loss due to increased entrance fees at the fairs. If B has been making and selling pots for only three years and he makes an election under 183 to postpone IRS challenges, which of the following is a true statement if B makes a profit next year?

a. He can carry forward this year's $1,500 loss and deduct it for A.G.I.

b. He is conclusively the owner of a for-profit business rather than a hobby.

c. He can postpone paying income tax on the profit until the challenge is resolved.

d. He may shift the burden of proof to the IRS, which must show that the pottery activity is not a business.

____ 9. After having his best three quarters of earnings ever, and with a predicted strong fourth quarter, D, a sole proprietor who is a calendar year, cash basis taxpayer in a manufacturing business, is looking for ways to reduce his A.G.I. this year. Which of the following would probably not generate a deduction for A.G.I.?

1. Expenses incurred in December for a big January ad campaign.
2. A large fine assessed by the government (OSHA) for unsafe factory condition
3. Selling assets below his adjusted basis in them.
4. Expenses incurred in providing information to the city council on matters of direct interest to the taxpayer
5. More than one of the above.

____ 10. T takes out a home equity loan for $35,000 at 5 percent. He immediately purchases $35,000 of tax-exempt bonds earning 4 percent a year. The IRS will probably

a. view the income from the bonds as taxable.

b. declare that the results of the transactions cancel each other out, so that they are a "wash" for T.

c. allow the interest deduction.

d. deny the deduction for the interest expense.