Mr. and Mrs. Watson borrowed $240,000 from BB&T to purchase a home. During 2015,

Question

Mr. and Mrs. Watson borrowed $240,000 from BB&T to purchase a home. During 2015, they paid $9,500 in interest on the mortgage loan. They also received a car loan of $25,000 from BB&T to purchase a new automobile. They paid $2,000 in interest on the auto loan during 2015.

For tax year 2015, if Mr. and Mrs. Watson itemize their deductions they may deduct both the $9,500 of mortgage interest and the $2,000 car loan interest.

True

False

The price of regular unleaded gasoline for cars is around $2.35 per gallon. This price includes 18.4 cents per gallon of Federal excise taxes.

When individual taxpayers buy gas for their personal vehicles (those not used in a business), these excise taxes paid are deductible as itemized deductions on their personal tax returns.

True

False

A difficult tax issue is whether some taxpayer's activity (e.g. selling paintings that they made) is a "hobby" or a "business".

Assume the activity generates a loss (expenses > sales). If the activity is a hobby then the losses cannot be deducted on the person's tax return. If the activity is a business, then the losses can be deducted on the person's tax return.

True/False. The tax law presumes that any activity that generates net income in 3 out of 5 years is a business.

True

False

Explanation / Answer

Ans FALSE Only mortgage interest can be deducted from itemwize deduction ans 2 TRUE An individual can claim it on his tax return ans 3 TRUE Yes if the actvity is an hobby and there is loss that cannot be claimed on tax return while in business it can be done ANS 4 True An activity that generates income for 3 years is 5 years is business not an hobby

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