Tax Topic 20 - Investment Income and Expenses

In this tax topic you will learn the tax treatment of investment income and expenses. You will learn what investment income is taxable and what investment expenses are deductible, including interest expenses. Here, you will learn when and how to include these items on your tax report. In addition, you will be able to determine and report gains and losses on the disposition of investment property, and property trades and tax shelters. 

Tax School Homepage

Student Instructions:

Print this page, work on the questions and then submit test by mailing the answer sheet or by completing quiz online.

Instructions to submit quiz online successfully: Step-by-Step check list

Answer Sheet            Quiz Online

Most forms are in Adobe Acrobat PDF format. You will need Adobe Reader to view and print these forms. If you do not already have Adobe Reader installed on your computer, you may download the software for free.

Please use IRS Publication 550, and Form 1040 Instructions (Form 1040 instructions only up to page 98) to complete this tax topic.

Please note: Form 1040 Instructions (Form 1040 instructions only up to page 98) will be used for the rest of the topics in the initial tax preparer certification course. You will be responsible to answer questions from the Form 1040 instructions booklet (up to page 98) on every topic so read it carefully.

Tax Return Situation 1:

Prepare  Form 1040, Form 4952, Schedule A, Schedule B. You may also need Schedule A Instructions.

Raul Beltrán needs to prepare his taxes. He is an unmarried investor and has borrowed money to invest in ABC Company. The total investment interest expense from borrowed funds was a total of $14,000 for tax year 2013.

Raul received the following:

Raul had no other items to itemize and he has no dependents. He paid $7,200 of rent for the entire year.

All information on W-2 is current.