1. Look at the Form 1040 you prepared for Nicolai. What is the amount on Form 1040, Line 40a?

A. $ 11,217.
B. $ 11,043.
C. $ 11,456. 
D. $ 11,128.

2. Look at the Form 1040 you prepared for Nicolai. What is the amount on Form 1040, Line 43a?

A. $ 629.
B. $ 554.
C. $ 584.
D. $ 144.

3. If you do not meet the tests to fully deduct points in the year paid, the loan is not a home improvement loan, or you choose not to deduct your points in full in the year paid, you can deduct the points ratably over the life of the loan if

A. You use the cash method of accounting and your loan is secured by a home even if it is not your main home.
B. Your loan period is not more than 30 years, and if your loan period is more than 10 years, the terms of your loan are the same as other loans offered in your area for the same or longer period.
C. Either your loan amount is $250,000 or less, or the number of points is not more than 4, if your loan period is 15 year or less, or 6 points if your loan period is more than 15 years.
D. All of the above.

4. Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. This is true,

A. Unless the new mortgage is secured by your main home.
B. Even if the new mortgage is secured by your main home.
C. Unless the new mortgage is secured by your second home.
D. Even if the new mortgage is secured by a second home.

5. Guillermo and Laura sold their home on May 7. Through April 30, they made home mortgage interest payments of $1,300. The settlement sheet for the sale of the home showed $80 interest for the 6-day period in May up to, but not including the date of sale. Their mortgage interest deduction is

A. $80.
B. $1,300.
C. $1,380.
D. None of the above.

6. If you sell your home, you can deduct your home mortgage interest (subject to any limits that apply),

A. Paid up to and including the date of sale.
B. Paid up to, but not including the date of sale.
C. Paid up to six months after the date of sale.
D. None of the above.

7. You can deduct all of the interest on mortgages you took out on or before October 14, 1987 (called grandfathered debt).

True False

8. If your adjusted gross income is more than $166,800 ($83,400 if you are married filing separately), the overall amount of your itemized deductions may be limited.                   

True False

9. As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. Points not included on Form 1098

A. Also may be deductible.
B. Are never deductible.
C. Should not show any interest that was paid for you by a government agency.
D. None of the above.

10. You can treat amounts you paid during 2009 for qualified mortgage insurance as home mortgage interest. Qualified mortgage insurance is mortgage insurance provided by the

A. Department of Veteran Affairs.
B. Federal Housing Administration or the Rural Housing Service.
C. Private mortgage insurance as defined in section 2 of the Homeowner Protection Act of 1998 as in effect on December 20, 2006.
D. Any of the above.

11. You can treat amounts you paid during the 2009 year for qualified mortgage insurance as home mortgage interest. To do so,

A. The insurance must be in connection with home acquisition debt.
B. The insurance contract must have been issued after 2006.
C. The mortgage insurance contract must have been issued in 2008.
D. Both A and B above.

12. You cannot claim the credit for a home purchased after November 6, 2009, if

A. The purchase price of the home is $700,000.
B. You (and your spouse if married) are 18 on the date of purchase.
C. You can be claimed as a dependent on another person's tax return.
D. Any of the above.

13. You can exclude from gross income any discharges of qualified principal residence indebtedness made after 2006 and before 2013.

True False

14. Most state and local governments charge an annual tax on the value of real estate. You can deduct the tax if

A. It is based on the assessed value of the real property.
B. The taxing authority charges a uniform rate on all property in its jurisdiction.
C. The tax is for the welfare of the general public and not a payment for a special privilege granted or service rendered to you.
D. All of the above.

15. You can deduct as home mortgage interest a late payment as long as if was for a specific service in connection with your mortgage loan.

True False

16. If you make annual or periodic rental payments on a redeemable ground rent, you can deduct the payments as mortgage interest. The ground rent is a redeemable ground rent only if

A. Your lease, including renewal periods, is for more than 15 years and you can freely assign the lease.
B. You have a present or future right (under state or local law) to end the lease and buy the lessor's entire interest in the land by paying a specific amount.
C. The lessor's interest in the land is primarily a security interest to protect the rental payments to which he or she is entitled.
D. All of the above.

17. If you refinance the mortgage with the same lender, you

A. Cannot deduct any remaining points for the year.
B. You can deduct remaining points over the term of the new loan.
C. Both A and B above.
D. Can deduct the remaining points for the year.

18. If you receive a refund of mortgage interest you overpaid in a prior year, you generally will receive a Form 1098 showing the refund in box 3. Generally,

A. You must include the refund in income in the year you receive it.
B. You must file an amended 1040X return for the year you took the deduction in.
C. You must include it in income only if the amount decreased your tax paid in the year of deduction.
D. None of the above.

19. You may be eligible for a credit if you were issued a mortgage credit certificate (MCC) from your state or local government. Generally,

A. An MCC is issued only in connection with a new mortgage for the purchase of a brand new home.
B. An MCC is issued only in connection with a new mortgage for the purchase of your main home.
C. An MCC is issued in connection with a first time buyer program purchase.
D. An MCC is issued only if you have filled out a form 8396 and attached it to your return.

20. If your mortgage loan amount is equal to (or smaller than) the certified indebtedness amount shown on your MCC,

A. Enter all the interest you paid on your mortgage during the year.
B. Figure the credit on only part of the interest you paid.
C. Multiply the total interest you paid during the year on your mortgage by a fraction.
D. The fraction will not change as long as you are entitled to take the mortgage interest credit.

21.  You can fully deduct points in the year paid if you meet certain tests. If you meet these tests, you can choose to either fully deduct the points in the year paid, or deduct them over the the life of the loan. Which of the following would disqualify points from being fully deductible in the year paid?

A. The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. 
B. The funds can be borrowed funds from the lender or mortgage broker.
C. You loan is secured by your main home (Your main home is the one you ordinarily live in most of the time).
D. You use the cash method of accounting.

22. What is not deductible as home mortgage interest?

A. Home mortgage interest that is secured by a debt.
B. Certain points and mortgage insurance premiums.
C. A debt secured solely because of a lien on your general assets or a security interest that attaches to the property without your consent.
D. All of the above.

23. Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. You can deduct home mortgage interest only if

A. You are legally liable for the loan and the mortgage is a secured debt on a qualified home in which you have an ownership interest.
B. There is a true debtor-creditor relationship between you and the lender.
C. You must file Form 1040 and itemized deductions on Schedule A (Form 1040) D. All of the above.

24. The term "points" is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. You generally cannot deduct the full amount of points in the year paid because they are prepaid interest, unless

A. Your home is secured by your main home (Your main home is the home you live in  most of the time).
B. Paying points is not an established business practice in the area where the loan was made.
C. The points paid were more than the points generally charged in that area.
D. All of the above.

25. If you and at least one more person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year,

A. You cannot deduct the mortgage interest because the person for whom it was reported has to report the interest.
B. You can take turns and alternate the reporting on interest expense each year.
C. Attach a statement to your return and report only the interest you paid, and give information for person who received the form and on line 11 print "See attached" next to the line.
D. To avoid complications, you should not report any mortgage interest for the years that both of you are on the loan documents.

26. You may be able to claim a mortgage interest credit if you were issued a mortgage interest credit certificate (MCC) by a state or local government. If you take this credit, you must

A. Not have Income from investing in properties.  
B. Figure the credit on Form 8102.
C. Reduce your mortgage interest deduction by the amount of the credit.
D. All of the above.

27. Which of the following would disqualify points from being fully deductible in the year paid?

A. The points were computed as a percentage of the principal amount of the mortgage.
B. The loan proceeds were used to purchase a second home.
C. The payment of points in common in your area.
D. The points are clearly stated on the settlement statement as points charged for the mortgage.

28. When you took out a $150,000 mortgage loan secured by your main home in December 2009,  you were charged two points ($2,000). You meet all the tests for deducting points in the year paid. Of which you paid $1,600 in December 2009 and the rest $400 in January 2010. How do you deduct your points paid?

A. You can fully deduct $2,000 in 2009 (in year paid) or over the life of your loan. 
B. You can deduct $400 in 2009; and $2,000 over the life of the mortgage.
C. You can deduct $1,600 in 2009; and $600  over the life of the mortgage.
D. None of the above.

29. Amounts charged by the lender for specific services connected to the loan are not interest. The following are examples of theses charges, except for

A. Appraisal fees.
B. Preparation costs for the mortgage note or deed of trust.
C. Notary fees.
D. Mortgage insurance premiums.

30. If you refinance your original mortgage loan on which you had been given an MCC,

A. The amount of credit you can claim on the new loan does not change.
B. You must get a new MCC to be able to claim the credit on the new loan.
C. Only keep claiming the MCC credit if the issue resissues an MCC after you refinance your mortgage.
D. You must attach a statement to Form 8396 showing the calculations for the old MCC was in effect.

31. You may be able to claim the first-time homebuyer credit if you are

A. A first-time homebuyer.
B. A long-time resident of the same main home.
C. Either A or B above.
D. A buyer of a brand new home.

32. You are considered a first-time homebuyer if

A. You purchased your main home located in the U.S. after December 31, 2008, and before 2010, or after April 30, 2010 and you entered into a binding contract before May 1, 2010 to purchase the property before July 1, 2010.
B. You (and your spouse if married) did not own any other main home during the 3-year period ending on the date of purchase.
C. You do not meet any of the conditions that prohibit you from claiming the credit.
D. All of the above.

33.  Generally, the first-time homebuyer credit is

A. $8,000 ($4,000 if married filing separately).
B. 10% of the purchase price of the home.
C. The smaller of A or B above.
D. $6,500 ($3,250 if married filing separately or 10% of the purchase price.

34. Generally, the first-time buyer credit for a long-time resident of the same main home is

A. $6,500 ($3,250 if married filing separately).
B. 10% of the purchase price of the home.
C. The smaller of A or B above.
D. $8,000 ($4,000 if married filing separately or 10% of the purchase price.

35. You cannot claim the first-time homebuyer credit if

A. The purchase price of the home is $500,000.
B. You are resident alien at any time during the year.
C. You acquired your home before November 6, 2009 from a person related to your spouse.
D. You acquired the home by gift or inheritance.

36. Basis is your starting point for figuring a gain or loss if you later sell your home, or for figuring depreciation if you later use part of your home for business purposes or for rent.

True False

37. If you took out a mortgage to finance the purchase of your home, you probably have to make monthly payments. The following costs are nondeductible expenses that may be included in your house payment.

A. Real estate taxes paid to the taxing authority.
B. Interest that qualifies as home mortgage interest.
C. Fire or homeowner's insurance premiums and any amount applied to reduce the principal of the mortgage.
D. All of the above.

38. You can deduct real estate taxes imposed on you. You must have paid them either at settlement or closing, or to a taxing authority either directly or through an escrow account during the year. If you own a cooperative apartment, you can deduct your share of the cooperative's deductible real estate taxes if

A. The corporation has many different classes of stock outstanding.
B. Each stockholder, solely because of ownership of the stock, can live in a house, apartment, or house trailer owned or leased by the corporation.
C. Stockholders can receive distributions out of capital.
D. All of the above.

39. If you elect to deduct the sales taxes paid on your home, or home building materials, you can include them as part of your cost basis in the home.

True False

40. Payments on nonredeemable ground rent are

A. Not mortgage interest and you can deduct them as rent only if they are business expense or if they are for rental property.
B. Mortgage interest if connect the purchase of a new home.
C. Mortgage interest and your can deduct them on Schedule A (Form 1040).
D. Considered real estate taxes because they are usually charged by a city or county (usually happens in states such as Maryland).