Evaluate Tax Implications Of Investments Practice Test

A taxpayer purchases a residential rental property for $500,000, allocating $380,000 to the building and $120,000 to land. The property generates $40,000 of rent and $16,000 of operating expenses (excluding depreciation). The taxpayer does not materially participate and has $3,000 of passive income from a publicly traded partnership, plus $160,000 of wages and $9,000 of qualified dividends. What are the tax implications of depreciation on a rental property?

A taxpayer is evaluating whether to contribute $10,000 to a traditional 401(k) or to a Roth 401(k). The taxpayer is currently in the 22% bracket, expects to be in the 12% bracket in retirement, and will invest in a broad-based stock mutual fund. The taxpayer also has a taxable account holding dividend-paying stocks and a bond fund generating interest income. Which retirement account option provides the best tax advantage given the individual's current tax bracket?