Petal, Inc.is an accrual basis taxpayer.Petal uses the aging approach to calculate the reserve for bad debts.During 2019, the following associated with bad debts occur . \[\begin{array} { l r } \text { Credit sales } & \$ 400,000 \\ \text { Collections on credit sales } & 250,000 \\ \text { Amount added to the reserve } & 10,000 \\ \text { Beginning balance in the reserve } & - 0 - \\ \text { Identifiable bad debts during 2019 } & 12,000 \end{array}\] The amount of the deduction for bad debt expense for Petal for 2019 is:

A) $10,000. B) $12,000. C) $22,000. D) $140,000. E) None of these. A) $10,000. B) $12,000. C) $22,000. D) $140,000. E) None of these.

Bob and April own a house at the beach.The house was rented to unrelated parties for eight weeks during the year. April and the children used the house 12 days for their vacation during the year.After properly dividing the expenses between rental and personal use, it was determined that a loss was incurred as follows: $\begin{array}{lll} \text { Gross rental income } & & \$ 4,000 \\ \text { Less: Mortgage interest and property taxes } & \$ 3,500 & \\ \text { Other allocated expenses } & \underline{2,000} & \underline{(5,500)} \\ \text { Net rental loss } & &\underline{ \underline{(\$ 1,500)}} \\ \end{array}$ What is the correct treatment of the rental income and expenses on Bob and April's joint income tax return for the current year assuming the IRS approach is used if applicable?

A) A $1,500 loss should be reported. B) Only the mortgage interest and property taxes should be deducted. C) Since the house was used more than 10 days personally by Bob and April, the rental expenses (other than mortgage interest and property taxes) are limited to the gross rental income in excess of deductions for interest and taxes allocated to the rental use. D) Since the house was used less than 50% personally by Bob and April, all expenses allocated to personal use may be deducted. E) Bob and April should include none of the rental income or expenses related to the beach house in their current year income tax return. A) A $1,500 loss should be reported. B) Only the mortgage interest and property taxes should be deducted. C) Since the house was used more than 10 days personally by Bob and April, the rental expenses (other than mortgage interest and property taxes) are limited to the gross rental income in excess of deductions for interest and taxes allocated to the rental use. D) Since the house was used less than 50% personally by Bob and April, all expenses allocated to personal use may be deducted. E) Bob and April should include none of the rental income or expenses related to the beach house in their current year income tax return.

Tom operates an illegal drug-running operation and incurred the following expenses: \[\begin{array} { l r } \text { Salaries } & \$ 75,000 \\ \text { Illegal kickbacks } & 20,000 \\ \text { Bribes to border guards } & 25,000 \\ \text { Cost of goods sold } & 160,000 \\ \text { Rent } & 8,000 \\ \text { Interest } & 10,000 \\ \text { Insurance on furniture and fixtures } & 6,000 \\ \text { Utilities and telephone } & 20,000 \end{array}\] Which of the following amounts reduces his taxable income?

A) $119,000. B) $160,000. C) $279,000. D) $324,000. E) None of these. A) $119,000. B) $160,000. C) $279,000. D) $324,000. E) None of these.

During the year, Rita rented her vacation home for 12 days for $2,400 and she used it personally for three months. The following expenses were incurred on the home: \[\begin{array} { l r } \text { Property taxes } & \$ 2,200 \\ \text { Mortgage interest } & 10,800 \\ \text { Utilities and maintenance } & 1,900 \\ \text { Depreciation } & 5,000 \\ \text { Insurance } & 900 \end{array}\] Calculate her rental gain or loss and itemized deductions.

Rita excludes the $2,400 of rental incom

Velma and Bud divorced.Velma's attorney fee of $5,000 is allocated as follows: \[\begin{array} { l r } \text { General representation in obtaining the divorce } & \$ 1,500 \\ \text { Services in obtaining custody of the child } & 900 \\ \text { Services in settlement of martial property } & 600 \\ \text { Determining the tax consequences of: } \\ \quad \text { Dependency deduction for child } & 700 \\ \text { Tax Consequences of property settlement } & 1,300 \end{array}\] Of the $5,000 Velma pays to her attorney in 2019, the amount she may deduct as an itemized deduction is:

A) $0. B) $700. C) $2,000. D) $5,000. E) None of these. A) $0. B) $700. C) $2,000. D) $5,000. E) None of these.

Cory incurred and paid the following expenses in 2019: \[\begin{array} { l r } \text { Tax return preparation fee } & \$ 600 \\ \text { Moving expenses } & 2,000 \\ \text { Investment expenses } & 500 \\ \text { Expenses associated with rental property } & 1,500 \\ \text { Interest expense associated with loan to finance tax-exempt bonds } & 400 \end{array}\] Calculate the amount that Cory can deduct (before any percentage limitations).

A) $5,000. B) $4,600. C) $3,000. D) $1,500. E) None of these. A) $5,000. B) $4,600. C) $3,000. D) $1,500. E) None of these.

Exam 6: Deductions and Losses: in General

Agnes operates a Christmas shop in Atlantic City, NJ.She makes a weekend trip to Vero Beach, FL, for the purpose of determining the feasibility of opening another shop.Her travel expenses are $2,000 (includes $500 for meals).In addition, she pays $5,000 to a market research firm in Vero Beach to prepare a feasibility study.Determine the amount of the expenses that Agnes can deduct if: a. She opens a new shop in Vero Beach. b. She decides not to open a new shop in Vero Beach.

(Essay)

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Question 41

Which of the following is not deductible in 2018?

(Multiple Choice)

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Question 42

Petal, Inc.is an accrual basis taxpayer.Petal uses the aging approach to calculate the reserve for bad debts.During 2019, the following associated with bad debts occur . Credit sales \ 400,000 Collections on credit sales 250,000 Amount added to the reserve 10,000 Beginning balance in the reserve -0- Identifiable bad debts during 2019 12,000 The amount of the deduction for bad debt expense for Petal for 2019 is:

(Multiple Choice)

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Question 43

Jacques, who is not a U.S.citizen, makes a contribution to the campaign of a candidate for governor.Cassie, a U.S.citizen, also makes a contribution to the same campaign fund.If contributions by noncitizens are illegal under state law, the contribution by Cassie is deductible while that by Jacques is not.

(True/False)

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Question 44

Which of the following is a required test for the deduction of a business expense?

(Multiple Choice)

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Question 45

If a publicly traded corporation hires a new CEO in 2019 and she earns $12,000,000 from a performance-based compensation plan, the corporation can deduct the entire $12,000,000.

(True/False)

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Question 46

Bob and April own a house at the beach.The house was rented to unrelated parties for eight weeks during the year. April and the children used the house 12 days for their vacation during the year.After properly dividing the expenses between rental and personal use, it was determined that a loss was incurred as follows: Gross rental income \ 4,000 Less: Mortgage interest and property taxes \ 3,500 Other allocated expenses Net rental loss What is the correct treatment of the rental income and expenses on Bob and April's joint income tax return for the current year assuming the IRS approach is used if applicable?

(Multiple Choice)

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Question 47

Deductions are allowed unless a specific provision in the tax law provides otherwise.

(True/False)

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Question 48

Section 212 expenses that are related to rent and royalty income are deductions for AGI.

(True/False)

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Question 49

Tom operates an illegal drug-running operation and incurred the following expenses: Salaries \ 75,000 Illegal kickbacks 20,000 Bribes to border guards 25,000 Cost of goods sold 160,000 Rent 8,000 Interest 10,000 Insurance on furniture and fixtures 6,000 Utilities and telephone 20,000 Which of the following amounts reduces his taxable income?

(Multiple Choice)

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Question 50

Alfred's Enterprises, an unincorporated entity, pays employee salaries of $100,000 during the year.At the end of the year, $12,000 of additional salaries have been earned but not paid until the beginning of the next year. a.Determine the amount of the deduction for salaries if Alfred is a cash method taxpayer. b.Determine the amount of the deduction for salaries if Alfred is an accrual method taxpayer.

(Essay)

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Question 51

During the year, Rita rented her vacation home for 12 days for $2,400 and she used it personally for three months. The following expenses were incurred on the home: Property taxes \ 2,200 Mortgage interest 10,800 Utilities and maintenance 1,900 Depreciation 5,000 Insurance 900 Calculate her rental gain or loss and itemized deductions.

(Essay)

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Question 52

The income of a sole proprietorship is reported on Schedule C (Profit or Loss from Business).

(True/False)

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Question 53

If an activity involves horses, a profit in at least two of seven consecutive years meets the presumptive rule of § 183.

(True/False)

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Question 54

Velma and Bud divorced.Velma's attorney fee of $5,000 is allocated as follows: General representation in obtaining the divorce \ 1,500 Services in obtaining custody of the child 900 Services in settlement of martial property 600 Determining the tax consequences of: Dependency deduction for child 700 Tax Consequences of property settlement 1,300 Of the $5,000 Velma pays to her attorney in 2019, the amount she may deduct as an itemized deduction is:

(Multiple Choice)

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Question 55

Iris, a calendar year cash basis taxpayer, owns and operates several TV rental outlets in Florida and wants to expand to other states.During 2019, she spends $14,000 to investigate TV rental stores in South Carolina and $9,000 to investigate TV rental stores in Georgia.She acquires the South Carolina operations but not the outlets in Georgia.As to these expenses, Iris should:

(Multiple Choice)

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Question 56

Aaron, a shareholder-employee of Pigeon, Inc., receives a $300,000 salary.The IRS classifies $100,000 of this amount as unreasonable compensation.The effect of this reclassification is to decrease Aaron's gross income by $100,000 and increase Pigeon's gross income by $100,000.

(True/False)

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Question 57

Susan is a sales representative for a U.S.weapons manufacturer.She makes a $100,000 "grease" payment to a U.S.government official associated with a weapons purchase by the U.S.Army.She makes a similar payment to a Saudi Arabian government official associated with a similar sale.Neither of these payments is deductible by Susan's employer.

(True/False)

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Question 58

Cory incurred and paid the following expenses in 2019: Tax return preparation fee \ 600 Moving expenses 2,000 Investment expenses 500 Expenses associated with rental property 1,500 Interest expense associated with loan to finance tax-exempt bonds 400 Calculate the amount that Cory can deduct (before any percentage limitations).

(Multiple Choice)

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Question 59

None of the prepaid rent paid on September 1 by a calendar year cash basis taxpayer for the next 18 months is deductible in the current period.

(True/False)

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Question 60

Showing 41 - 60 of 108

Which of the following is not deductible in 2018?

Which of the following is a required test for the deduction of a business expense?

If a publicly traded corporation hires a new CEO in 2019 and she earns $12,000,000 from a performance-based compensation plan, the corporation can deduct the entire $12,000,000.

Deductions are allowed unless a specific provision in the tax law provides otherwise.

Section 212 expenses that are related to rent and royalty income are deductions for AGI.

The income of a sole proprietorship is reported on Schedule C (Profit or Loss from Business).

If an activity involves horses, a profit in at least two of seven consecutive years meets the presumptive rule of § 183.

Aaron, a shareholder-employee of Pigeon, Inc., receives a $300,000 salary.The IRS classifies $100,000 of this amount as unreasonable compensation.The effect of this reclassification is to decrease Aaron's gross income by $100,000 and increase Pigeon's gross income by $100,000.

None of the prepaid rent paid on September 1 by a calendar year cash basis taxpayer for the next 18 months is deductible in the current period.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Tax Formula and Tax Determination an Overview of Property Transactions

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed-Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Alternative Minimum Tax

Tax Credits and Payment Procedures

Property Transactions: Determination of Gain or Loss and Basic Considerations

Property Transactions: Nontaxable Exchanges

Property Transactions: Capital Gains and Losses

Property Transactions: Section 1231 and Recapture Provisions

Accounting Periods and Methods

Deferred Compensation

Corporations and Partnerships

Filters