Question 1

Purchased goodwill must be capitalized but can be amortized over a 60-month period.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not relevant in determining whether an activity is profit seeking or a hobby?

Accepted Answer

A) Whether the activity is enjoyed by the taxpayer. 
B) The expertise of the taxpayers or their advisers. 
C) The time and effort expended. 
D) The relationship of profits earned and losses incurred. 
E) All of these are relevant factors. 
A) Whether the activity is enjoyed by the taxpayer. 
B) The expertise of the taxpayers or their advisers. 
C) The time and effort expended. 
D) The relationship of profits earned and losses incurred. 
E) All of these are relevant factors.

Question 3

The portion of a shareholder-employee's salary that is classified as unreasonable has no effect on the amount of the shareholder-employee's gross income but results in an increase in the taxable income of the corporation.

Accepted Answer

A) True 
 B)False

Question 4

Marge sells land to her adult son, Jason, for its $20,000 appraised value.Her adjusted basis for the land is $25,000.
Marge's recognized loss is $5,000, and Jason's adjusted basis for the land is $25,000 ($20,000 cost + $5,000 recognized lossof Marge).

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a related party for constructive ownership purposes under § 267?

Accepted Answer

A) The taxpayer's aunt. 
B) The taxpayer's brother. 
C) The taxpayer's grandmother. 
D) A corporation owned more than 50% by the taxpayer. 
E) None of these. 
A) The taxpayer's aunt. 
B) The taxpayer's brother. 
C) The taxpayer's grandmother. 
D) A corporation owned more than 50% by the taxpayer. 
E) None of these.

Question 6

The legal cost of having a will prepared is not deductible.

Accepted Answer

A) True 
 B)False

Question 7

Investment related expenses, such as paying a fee to an investment manager, generally are deductions from adjusted gross income in 2019.

Accepted Answer

A) True 
 B)False

Question 8

Al is single, age 60, and has gross income of $140,000.His deductible expenses are as follows: $$\begin{array} { l r } 
\text { Alimony(divorce finalized in 2017) } & \$ 20,000 \
\text { Charitable contributions } & 4,000 \
\text { Contribution to a traditional IRA } & 5,500 \
\text { Expenses paid on rental property } & 7,500 \
\text { Interest on home mortgage and property taxes on personal residence } & 7,200 \
\text { State income tax } & 2,200
\end{array}$$ What is Al's AGI?

Accepted Answer

A) $94,100. 
B) $103,000. 
C) $107,000. 
D) $127,000. 
E) None of these. 
A) $94,100. 
B) $103,000. 
C) $107,000. 
D) $127,000. 
E) None of these.

Question 9

Rex, a cash basis calendar year taxpayer, runs a bingo operation that is illegal under state law.During 2019, a bill designated H.R.9 is introduced into the state legislature, which, if enacted, would legitimize bingo games.In 2019, Rex had the following expenses: $$\begin{array} { l r } 
\text { Operating expenses in conducting bingo games } & \$ 247,000 \
\text { Payoff money to state and local police } & 24,000 \
\text { Newspaper ads supporting H.R. } 9 & 3,000 \
\text { Political contributions to legislators who support H.R. 9 } & 8,000
\end{array}$$ Of these expenditures, Rex may deduct:

Accepted Answer

A) $247,000. 
B) $250,000. 
C) $258,000. 
D) $282,000. 
E) None of these. 
A) $247,000. 
B) $250,000. 
C) $258,000. 
D) $282,000. 
E) None of these.

Question 10

Which of the following may be deductible in 2019?

Accepted Answer

A) Bribes that relate to a U.S.business. 
B) Fines paid for violations of the law. 
C) Interest on a loan used in a hobby. 
D) All of these. 
E) None of these. 
A) Bribes that relate to a U.S.business. 
B) Fines paid for violations of the law. 
C) Interest on a loan used in a hobby. 
D) All of these. 
E) None of these.

Question 11

Rachel operates a sole proprietorship that earns $200,000 of qualified business income after deducting salaries of $60,000.The sole proprietorship is not a specified service business.She files a single tax return for 2019.Assume her taxable income before the QBI deduction is $230,000.Rachel's QBI deduction for 2019 is:

Accepted Answer

A) $-0-. 
B) $30,000. 
C) $35,000. 
D) $46,000. 
E) $52,000. 
A) $-0-. 
B) $30,000. 
C) $35,000. 
D) $46,000. 
E) $52,000.

Question 12

All domestic bribes (i.e., to a U.S.official) are disallowed as deductions.

Accepted Answer

A) True 
 B)False

Question 13

Kitty runs a brothel (illegal under state law) and has the following items of income and expense.What is the amount that she must include in taxable income from her operation? $$\begin{array} { l l r } 
\text { Income } & & \$ 200,000 \
\text { Expenses: } & & \
& \text { Rent } & 8,000 \
& \text { Utilities } & 2,000 \
& \text { Bribes to police } & 10,000 \
& \text { Office supplies } & 5,000 \
& \text { Legal fees } & 20,000 \
& \text { Depreciation } & 14,000 \
& \text { Illegal kickbacks } & 15,000
\end{array}$$

Accepted Answer

@#LAT-DLM& The bribes to polic

Question 14

Payments by a cash basis taxpayer of capital expenditures:

Accepted Answer

A) Must be expensed at the time of payment. 
B) Must be expensed by the end of the first year after the asset is acquired. 
C) Must be deducted over the actual or statutory life of the asset. 
D) Can be deducted in the year the taxpayer chooses. 
E) None of these. 
A) Must be expensed at the time of payment. 
B) Must be expensed by the end of the first year after the asset is acquired. 
C) Must be deducted over the actual or statutory life of the asset. 
D) Can be deducted in the year the taxpayer chooses. 
E) None of these.

Question 15

Only under limited circumstances can a loss on the sale of a personal use asset be deducted.

Accepted Answer

A) True 
 B)False

Question 16

A baseball team that pays a star player an annual salary of $25 million can deduct the entire $25 million as salary expense.If the same amount is paid to the CEO of IBM, only $1 million is deductible.

Accepted Answer

A) True 
 B)False

Question 17

Beulah's personal residence has an adjusted basis of $450,000 and a fair market value of $390,000.Beulah converts the property to rental use this year.The vacation home rules that limit the amount of the deduction to the rental income will apply and the adjusted basis for depreciation is $390,000.

Accepted Answer

A) True 
 B)False

Question 18

Generally, a closely held family corporation is not permitted to take a deduction for a salary paid to a family member in calculating corporate taxable income.

Accepted Answer

A) True 
 B)False

Question 19

An expense need not be recurring in order to be "ordinary."

Accepted Answer

A) True 
 B)False

Question 20

For purposes of the § 267 loss disallowance provision, a taxpayer's aunt is a related party.

Accepted Answer

A) True 
 B)False

Purchased goodwill must be capitalized but can be amortized over a 60-month period.

Which of the following is not relevant in determining whether an activity is profit seeking or a hobby?

The portion of a shareholder-employee's salary that is classified as unreasonable has no effect on the amount of the shareholder-employee's gross income but results in an increase in the taxable income of the corporation.

Marge sells land to her adult son, Jason, for its $20,000 appraised value.Her adjusted basis for the land is $25,000. Marge's recognized loss is $5,000, and Jason's adjusted basis for the land is $25,000 ($20,000 cost + $5,000 recognized lossof Marge).

Which of the following is not a related party for constructive ownership purposes under § 267?

The legal cost of having a will prepared is not deductible.

Investment related expenses, such as paying a fee to an investment manager, generally are deductions from adjusted gross income in 2019.

Which of the following may be deductible in 2019?

All domestic bribes (i.e., to a U.S.official) are disallowed as deductions.

Payments by a cash basis taxpayer of capital expenditures:

Only under limited circumstances can a loss on the sale of a personal use asset be deducted.

A baseball team that pays a star player an annual salary of $25 million can deduct the entire $25 million as salary expense.If the same amount is paid to the CEO of IBM, only $1 million is deductible.

Beulah's personal residence has an adjusted basis of $450,000 and a fair market value of $390,000.Beulah converts the property to rental use this year.The vacation home rules that limit the amount of the deduction to the rental income will apply and the adjusted basis for depreciation is $390,000.

Generally, a closely held family corporation is not permitted to take a deduction for a salary paid to a family member in calculating corporate taxable income.

An expense need not be recurring in order to be "ordinary."

For purposes of the § 267 loss disallowance provision, a taxpayer's aunt is a related party.

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

Exam 6: Deductions and Losses: in General

Purchased goodwill must be capitalized but can be amortized over a 60-month period.

Which of the following is not relevant in determining whether an activity is profit seeking or a hobby?

The portion of a shareholder-employee's salary that is classified as unreasonable has no effect on the amount of the shareholder-employee's gross income but results in an increase in the taxable income of the corporation.

Marge sells land to her adult son, Jason, for its $20,000 appraised value.Her adjusted basis for the land is $25,000. Marge's recognized loss is $5,000, and Jason's adjusted basis for the land is $25,000 ($20,000 cost + $5,000 recognized lossof Marge).

Which of the following is not a related party for constructive ownership purposes under § 267?

The legal cost of having a will prepared is not deductible.

Investment related expenses, such as paying a fee to an investment manager, generally are deductions from adjusted gross income in 2019.

Which of the following may be deductible in 2019?

All domestic bribes (i.e., to a U.S.official) are disallowed as deductions.

Payments by a cash basis taxpayer of capital expenditures:

Only under limited circumstances can a loss on the sale of a personal use asset be deducted.

A baseball team that pays a star player an annual salary of $25 million can deduct the entire $25 million as salary expense.If the same amount is paid to the CEO of IBM, only $1 million is deductible.

Beulah's personal residence has an adjusted basis of $450,000 and a fair market value of $390,000.Beulah converts the property to rental use this year.The vacation home rules that limit the amount of the deduction to the rental income will apply and the adjusted basis for depreciation is $390,000.

Generally, a closely held family corporation is not permitted to take a deduction for a salary paid to a family member in calculating corporate taxable income.

An expense need not be recurring in order to be "ordinary."

For purposes of the § 267 loss disallowance provision, a taxpayer's aunt is a related party.

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