Exam 6: Deductions and Losses: in General

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:

Describe the circumstances under which a taxpayer can receive rent income from a personal residence but does not have to report it as gross income.

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:

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.

Under what circumstance can a bribe be deducted?

The cost of legal advice associated with the preparation of an individual's Federal income tax return that is paid in 2019 is not deductible because it is a personal expense.

Marsha is single, had gross income of $50,000, and incurred the following expenses: Charitable contribution \ 2,000 Taxes and interest on home 7,000 Legal fees incurred in a tax dispute 1,000 Medical expenses 3,000 Penalty on early withdrawal of savings 250 Her AGI is:

The period in which an accrual basis taxpayer can deduct an expense is determined by applying the economic performance and all events tests.

Legal fees incurred in connection with a criminal defense are not deductible even if the crime is associated with a trade or business.

Walter sells land with an adjusted basis of $175,000 and a fair market value of $160,000 to his mother, Shirley, for $160,000. Walter reinvests the proceeds in the stock market. Shirley holds the land for one year and a day and sells it in the marketplace for $169,000. a. Determine the tax consequences to Walter. b. Determine the tax consequences to Shirley.

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

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

Sandra sold 500 shares of Wren Corporation to Bob, her brother, for its fair market value. She had paid $26,000 for the stock. Calculate Sandra's and Bob's gain or loss under the following circumstances: a. Sandra sold the shares to Bob for $20,000. One year later, Bob sold them for $18,000. b. Sandra sold the shares to Bob for $30,000. One year later, Bob sold them for $27,000. c. Sandra sold the shares to Bob for $20,000. One year later, Bob sold them for $28,000.

LD Partnership, a cash basis taxpayer, purchases land and a building for $200,000 with $150,000 of the cost being allocated to the building. The gross receipts of the partnership are less than $100,000. LD must capitalize the $50,000 paid for the land but can deduct the $150,000 paid for the building in the current tax year.

Sammy, a calendar year cash basis taxpayer who is age 66, has the following transactions in 2019: Salary from job \ 90,000 Alimony received from ex-wife 10,000 Medical expenses 7,000 Based on this information, Sammy has:

For a vacation home to be classified in the primarily rental use category, what attributes must be present?

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

Which of the following is incorrect?

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:

Two-thirds of treble damage payments under the antitrust law are not deductible.