Question 1

In applying the $1 million limit on deducting executive compensation,what corporations are subject to the deduction limit? What executives are covered?

Accepted Answer

The $1 million limit on deducting the compensation of a covered executive applies to corporations that have at least one class of stock registered under the Securities Exchange Act of 1934.Covered employees include the chief (or principal) executive officer,the chief (or principal) financial officer,and the three other most highly compensated officers.

Question 2

A taxpayer's note or promise to pay satisfies the "actually paid" requirement for the cash basis method of accounting.

Accepted Answer

A) True 
 B)False  False

Question 3

Robyn rents her beach house for 60 days and uses it for personal use for 30 days during the year.The rental income is $6,000 and the expenses are as follows: Mortgage interest $9,000 Real estate taxes 3,000 Utilities 2,000 Maintenance 1,000 Insurance 500 Depreciation (rental part) 4,000 ​ Using the IRS approach,total expenses that Robyn can deduct on her tax return associated with the beach house are:

Accepted Answer

A) $0. 
B) $6,000. 
C) $8,000. 
D) $12,000. 
E) None of the above. 
A) $0. 
B) $6,000. 
C) $8,000. 
D) $12,000. 
E) None of the above. D

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 gain of Marge).

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Legal expenses incurred in connection with rental property are deductions from AGI.

Accepted Answer

A) True 
 B)False

Question 7

If a taxpayer can satisfy the three-out-of-five year presumption test associated with hobby losses,then expenses from the activity can be deducted in excess of the gross income from the activity.

Accepted Answer

A) True 
 B)False

Question 8

How can an individual's consultation with a lawyer be classified as a deduction for AGI in some cases and a deduction from AGI in other instances?

Accepted Answer

Legal expenses are deductible when they

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements is correct in connection with the investigation of a business?

Accepted Answer

A) If the taxpayer is not already engaged in the trade or business,the expenses incurred are deductible if the project is abandoned. 
B) If the business is acquired,the expenses may be deducted immediately by a taxpayer engaged in a similar trade or business regardless of whether the business being investigated is acquired. 
C) That business must be related to the taxpayer's present business for any expense ever to be deductible. 
D) Regardless of whether the taxpayer is already engaged in the trade or business,the expenses must be capitalized and amortized. 
E) None of the above. 
A) If the taxpayer is not already engaged in the trade or business,the expenses incurred are deductible if the project is abandoned. 
B) If the business is acquired,the expenses may be deducted immediately by a taxpayer engaged in a similar trade or business regardless of whether the business being investigated is acquired. 
C) That business must be related to the taxpayer's present business for any expense ever to be deductible. 
D) Regardless of whether the taxpayer is already engaged in the trade or business,the expenses must be capitalized and amortized. 
E) None of the above.

Question 11

The Code does not specifically define what constitutes a trade or business.

Accepted Answer

A) True 
 B)False

Question 12

Alice incurs qualified moving expenses of $12,000.If she is reimbursed by her employer,the deduction is classified as a deduction for AGI.If not reimbursed,the deduction is classified as an itemized deduction.

Accepted Answer

A) True 
 B)False

Question 13

During the year,Rita rented her vacation home for twelve 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.

Accepted Answer

Rita excludes the $2,400 of rental incom

Question 14

Bruce owns several sole proprietorships.Must Bruce use the same accounting method for each of these businesses?

Accepted Answer

No.If a taxpayer owns multiple

Question 15

Why are there restrictions on the recognition of gains and losses resulting from transactions between related parties?

Accepted Answer

Sham transactions can be structured betw

Question 16

Cory incurred and paid the following expenses: 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).

Accepted Answer

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

Question 17

Under what circumstance can a bribe be deducted?

Accepted Answer

Bribes paid to a domestic official are d

Question 18

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.

Accepted Answer

A) True 
 B)False

Question 19

A hobby activity can result in all of the hobby income being included in AGI and no deductions being allowed.

Accepted Answer

A) True 
 B)False

Question 20

Iris,a calendar year cash basis taxpayer,owns and operates several TV rental outlets in Florida,and wants to expand to other states.During 2015,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:

Accepted Answer

A) Capitalize $14,000 and not deduct $9,000. 
B) Expense $23,000 for 2015. 
C) Expense $9,000 for 2015 and capitalize $14,000. 
D) Capitalize $23,000. 
E) None of the above. 
A) Capitalize $14,000 and not deduct $9,000. 
B) Expense $23,000 for 2015. 
C) Expense $9,000 for 2015 and capitalize $14,000. 
D) Capitalize $23,000. 
E) None of the above.

Exam 6: Deductions and Losses: in General

In applying the $1 million limit on deducting executive compensation,what corporations are subject to the deduction limit? What executives are covered?

A taxpayer's note or promise to pay satisfies the "actually paid" requirement for the cash basis method of accounting.

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 gain of Marge).

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

Legal expenses incurred in connection with rental property are deductions from AGI.

If a taxpayer can satisfy the three-out-of-five year presumption test associated with hobby losses,then expenses from the activity can be deducted in excess of the gross income from the activity.

How can an individual's consultation with a lawyer be classified as a deduction for AGI in some cases and a deduction from AGI in other instances?

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

Which of the following statements is correct in connection with the investigation of a business?

The Code does not specifically define what constitutes a trade or business.

Alice incurs qualified moving expenses of $12,000.If she is reimbursed by her employer,the deduction is classified as a deduction for AGI.If not reimbursed,the deduction is classified as an itemized deduction.

Bruce owns several sole proprietorships.Must Bruce use the same accounting method for each of these businesses?

Why are there restrictions on the recognition of gains and losses resulting from transactions between related parties?

Under what circumstance can a bribe be deducted?

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.

A hobby activity can result in all of the hobby income being included in AGI and no deductions being allowed.

An Introduction to Taxation and Understanding the Tax Law

Working With the Tax Law

Computing the Tax

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

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxabl

Property Transactions: Capital Gains and Losses, section 1231 and Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

Family Tax Planning

Income Taxation of Trusts and Estates

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