Exam 6: Deductions and Losses in General

Priscella pursued a hobby of making bedspreads in her spare time.Her AGI before considering the hobby is $40,000.During the year she sold the bedspreads for $10,000.She incurred expenses as follows: Supplies $4,000 Interest on loan to get business started 500 Advertising 6,500 ​ Assuming that the activity is deemed a hobby,how should she report these items on her tax return?

Which of the following is a deduction for AGI (itemized deduction)?

The portion of property tax on a vacation home that is attributable to personal use is an itemized deduction.

If a taxpayer operated an illegal business (not drug trafficking),what expenses can be deducted and what expenses are disallowed?

Andrew,who operates a laundry business,incurred the following expenses during the year. ∙ Parking ticket of $250 for one of his delivery vans that parked illegally. ∙ Parking ticket of $75 when he parked illegally while attending a rock concert in Tulsa. ∙ DUI ticket of $500 while returning from the rock concert. ∙ Attorney's fee of $600 associated with the DUI ticket. What amount can Andrew deduct for these expenses?

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

Hobby activity expenses are deductible from AGI to the extent of hobby income.Such expenses not in excess of hobby income are not subject to the 2%-of-AGI floor.

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.

Marvin spends the following amounts on a house he owns: Repair to roof $1,100 Carpeting for the living room 1,200 Painting of the exterior 4,000 Replacement of front door 800 ​ a.How much of these expenses can Marvin deduct if the house is his principal residence? b.How much of these expenses can Marvin deduct if he rents the house to a tenant? c.Classify any deductible expenses as deductions for AGI or as deductions from AGI.

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

Abner contributes $2,000 to the campaign of the Tea Party candidate for governor,$1,000 to the campaign of the Tea Party candidate for senator,and $500 to the campaign of the Tea Party candidate for mayor.Can Abner deduct these political contributions?

What are the relevant factors to be considered in determining whether an activity is profit-seeking or a hobby?

If a taxpayer operates an illegal business,no deductions are permitted.

Are there any exceptions to the rule that personal expenditures cannot be deducted?

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

Payments by a cash basis taxpayer of capital expenditures:

Expenses incurred for the production or collection of income generally are deductions from adjusted gross income.

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?

Tommy,an automobile mechanic employed by an auto dealership,is considering opening a fast food franchise.If Tommy decides not to acquire the fast food franchise,any investigation expenses are:

A vacation home at the beach which is rented for 200 days and used personally for 16 days is classified in the personal/rental use category.