Question 1

Which of the following is not deductible?

Accepted Answer

A) Moving expenses in excess of reimbursement. 
B) Tax return preparation fees of an individual. 
C) Expenses incurred associated with investments in stocks and bonds. 
D) Allowable hobby expenses in excess of hobby income. 
E) None of the above. 
A) Moving expenses in excess of reimbursement. 
B) Tax return preparation fees of an individual. 
C) Expenses incurred associated with investments in stocks and bonds. 
D) Allowable hobby expenses in excess of hobby income. 
E) None of the above.

Question 2

The cash method can be used even if inventory and cost of goods sold are an income producing factor in the business.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not a "trade or business" expense?

Accepted Answer

A) Interest on business indebtedness. 
B) Property taxes on business property. 
C) Parking ticket paid on business auto. 
D) Depreciation on business property. 
E) All of the above are "trade or business" expenses. 
A) Interest on business indebtedness. 
B) Property taxes on business property. 
C) Parking ticket paid on business auto. 
D) Depreciation on business property. 
E) All of the above are "trade or business" expenses.

Question 4

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.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

If a vacation home is rented for less than 15 days during a year,the only expenses that can be deducted are mortgage interest,property taxes,and personal casualty losses.

Accepted Answer

A) True 
 B)False

Question 7

Martha rents part of her personal residence in the summer for 3 weeks for $3,000.Anne rents all of her personal residence for one week in December for $2,500.Anne is not required to include the $2,500 in her gross income whereas Martha is required to include the $3,000 in her gross income.

Accepted Answer

A) True 
 B)False

Question 8

During the year,Martin rented his vacation home for three months and spent one month there.Gross rental income from the property was $5,000.Martin incurred the following expenses: mortgage interest,$3,000;real estate taxes,$1,500;utilities,$800;maintenance,$500;and depreciation,$4,000.Compute Martin's allowable deductions for the vacation home under the court's approach and the IRS's approach.

Accepted Answer

Since the vacation home is rented for 15

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

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.

Accepted Answer

If the personal residence is r

Question 11

If part of a shareholder/employee's salary is classified as unreasonable,determine the effect on the:
a.Shareholder/employee's gross income.
b.Corporation's taxable income.

Accepted Answer

a.The reclassification of part of a shar

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Are all personal expenses disallowed as deductions?

Accepted Answer

No.Selected personal expenses can be ded

Question 14

Melba incurred the following expenses for her dependent daughter during the current year:
Payment of principal on daughter's automobile loan
$3,600
Payment of interest on above loan
2,900
Payment of daughter's property taxes
1,800
Payment of principal on daughter's personal residence loan
2,800
Payment of interest on daughter's personal residence loan
7,000
​
How much may Melba deduct in computing her itemized deductions?

Accepted Answer

A) $0. 
B) $8,800. 
C) $11,700. 
D) $18,100. 
E) None of the above. 
A) $0. 
B) $8,800. 
C) $11,700. 
D) $18,100. 
E) None of the above.

Question 15

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.

Accepted Answer

a.​
Because Agnes is already in the Chri

Question 16

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

Question 17

While she was a college student,Angel lived by a bookstore located near campus.She thinks a bookstore located on the other side of campus would be successful.She incurs expenses of $42,800 (legal fees,accounting fees,marketing survey,etc. )in exploring its business potential.Her parents have agreed to loan her the money required to start the business.What amount of these investigation costs can Angel deduct if:
a.She opens the bookstore on August 1,2016.
b.She decides not to open the bookstore.

Accepted Answer

a.If Angel opens the bookstore on August

Question 18

Only some employment related expenses are classified as deductions for AGI.

Accepted Answer

A) True 
 B)False

Question 19

What losses are deductible by an individual taxpayer?

Accepted Answer

Generally deductible losses of individua

Question 20

Bob and April own a house at the beach.The house was rented to unrelated parties for 8 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
2,000
(5,500)
Net rental loss
($1,500)
​
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?

Accepted Answer

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 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 income or expenses related to the beach house in their current year income tax return.

Which of the following is not deductible?

The cash method can be used even if inventory and cost of goods sold are an income producing factor in the business.

Which of the following is not a "trade or business" expense?

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.

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

If a vacation home is rented for less than 15 days during a year,the only expenses that can be deducted are mortgage interest,property taxes,and personal casualty losses.

Martha rents part of her personal residence in the summer for 3 weeks for $3,000.Anne rents all of her personal residence for one week in December for $2,500.Anne is not required to include the $2,500 in her gross income whereas Martha is required to include the $3,000 in her gross income.

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

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.

If part of a shareholder/employee's salary is classified as unreasonable,determine the effect on the: a.Shareholder/employee's gross income. b.Corporation's taxable income.

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

Are all personal expenses disallowed as deductions?

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

Only some employment related expenses are classified as deductions for AGI.

What losses are deductible by an individual taxpayer?

An Introduction to Taxation and Understanding the Federal 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

Deduction and Losses Certain Itemized Deductions

Investor Losses

Alternative Minimum Tax

Tax Credits and Payment Procedures

Property Transactions Determination of Gain and 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

Which of the following is not deductible?

The cash method can be used even if inventory and cost of goods sold are an income producing factor in the business.

Which of the following is not a "trade or business" expense?

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.

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

If a vacation home is rented for less than 15 days during a year,the only expenses that can be deducted are mortgage interest,property taxes,and personal casualty losses.

Martha rents part of her personal residence in the summer for 3 weeks for $3,000.Anne rents all of her personal residence for one week in December for $2,500.Anne is not required to include the $2,500 in her gross income whereas Martha is required to include the $3,000 in her gross income.

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

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.

If part of a shareholder/employee's salary is classified as unreasonable,determine the effect on the: a.Shareholder/employee's gross income. b.Corporation's taxable income.

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

Are all personal expenses disallowed as deductions?

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

Only some employment related expenses are classified as deductions for AGI.

What losses are deductible by an individual taxpayer?

An Introduction to Taxation and Understanding the Federal 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

Deduction and Losses Certain Itemized Deductions

Investor Losses

Alternative Minimum Tax

Tax Credits and Payment Procedures

Property Transactions Determination of Gain and 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