Exam 6: Deductions and Losses: in General

What is the appropriate tax treatment for expenditures paid by a taxpayer for another's benefit?

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

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.

Sandra owns an insurance agency. The following selected data are taken from the agency balance sheet and income statement prepared using the accrual method.Calculate Sandra's net profit using the cash method for 2017.

Briefly discuss the two tests that an accrual basis taxpayer must apply before an expense can be deducted.

Trade and business expenses should be treated as:

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

If a vacation home is classified as primarily personal use, part of the maintenance and utility expenses can be allocated and deducted as a rental expense.

Benita incurred a business expense on December 10, 2017, which she charged on her bank credit card. She paid the credit card statement which included the charge on January 5, 2018. Which of the following is correct?

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.

Calculate the net income includible in taxable income for the following hobby:

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

For an activity classified as a hobby, the expenses are categorized as follows: (1) Amounts that affect adjusted basis and would be deductible under other Code sections if the activity had been engaged in for profit (e.g., depreciation, amortization, and depletion). (2) Amounts deductible under other Code sections without regard to the nature of the activity, such as property taxes and home mortgage interest. (3) Amounts deductible under other Code sections if the activity had been engaged in for profit, but only if those amounts do not affect adjusted basis (e.g., maintenance, utilities, and supplies). If these expenses exceed the gross income from the activity and are thus limited, the sequence in which they are deductible is:

Al is single, age 60, and has gross income of $140,000. His deductible expenses are as follows: ​ What is Al's AGI?

Which of the following may be deductible?

Andrew, who operates a laundry business, incurred the following expenses during the year. What amount can Andrew deduct for these expenses?

The amount of the addition to the reserve for bad debts for an accrual method taxpayer is allowed as a deduction for tax purposes, but is not allowed for a cash method taxpayer.

Beige, Inc., an airline manufacturer, is conducting negotiations for the sale of military aircraft. One negotiation is with a U.S. assistant secretary of defense. She can close the deal on the purchase of 50 attack helicopters if she is paid $750,000 under the table. Another negotiation is with the minister of defense of a third world country. To complete the sale of 20 jet fighters to his government, he demands that he be paid a $1 million grease payment. Beige makes the payments and closes the deals. How much of these payments are deductible by Beige, Inc.?

If a vacation home is determined to be a personal/rental use residence, which of the following statements is correct?

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