Exam 5: Introduction to Business Expenses

Henry owns a hardware store in Indianapolis.He has decided to expand his business interests and is considering opening a golf store in a neighboring town.He has incurred $12,000 of expenses investigating whether to open the new golf store.In July of the current year he finds the perfect location and opens the golf store on October 1.What amount of the investigation expenses can he deduct in the current year?

Which of the following people is currently engaged in a trade or business? I.Barry spends 4 hours a day 5 days a week managing his investment portfolio.He watches the market and buys and sells securities when he thinks the market is right.His investment strategy is to realize income from dividends and long-term gains from holding investments for appreciation in value. II.Jennifer is a full-time realtor,and she owns a house that she rents to Barry and his family for $900 a month.Jennifer provides for the repairs and maintenance of the house,and she stops by monthly to collect the rent and visit with Barry and his family. ​

Business expenses include I.expenditures that have a business purpose II.expenditures that are incurred for the production of income. ​

Which of the following payments are deductible? I.Wilcox pays $1,000 to run an add in the program of the state Independent Party convention II.Wilcox is in the construction business.In January,he sends his chief financial officer to Washington,D.C. ,to monitor current legislation affecting the real estate industry.Expenses totaled $2,100. III.In March,Wilcox personally travels to Washington,D.C. ,to testify before the banking subcommittee on the effects of proposed legislation on the construction industry.Expenses totaled $2,300. ​

Match the proper deduction method with the correct expenditures. -Start-up costs over $5,000.

Match the proper deduction method with the correct expenditures. -Betterment

Morgan,a banker,is an amateur photographer who takes pictures at weddings and parties.He earned $1,000 but incurred $1,200 in related expenses.Since he takes a standard deduction,he will have to include the $1,000 in income but will not get any benefit from the expenses.