Question 1

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.

Accepted Answer

A) True 
 B)False  False

Question 2

A football team that pays a star player an annual salary of $20 million can deduct the entire $20 million as salary expense.If the same amount is paid to the CEO of IBM, only $1 million is deductible.

Accepted Answer

A) True 
 B)False  True

Question 3

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

Accepted Answer

A) True 
 B)False  True

Question 4

During the year, Jim rented his vacation home for 200 days and lived in it for 19 days. During the remaining days, the vacation home was available for rental use. Is the vacation home subject to the limitation on the deductions of a personal/rental vacation home?

Accepted Answer

The vacation home is not subject to the

Question 5

The ordinary and necessary expenses for operating an illegal gambling operation (excluding such items as fines, bribes, and other illegal payments) are deductible.

Accepted Answer

A) True 
 B)False

Question 6

Rose's business sells air conditioners which have a one-year warranty.Based on historical data, the warranty costs amount to 14% of sales.During 2012, air conditioner sales are $300,000.Actual warranty expenses paid in 2012 are $37,000.

Accepted Answer

The answer of Rose's business sells air conditioners which have...

Question 7

Depending on the nature of the expenditure, expenses incurred in a trade or business may be deductible for or from AGI.

Accepted Answer

A) True 
 B)False

Question 8

What losses are deductible by an individual taxpayer?

Accepted Answer

Generally deductible losses of individua

Question 9

Emelie and Taylor are employed by the Federal government and own their home in Washington,
D.C.While vacationing in the summer for three weeks, they rent their home for two weeks to an Angolian diplomat for $3,000.During the third week, they permit Taylor's aunt and uncle to stay in the house with no rent being charged.Expenses associated with the home for the year are as follows:
   Determine the effect of these income and expense items associated with their home if they file a joint return.

Accepted Answer

Since Emelie and Taylor rent their home

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. 
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. 
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 income of a sole proprietorship are reported on Schedule C (Profit or Loss from Business).

Accepted Answer

A) True 
 B)False

Question 12

On January 2, 2012, Fran acquires a business from Chuck.Among the assets purchased are the following intangibles: patent with a 7-year remaining life, a covenant not to compete for 10 years, and goodwill. Of the purchase price, $140,000 was paid for the patent and $60,000 for the covenant.The amount of the excess of the purchase price over the identifiable assets was $100,000.What is the amount of the amortization deduction for 2012?

Accepted Answer

A) $10,667. 
B) $16,000. 
C) $20,000. 
D) $32,667. 
E) None of the above. 
A) $10,667. 
B) $16,000. 
C) $20,000. 
D) $32,667. 
E) None of the above.

Question 13

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:   Assuming that the activity is deemed a hobby, how should she report these items on her tax return?

Accepted Answer

A) Include $10,000 in income and deduct $11,000 for AGI. 
B) Ignore both income and expenses since hobby losses are disallowed. 
C) Include $10,000 in income, deduct nothing for AGI, and claim $10,000 of the expenses as itemized deductions. 
D) Include $10,000 in income and deduct interest of $500 for AGI. 
E) None of the above. 
A) Include $10,000 in income and deduct $11,000 for AGI. 
B) Ignore both income and expenses since hobby losses are disallowed. 
C) Include $10,000 in income, deduct nothing for AGI, and claim $10,000 of the expenses as itemized deductions. 
D) Include $10,000 in income and deduct interest of $500 for AGI. 
E) None of the above.

Question 14

The only § 212 expenses that are deductions for AGI are those related to rent and royalty income.

Accepted Answer

A) True 
 B)False

Question 15

Larry, a calendar year cash basis taxpayer, has the following transactions:   Based on this information, Larry has:

Accepted Answer

A) AGI of $46,500. 
B) AGI of $51,000. 
C) AGI of $60,000. 
D) Deduction for medical expenses of $0. 
E) None of the above. 
A) AGI of $46,500. 
B) AGI of $51,000. 
C) AGI of $60,000. 
D) Deduction for medical expenses of $0. 
E) None of the above.

Question 16

Landscaping expenditures on new rental property are deductible in the year they are paid or incurred.

Accepted Answer

A) True 
 B)False

Question 17

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 18

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.?

Accepted Answer

The $750,000 payment to the U.S.assistan

Question 19

Because Scott is three months delinquent on the mortgage payments for his personal residence, Jeanette (his sister) is going to cover the arrearage. Based on past experience, she does not expect to be repaid by Scott. Which of the following statements is correct?

Accepted Answer

A) If Scott receives the money from Jeanette and pays the mortgage company, Jeanette can deduct the interest part. 
B) If Jeanette pays the mortgage company directly, neither Scott nor Jeanette can deduct the interest part. 
C) If Jeanette pays the mortgage company directly, she cannot deduct the interest part. 
D) Only b.and c.are correct. 
E) a., b., and c.are correct. 
A) If Scott receives the money from Jeanette and pays the mortgage company, Jeanette can deduct the interest part. 
B) If Jeanette pays the mortgage company directly, neither Scott nor Jeanette can deduct the interest part. 
C) If Jeanette pays the mortgage company directly, she cannot deduct the interest part. 
D) Only b.and c.are correct. 
E) a., b., and c.are correct.

Question 20

Walter sells land with an adjusted basis of $175,000 and a fair market value of $160,000 to his mother, Shirley, for $160,000.Walter reinvests the proceeds in the stock market.Shirley holds the land for one year and a day and sells it in the marketplace for $169,000.

Accepted Answer

The answer of Walter sells land with an adjusted basis...

Exam 6: Deductions and Losses: in General

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.

A football team that pays a star player an annual salary of $20 million can deduct the entire $20 million as salary expense.If the same amount is paid to the CEO of IBM, only $1 million is deductible.

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

During the year, Jim rented his vacation home for 200 days and lived in it for 19 days. During the remaining days, the vacation home was available for rental use. Is the vacation home subject to the limitation on the deductions of a personal/rental vacation home?

The ordinary and necessary expenses for operating an illegal gambling operation (excluding such items as fines, bribes, and other illegal payments) are deductible.

Rose's business sells air conditioners which have a one-year warranty.Based on historical data, the warranty costs amount to 14% of sales.During 2012, air conditioner sales are $300,000.Actual warranty expenses paid in 2012 are $37,000.

Depending on the nature of the expenditure, expenses incurred in a trade or business may be deductible for or from AGI.

What losses are deductible by an individual taxpayer?

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

The income of a sole proprietorship are reported on Schedule C (Profit or Loss from Business).

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: Assuming that the activity is deemed a hobby, how should she report these items on her tax return?

The only § 212 expenses that are deductions for AGI are those related to rent and royalty income.

Larry, a calendar year cash basis taxpayer, has the following transactions: Based on this information, Larry has:

Landscaping expenditures on new rental property are deductible in the year they are paid or incurred.

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.

Because Scott is three months delinquent on the mortgage payments for his personal residence, Jeanette (his sister) is going to cover the arrearage. Based on past experience, she does not expect to be repaid by Scott. Which of the following statements is correct?

Walter sells land with an adjusted basis of $175,000 and a fair market value of $160,000 to his mother, Shirley, for $160,000.Walter reinvests the proceeds in the stock market.Shirley holds the land for one year and a day and sells it in the marketplace for $169,000.

An Introduction to Taxation and Understanding the Federal 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 Nontaxable Exchanges-Part 1

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 2

Property Transactions: Capital Gains and Losses, 1231, 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

Income Taxation of Trusts and Estates

Filters