Question 1

Are there any circumstances under which lobbying expenditures are deductible?

Accepted Answer

Yes.Lobbying expenditures are deductible

Question 2

If a taxpayer cannot satisfy the three-out-of-five year presumption test associated with hobby losses, then expenses from the activity cannot be deducted in excess of the gross income from the activity.

Accepted Answer

A) True 
 B)False

Question 3

Discuss the application of the "one-year rule" on prepayments by a cash basis taxpayer.

Accepted Answer

The Regulations set forth the general ru

Question 4

Bridgett's son, Hubert, is $10,000 in arrears on his residential mortgage payments.Of the $10,000, $7,500 represents interest and $2,500 represents principal.

Accepted Answer

The answer of Bridgett's son, Hubert, is $10,000 in arrears...

Question 5

Which of the following is incorrect?

Accepted Answer

A)  All salaries of a business are deductible. 
B)  To be deductible, a business expense must be both ordinary and necessary. 
C)  The income and expenses of a sole proprietorship business are reported on Schedule C. 
D)  The purchase of a building must be capitalized. 
E)  All of the above are incorrect. 
A)  All salaries of a business are deductible. 
B)  To be deductible, a business expense must be both ordinary and necessary. 
C)  The income and expenses of a sole proprietorship business are reported on Schedule C. 
D)  The purchase of a building must be capitalized. 
E)  All of the above are incorrect.

Question 6

If part of a shareholder/employee's salary is classified as unreasonable, determine the effect on the:

Accepted Answer

The answer of If part of a shareholder/employee's salary is...

Question 7

Kitty runs a brothel (illegal under state law) and has the following items of income and expense.What is the amount that she must include in taxable income from her operation?

Accepted Answer

@#IMG-DLM& @#IMG-DLM& The bribes to poli

Question 8

Vera is the CEO of Brunettes, a publicly held corporation.For the year, she receives a salary of $800,000, a bonus of $400,000, and contributions to her retirement plan of $45,000.The bonus was awarded at the December board meeting based on Vera's threat to accept a better paying job with a competitor.What amount may Brunettes deduct?

Accepted Answer

A) $842,000. 
B) $1,045,000. 
C) $1,200,000. 
D) $1,245,000. 
E) None of the above. 
A) $842,000. 
B) $1,045,000. 
C) $1,200,000. 
D) $1,245,000. 
E) None of the above.

Question 9

Gladys owns a retail hardware store in Tangipahoa.She is considering opening a business in Hammond, a community located 25 miles away.She incurs expenses of $60,000 in 2012 in investigating the feasibility and desirability of doing so.What amount can Gladys deduct in 2012 if the business is:

Accepted Answer

The answer of Gladys owns a retail hardware store in...

Question 10

Robin and Jeff own an unincorporated hardware store.They determine their salaries at the end of the year by using the amount required to reduce the net income of the hardware store to $0.Based on this policy, Robin and Jeff each receive a total salary of $125,000.This is paid as follows: $8,000 per month and $29,000 on December 31.Determine the amount of the salary deduction.

Accepted Answer

Since the hardware store is not incorpor

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Briefly discuss the disallowance of deductions for capital expenditures.

Accepted Answer

Any expenditures that add to t

Question 13

For a vacation home to be classified in the primarily rental use category, what attributes must be present?

Accepted Answer

To be classified in the primarily rental

Question 14

Cory incurred and paid the following expenses:   Calculate the amount that Cory can deduct (before any percentage limitations).

Accepted Answer

A) $5,000. 
B) $4,600. 
C) $3,000. 
D) $1,500. 
E) None of the above. 
A) $5,000. 
B) $4,600. 
C) $3,000. 
D) $1,500. 
E) None of the above.

Question 15

A vacation home at the beach which is rented for 170 days and used personally for 16 days is classified in the personal/rental use category.

Accepted Answer

A) True 
 B)False

Question 16

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?

Accepted Answer

Legal expenses are deductible when they

Question 17

Benita incurred a business expense on December 10, 2012, which she charged on her bank credit card.She paid the credit card statement which included the charge on January 5, 2013.Which of the following is correct?

Accepted Answer

A) If Benita is a cash method taxpayer, she cannot deduct the expense until 2013. 
B) If Benita is an accrual method taxpayer, she can deduct the expense in 2012. 
C) If Benita uses the accrual method, she can choose to deduct the expense in either 2012 or 2013. 
D) Only b.and c.are correct. 
E) a., b., and c.are correct. 
A) If Benita is a cash method taxpayer, she cannot deduct the expense until 2013. 
B) If Benita is an accrual method taxpayer, she can deduct the expense in 2012. 
C) If Benita uses the accrual method, she can choose to deduct the expense in either 2012 or 2013. 
D) Only b.and c.are correct. 
E) a., b., and c.are correct.

Question 18

Janet is the CEO for Silver, Inc., a closely held corporation. Her total compensation for 2012 is $5 million. Of this amount, $2 million is a salary and $3 million is a bonus. The bonus was calculated as 5% of Silver's net income before the bonus and before taxes ($60 million X 5% = $3 million). The bonus provision has been in effect since Janet became CEO five years ago and is related to Silver's performance.It is approved annually by the entire board of directors (1 of the 5 directors is an outside director) of Silver. How much of Janet's compensation can Silver deduct for 2012?

Accepted Answer

All of the $5 million is deductible by S

Question 19

Rex, a cash basis calendar year taxpayer, runs a bingo operation which is illegal under state law.During 2012, a bill designated H.R.9 is introduced into the state legislature which, if enacted, would legitimize bingo games.In 2012, Rex had the following expenses:   Of these expenditures, Rex may deduct:

Accepted Answer

A) $247,000. 
B) $250,000. 
C) $258,000. 
D) $282,000. 
E) None of the above. 
A) $247,000. 
B) $250,000. 
C) $258,000. 
D) $282,000. 
E) None of the above.

Question 20

Why are there restrictions on the recognition of gains and losses resulting from transactions between related parties?

Accepted Answer

Sham transactions can be structured betw

Exam 6: Deductions and Losses: in General

Are there any circumstances under which lobbying expenditures are deductible?

If a taxpayer cannot satisfy the three-out-of-five year presumption test associated with hobby losses, then expenses from the activity cannot be deducted in excess of the gross income from the activity.

Discuss the application of the "one-year rule" on prepayments by a cash basis taxpayer.

Bridgett's son, Hubert, is $10,000 in arrears on his residential mortgage payments.Of the $10,000, $7,500 represents interest and $2,500 represents principal.

Which of the following is incorrect?

If part of a shareholder/employee's salary is classified as unreasonable, determine the effect on the:

Kitty runs a brothel (illegal under state law) and has the following items of income and expense.What is the amount that she must include in taxable income from her operation?

Gladys owns a retail hardware store in Tangipahoa.She is considering opening a business in Hammond, a community located 25 miles away.She incurs expenses of $60,000 in 2012 in investigating the feasibility and desirability of doing so.What amount can Gladys deduct in 2012 if the business is:

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

Briefly discuss the disallowance of deductions for capital expenditures.

For a vacation home to be classified in the primarily rental use category, what attributes must be present?

Cory incurred and paid the following expenses: Calculate the amount that Cory can deduct (before any percentage limitations).

A vacation home at the beach which is rented for 170 days and used personally for 16 days is classified in the personal/rental use category.

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?

Benita incurred a business expense on December 10, 2012, which she charged on her bank credit card.She paid the credit card statement which included the charge on January 5, 2013.Which of the following is correct?

Why are there restrictions on the recognition of gains and losses resulting from transactions between related parties?

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

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