Question 1

If a vacation home is classified as primarily personal use (i.e. ,rented for fewer than 15 days),none of the related expenses can be deducted.

Accepted Answer

A) True 
 B)False

Question 2

Marvin spends the following amounts on a house he owns:
   
a.How much of these expenses can Marvin deduct if the house is his principal residence?
b.How much of these expenses can Marvin deduct if he rents the house to a tenant?
c.Classify any deductible expenses as deductions for AGI or as deductions from AGI.

Accepted Answer

a.Since these expenditures are personal

Question 3

A vacation home at the beach which is rented for 200 days and used personally for 16 days is classified in the personal/rental use category.

Accepted Answer

A) True 
 B)False

Question 4

Iris,a calendar year cash basis taxpayer,owns and operates several TV rental outlets in Florida,and wants to expand to other states.During 2014,she spends $14,000 to investigate TV rental stores in South Carolina and $9,000 to investigate TV rental stores in Georgia.She acquires the South Carolina operations,but not the outlets in Georgia.As to these expenses,Iris should:

Accepted Answer

A) Capitalize $14,000 and not deduct $9,000. 
B) Expense $23,000 for 2014. 
C) Expense $9,000 for 2014 and capitalize $14,000. 
D) Capitalize $23,000. 
E) None of these. 
A) Capitalize $14,000 and not deduct $9,000. 
B) Expense $23,000 for 2014. 
C) Expense $9,000 for 2014 and capitalize $14,000. 
D) Capitalize $23,000. 
E) None of these.

Question 5

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 6

Andrew,who operates a laundry business,incurred the following expenses during the year. -Parking ticket of $250 for one of his delivery vans that parked illegally.
-Parking ticket of $75 when he parked illegally while attending a rock concert in Tulsa.
-DUI ticket of $500 while returning from the rock concert.
-Attorney's fee of $600 associated with the DUI ticket.
What amount can Andrew deduct for these expenses?

Accepted Answer

A) $0. 
B) $250. 
C) $600. 
D) $1,425. 
E) None of these. 
A) $0. 
B) $250. 
C) $600. 
D) $1,425. 
E) None of these.

Question 7

Alfred's Enterprises,an unincorporated entity,pays employee salaries of $100,000 during the year.At the end of the year,$12,000 of additional salaries have been earned but not paid until the beginning of the next year.
a.Determine the amount of the deduction for salaries if Alfred is a cash method taxpayer.
b.Determine the amount of the deduction for salaries if Alfred is an accrual method taxpayer.

Accepted Answer

a.The deduction for salaries i

Question 8

Which of the following may be deductible?

Accepted Answer

A) Bribes that relate to a U.S.business. 
B) Fines paid for violations of the law. 
C) Interest on a loan used in a hobby. 
D) All of the above. 
E) None of these. 
A) Bribes that relate to a U.S.business. 
B) Fines paid for violations of the law. 
C) Interest on a loan used in a hobby. 
D) All of the above. 
E) None of these.

Question 9

Isabella owns two business entities.She may be able to use the cash method for one and the accrual method for the other.

Accepted Answer

A) True 
 B)False

Question 10

The portion of a shareholder­employee's salary that is classified as unreasonable has no effect on the amount of a shareholder­employee's gross income,but results in an increase in the taxable income of the corporation.

Accepted Answer

A) True 
 B)False

Question 11

If a vacation home is classified as primarily rental use,a deduction for all of the rental expenses is allowed.

Accepted Answer

A) True 
 B)False

Question 12

Hobby activity expenses are deductible from AGI to the extent of hobby income.Such expenses not in excess of hobby income are not subject to the 2% of AGI floor.

Accepted Answer

A) True 
 B)False

Question 13

Sandra owns an insurance agency.The following selected data are taken from the agency balance sheet and income statement prepared using the accrual method.

Accepted Answer

Sandra's accrual method net profit is ca

Question 14

Legal expenses incurred in connection with rental property are deductions from AGI.

Accepted Answer

A) True 
 B)False

Question 15

Bobby operates a drug trafficking business.Because he has an accounting background,he keeps detailed financial records.What expenses can Bobby deduct on his Federal income tax return?

Accepted Answer

Bobby cannot deduct any of the expenses

Question 16

If a taxpayer operates an illegal business,no deductions are permitted.

Accepted Answer

A) True 
 B)False

Question 17

In determining whether an activity should be classified as a business or as a hobby,the satisfaction of the presumption (i.e. ,profit in at least 3 out of 5 years)ensures treatment as a business.

Accepted Answer

A) True 
 B)False

Question 18

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 Christ

Question 19

Albie operates an illegal drug­running business and has the following items of income and expense.What is Albie's adjusted gross income from this operation?

Accepted Answer

Albie is allowed to reduce his AGI only

Question 20

The period in which an accrual basis taxpayer can deduct an expense is determined by applying the economic performance and all events tests.

Accepted Answer

A) True 
 B)False

If a vacation home is classified as primarily personal use (i.e. ,rented for fewer than 15 days),none of the related expenses can be deducted.

A vacation home at the beach which is rented for 200 days and used personally for 16 days is classified in the personal/rental use category.

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.

Which of the following may be deductible?

Isabella owns two business entities.She may be able to use the cash method for one and the accrual method for the other.

The portion of a shareholderemployee's salary that is classified as unreasonable has no effect on the amount of a shareholderemployee's gross income,but results in an increase in the taxable income of the corporation.

If a vacation home is classified as primarily rental use,a deduction for all of the rental expenses is allowed.

Hobby activity expenses are deductible from AGI to the extent of hobby income.Such expenses not in excess of hobby income are not subject to the 2% of AGI floor.

Sandra owns an insurance agency.The following selected data are taken from the agency balance sheet and income statement prepared using the accrual method.

Legal expenses incurred in connection with rental property are deductions from AGI.

Bobby operates a drug trafficking business.Because he has an accounting background,he keeps detailed financial records.What expenses can Bobby deduct on his Federal income tax return?

If a taxpayer operates an illegal business,no deductions are permitted.

In determining whether an activity should be classified as a business or as a hobby,the satisfaction of the presumption (i.e. ,profit in at least 3 out of 5 years)ensures treatment as a business.

Albie operates an illegal drugrunning business and has the following items of income and expense.What is Albie's adjusted gross income from this operation?

The period in which an accrual basis taxpayer can deduct an expense is determined by applying the economic performance and all events tests.

An Introduction to Taxation and Understanding the Federal Tax 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

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Alternative Minimum Tax

Tax Credits and Payment Procedures

Property Transactions: Determination of Gain or Loss and Basis Considerations

Property Transactions: Nontaxable Exchanges

Property Transactions: Capital Gains and Losses

Property Transactions: 1231 and Recapture Provisions

Accounting Periods and Methods

Deferred Compensation

Corporations and Partnerships

Filters

Exam 6: Deductions and Losses: in General

If a vacation home is classified as primarily personal use (i.e. ,rented for fewer than 15 days),none of the related expenses can be deducted.

A vacation home at the beach which is rented for 200 days and used personally for 16 days is classified in the personal/rental use category.

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.

Which of the following may be deductible?

Isabella owns two business entities.She may be able to use the cash method for one and the accrual method for the other.

The portion of a shareholder­employee's salary that is classified as unreasonable has no effect on the amount of a shareholder­employee's gross income,but results in an increase in the taxable income of the corporation.

If a vacation home is classified as primarily rental use,a deduction for all of the rental expenses is allowed.

Hobby activity expenses are deductible from AGI to the extent of hobby income.Such expenses not in excess of hobby income are not subject to the 2% of AGI floor.

Sandra owns an insurance agency.The following selected data are taken from the agency balance sheet and income statement prepared using the accrual method.

Legal expenses incurred in connection with rental property are deductions from AGI.

Bobby operates a drug trafficking business.Because he has an accounting background,he keeps detailed financial records.What expenses can Bobby deduct on his Federal income tax return?

If a taxpayer operates an illegal business,no deductions are permitted.

In determining whether an activity should be classified as a business or as a hobby,the satisfaction of the presumption (i.e. ,profit in at least 3 out of 5 years)ensures treatment as a business.

Albie operates an illegal drug­running business and has the following items of income and expense.What is Albie's adjusted gross income from this operation?

The period in which an accrual basis taxpayer can deduct an expense is determined by applying the economic performance and all events tests.

An Introduction to Taxation and Understanding the Federal Tax 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

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Alternative Minimum Tax

Tax Credits and Payment Procedures

Property Transactions: Determination of Gain or Loss and Basis Considerations

Property Transactions: Nontaxable Exchanges

Property Transactions: Capital Gains and Losses

Property Transactions: 1231 and Recapture Provisions

Accounting Periods and Methods

Deferred Compensation

Corporations and Partnerships

Filters

The portion of a shareholderemployee's salary that is classified as unreasonable has no effect on the amount of a shareholderemployee's gross income,but results in an increase in the taxable income of the corporation.

Albie operates an illegal drugrunning business and has the following items of income and expense.What is Albie's adjusted gross income from this operation?