Question 1

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

Accepted Answer

To be classified in the personal/rental

Question 2

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 3

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

Accepted Answer

Income (includible in gross income)$ 23,

Question 4

In January,Lance sold stock with a cost basis of $26,000 to his brother,James,for $24,000,the fair market value of the stock on the date of sale.Five months later,James sold the same stock through his broker for $27,000.What is the tax effect of these transactions?

Accepted Answer

A) Disallowed loss to James of $2,000;gain to Lance of $1,000. 
B) Disallowed loss to Lance of $2,000;gain to James of $3,000. 
C) Deductible loss to Lance of $2,000;gain to James of $3,000. 
D) Disallowed loss to Lance of $2,000;gain to James of $1,000. 
E) None of these. 
A) Disallowed loss to James of $2,000;gain to Lance of $1,000. 
B) Disallowed loss to Lance of $2,000;gain to James of $3,000. 
C) Deductible loss to Lance of $2,000;gain to James of $3,000. 
D) Disallowed loss to Lance of $2,000;gain to James of $1,000. 
E) None of these.

Question 5

Under what circumstance can a bribe be deducted?

Accepted Answer

Bribes paid to a domestic official are d

Question 6

For a taxpayer who is engaged in a trade or business,the cost of investigating a business in the same field is deductible only if the taxpayer acquires the business.

Accepted Answer

A) True 
 B)False

Question 7

Melba incurred the following expenses for her dependent daughter during the current year: 
$\begin{array} { l  }
 \text {Payment of principal on daughter's automobile loan }&\$3,600\
 \text {Payment of interest on above loan }&2,900\
 \text { Payment of daughter's property taxes}&1,800\
 \text {Payment of principal on daughter's personal residence loan }&2,800\
 \text { Payment of interest on daughter's personal residence loan}&7,00\
\
 \text {How much may Melba deduct in computing her itemized deductions? }&\
\end{array}$

Accepted Answer

A) $0 
B) $\$ 8,800$ 
C) $\$ 11,700$ 
D) $\$ 18.100$ 
E) $\text { None of these }$ 
A) $0 
B) $\$ 8,800$ 
C) $\$ 11,700$ 
D) $\$ 18.100$ 
E) $\text { None of these }$

Question 8

Janet is the CEO for Silver,Inc. ,a closely held corporation.Her total compensation for 2014 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 × 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 2014?

Accepted Answer

All of the $5 million is deductible by S

Question 9

The legal cost of having a will prepared is not deductible.

Accepted Answer

A) True 
 B)False

Question 10

Only some employment related expenses are classified as deductions for AGI.

Accepted Answer

A) True 
 B)False

Question 11

Ordinary and necessary business expenses,other than cost of goods sold,of an illegal drug trafficking business do not reduce taxable income.

Accepted Answer

A) True 
 B)False

Question 12

A taxpayer's note or promise to pay satisfies the "actually paid" requirement for the cash basis method of accounting.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not a "trade or business" expense?

Accepted Answer

A) Interest on business indebtedness. 
B) Property taxes on business property. 
C) Parking ticket paid on business auto. 
D) Depreciation on business property. 
E) All of these are "trade or business" expenses. 
A) Interest on business indebtedness. 
B) Property taxes on business property. 
C) Parking ticket paid on business auto. 
D) Depreciation on business property. 
E) All of these are "trade or business" expenses.

Question 14

If a taxpayer can satisfy the three-out-of-five year presumption test associated with hobby losses,then expenses from the activity can be deducted in excess of the gross income from the activity.

Accepted Answer

A) True 
 B)False

Question 15

Beulah's personal residence has an adjusted basis of $450,000 and a fair market value of $390,000.Beulah converts the property to rental use on November 1,2014.The vacation home rules that limit the amount of the deduction to the rental income will apply and the adjusted basis for depreciation is $390,000.

Accepted Answer

A) True 
 B)False

Question 16

Generally,a closely-held family corporation is not permitted to take a deduction for a salary paid to a family member in calculating corporate taxable income.

Accepted Answer

A) True 
 B)False

Question 17

Taylor,a cash basis architect,rents the building in which his office is located for $5,000 per month.He commenced his practice on February 1,2014.In order to guarantee no rent increases during an 18-month period,he signed an 18-month lease and prepaid the $90,000 on February 1,2014.How much can Taylor deduct as rent expense for 2014?

Accepted Answer

Taylor is a cash basis taxpayer.Thus,he

Question 18

If a vacation home is rented for less than 15 days during a year,the only expenses that can be deducted are mortgage interest,property taxes,and personal casualty losses.

Accepted Answer

A) True 
 B)False

Question 19

LD Partnership,a cash basis taxpayer,purchases land and a building for $200,000 with $150,000 of the cost being allocated to the building.The gross receipts of the partnership are less than $100,000.LD must capitalize the $50,000 paid for the land,but can deduct the $150,000 paid for the building in the current tax year.

Accepted Answer

A) True 
 B)False

Question 20

Section 212 expenses that are related to rent and royalty income are deductions for AGI.

Accepted Answer

A) True 
 B)False

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

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

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

In January,Lance sold stock with a cost basis of $26,000 to his brother,James,for $24,000,the fair market value of the stock on the date of sale.Five months later,James sold the same stock through his broker for $27,000.What is the tax effect of these transactions?

Under what circumstance can a bribe be deducted?

For a taxpayer who is engaged in a trade or business,the cost of investigating a business in the same field is deductible only if the taxpayer acquires the business.

The legal cost of having a will prepared is not deductible.

Only some employment related expenses are classified as deductions for AGI.

Ordinary and necessary business expenses,other than cost of goods sold,of an illegal drug trafficking business do not reduce taxable income.

A taxpayer's note or promise to pay satisfies the "actually paid" requirement for the cash basis method of accounting.

Which of the following is not a "trade or business" expense?

If a taxpayer can satisfy the three-out-of-five year presumption test associated with hobby losses,then expenses from the activity can be deducted in excess of the gross income from the activity.

Generally,a closely-held family corporation is not permitted to take a deduction for a salary paid to a family member in calculating corporate taxable income.

If a vacation home is rented for less than 15 days during a year,the only expenses that can be deducted are mortgage interest,property taxes,and personal casualty losses.

Section 212 expenses that are related to rent and royalty income are deductions for AGI.

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

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

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

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

In January,Lance sold stock with a cost basis of $26,000 to his brother,James,for $24,000,the fair market value of the stock on the date of sale.Five months later,James sold the same stock through his broker for $27,000.What is the tax effect of these transactions?

Under what circumstance can a bribe be deducted?

For a taxpayer who is engaged in a trade or business,the cost of investigating a business in the same field is deductible only if the taxpayer acquires the business.

The legal cost of having a will prepared is not deductible.

Only some employment related expenses are classified as deductions for AGI.

Ordinary and necessary business expenses,other than cost of goods sold,of an illegal drug trafficking business do not reduce taxable income.

A taxpayer's note or promise to pay satisfies the "actually paid" requirement for the cash basis method of accounting.

Which of the following is not a "trade or business" expense?

If a taxpayer can satisfy the three-out-of-five year presumption test associated with hobby losses,then expenses from the activity can be deducted in excess of the gross income from the activity.

Generally,a closely-held family corporation is not permitted to take a deduction for a salary paid to a family member in calculating corporate taxable income.

If a vacation home is rented for less than 15 days during a year,the only expenses that can be deducted are mortgage interest,property taxes,and personal casualty losses.

Section 212 expenses that are related to rent and royalty income are deductions for AGI.

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