Question 1

Arnold and Beth file a joint return.Use the following data to calculate their deduction for AGI.

Accepted Answer

Arnold and Beth's deduction for AGI is $

Question 2

Briefly discuss the disallowance of deductions for capital expenditures.

Accepted Answer

Any expenditures that add to t

Question 3

Amos,a shareholder-employee of Pigeon,Inc.,receives a $400,000 salary.The IRS classifies $125,000 of this amount as unreasonable compensation.The effect of this reclassification is to decrease Amos' gross income by $125,000 and increase Pigeon's gross income by $125,000.

Accepted Answer

A) True 
 B)False

Question 4

For an activity classified as a hobby,the expenses are categorized as follows: (1) Amounts that affect adjusted basis and would be deductible under other Code sections if the activity had been engaged in for profit (e.g.,depreciation,amortization,and depletion).
(2) Amounts deductible under other Code sections without regard to the nature of the activity,such as property taxes and home mortgage interest.
(3) Amounts deductible under other Code sections if the activity had been engaged in for profit,but only if those amounts do not affect adjusted basis (e.g.,maintenance,utilities,and supplies).
If these expenses exceed the gross income from the activity and are thus limited,the sequence in which they are deductible is:

Accepted Answer

A)  (1), (2), (3). 
B)  (1), (3), (2). 
C)  (2), (3), (1). 
D)  (2), (1), (3). 
E)  (3), (2), (1). 
A)  (1), (2), (3). 
B)  (1), (3), (2). 
C)  (2), (3), (1). 
D)  (2), (1), (3). 
E)  (3), (2), (1).

Question 5

Which of the following are deductions for AGI?

Accepted Answer

A)  Mortgage interest on a personal residence. 
B)  Property taxes on a personal residence. 
C)  Mortgage interest on a building used in a business. 
D)  Fines and penalties incurred in a trade or business. 
E)  None of the above. 
A)  Mortgage interest on a personal residence. 
B)  Property taxes on a personal residence. 
C)  Mortgage interest on a building used in a business. 
D)  Fines and penalties incurred in a trade or business. 
E)  None of the above.

Question 6

Which of the following expenses associated with the illegal sale of whiskey (i.e.,bootlegging)can be deducted?

Accepted Answer

A)  Cost of goods sold. 
B)  Advertising. 
C)  Cost of delivery. 
D)  Only a. and c. 
E)  a., b., and c. 
A)  Cost of goods sold. 
B)  Advertising. 
C)  Cost of delivery. 
D)  Only a. and c. 
E)  a., b., and c.

Question 7

Olive,Inc.,an accrual method taxpayer,is a corporation that is equally owned by Maurice and Alex,who are brothers.The corporation uses the accrual method of accounting and the shareholders use the cash method.To provide Olive with funds to acquire additional working capital,the shareholders each loan Olive $100,000 with a 6% interest rate.At the end of the tax year,there is unpaid accrued interest of $3,000 due to each shareholder.From a timing perspective,when should Olive deduct this $6,000 and when should Maurice and Alex include the $3,000 in gross income? Olive pays the $3,000 to each shareholder early next year.

Accepted Answer

Maurice and Alex are related parties wit

Question 8

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 9

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

Accepted Answer

A) True 
 B)False

Question 10

In applying the $1 million limit on deducting executive compensation,what corporations are subject to the deduction limit? What executives are covered?

Accepted Answer

The $1 million limit on deducting the co

Question 11

Which of the following must be capitalized by a business?

Accepted Answer

A)  Replacement of a windshield of a business truck which was broken in an accident. 
B)  Repair of a roof of a building used in business. 
C)  Amount paid for a covenant not to compete. 
D)  Only b. and c. must be capitalized. 
E)  a., b., and c. can be expensed rather than capitalized. 
A)  Replacement of a windshield of a business truck which was broken in an accident. 
B)  Repair of a roof of a building used in business. 
C)  Amount paid for a covenant not to compete. 
D)  Only b. and c. must be capitalized. 
E)  a., b., and c. can be expensed rather than capitalized.

Question 12

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 13

Fines and penalties paid for violations of the law (e.g.,illegal dumping of hazardous waste)are deductible only if they relate to a trade or business.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Emelie and Taylor are employed by the Federal government and own their home in Washington,

Accepted Answer

Since Emelie and Taylor rent their home

Question 16

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 17

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 18

A hobby activity can result in all of the hobby income being included in AGI and no deductions being allowed.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is relevant in deciding whether an activity is profit-seeking or a hobby?

Accepted Answer

A)  The time and effort expended. 
B)  The expertise of the taxpayers or their advisers. 
C)  The history of income or losses from the activity. 
D)  The tax benefits of the activity to the taxpayer. 
E)  All of the above factors are to be considered. 
A)  The time and effort expended. 
B)  The expertise of the taxpayers or their advisers. 
C)  The history of income or losses from the activity. 
D)  The tax benefits of the activity to the taxpayer. 
E)  All of the above factors are to be considered.

Question 20

Which of the following is not a related party for constructive ownership purposes under § 267?

Accepted Answer

A)  The taxpayer's cousin. 
B)  The taxpayer's brother. 
C)  The taxpayer's grandmother. 
D)  A corporation owned more than 50% by the taxpayer. 
E)  None of the above. 
A)  The taxpayer's cousin. 
B)  The taxpayer's brother. 
C)  The taxpayer's grandmother. 
D)  A corporation owned more than 50% by the taxpayer. 
E)  None of the above.

Arnold and Beth file a joint return.Use the following data to calculate their deduction for AGI.

Briefly discuss the disallowance of deductions for capital expenditures.

Amos,a shareholder-employee of Pigeon,Inc.,receives a $400,000 salary.The IRS classifies $125,000 of this amount as unreasonable compensation.The effect of this reclassification is to decrease Amos' gross income by $125,000 and increase Pigeon's gross income by $125,000.

Which of the following are deductions for AGI?

Which of the following expenses associated with the illegal sale of whiskey (i.e.,bootlegging)can be deducted?

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

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

In applying the $1 million limit on deducting executive compensation,what corporations are subject to the deduction limit? What executives are covered?

Which of the following must be capitalized by a business?

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:

Fines and penalties paid for violations of the law (e.g.,illegal dumping of hazardous waste)are deductible only if they relate to a trade or business.

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

Emelie and Taylor are employed by the Federal government and own their home in Washington,

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

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.

A hobby activity can result in all of the hobby income being included in AGI and no deductions being allowed.

Which of the following is relevant in deciding whether an activity is profit-seeking or a hobby?

Which of the following is not a related party for constructive ownership purposes under § 267?

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: Section 1231 and Recapture Provisions

Accounting Periods and Methods

Deferred Compensation

Corporations and Partnerships

Filters

Exam 6: Deductions and Losses: in General

Arnold and Beth file a joint return.Use the following data to calculate their deduction for AGI.

Briefly discuss the disallowance of deductions for capital expenditures.

Amos,a shareholder-employee of Pigeon,Inc.,receives a $400,000 salary.The IRS classifies $125,000 of this amount as unreasonable compensation.The effect of this reclassification is to decrease Amos' gross income by $125,000 and increase Pigeon's gross income by $125,000.

Which of the following are deductions for AGI?

Which of the following expenses associated with the illegal sale of whiskey (i.e.,bootlegging)can be deducted?

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

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

In applying the $1 million limit on deducting executive compensation,what corporations are subject to the deduction limit? What executives are covered?

Which of the following must be capitalized by a business?

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:

Fines and penalties paid for violations of the law (e.g.,illegal dumping of hazardous waste)are deductible only if they relate to a trade or business.

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

Emelie and Taylor are employed by the Federal government and own their home in Washington,

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

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.

A hobby activity can result in all of the hobby income being included in AGI and no deductions being allowed.

Which of the following is relevant in deciding whether an activity is profit-seeking or a hobby?

Which of the following is not a related party for constructive ownership purposes under § 267?

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: Section 1231 and Recapture Provisions

Accounting Periods and Methods

Deferred Compensation

Corporations and Partnerships

Filters