Exam 6: Deductions and Losses: in General

Robyn rents her beach house for 60 days and uses it for personal use for 30 days during the year.The rental income is $6,000 and the expenses are as follows: Using the IRS approach,total expenses that Robyn can deduct on her tax return associated with the beach house are:

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?

Assuming an activity is deemed to be a hobby,discuss the order and limits in which expenses must be deducted.

If a vacation home is determined to be a personal/rental use residence,which of the following statements is correct?

While she was a college student,Juliet worked in a bookstore located near campus.She thinks a bookstore located on the other side of campus would be successful.She incurs expenses of $41,000 (accounting fees,marketing survey,etc.)in exploring its business potential.Her parents have agreed to loan her the money required to start the business.What amount of these investigation costs can Juliet deduct if:

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.

Paula is the sole shareholder of Violet,Inc.For 2012,she receives from Violet a salary of $300,000 and dividends of $100,000.Violet's taxable income for 2012 is $500,000.On audit,the IRS treats $100,000 of Paula's salary as unreasonable.Which of the following statements is correct?

If an item such as property taxes and home mortgage interest exceed the income from a hobby,the excess amount of this item over the hobby income cannot be deducted if the taxpayer itemizes deductions.

Which of the following is deductible as a trade or business expense?

Which of the following can be claimed as a deduction for AGI?

Terry and Jim are both involved in operating illegal businesses.Terry operates a gambling business and Jim operates a drug running business.Both businesses have gross revenues of $500,000.The businesses incur the following expenses. Which of the following statements is correct?

Andrew,who operates a laundry business,incurred the following expenses during the year. What amount can Andrew deduct for these expenses?

Melba incurred the following expenses for her dependent daughter during the current year: How much may Melba deduct in computing her itemized deductions?

Are all personal expenses disallowed as deductions?

Tommy,an automobile mechanic employed by an auto dealership,is considering opening a fast food franchise.If Tommy decides not to acquire the fast food franchise,any investigation expenses are:

A cash basis taxpayer who charges an expense on a bank credit card is allowed to claim a deduction currently,whereas a cash basis taxpayer who charges an expense on a department store credit card is not allowed to claim a deduction until payment is made.

Briefly discuss the two tests that an accrual basis taxpayer must apply before an expense can be deducted.

Trade and business expenses should be treated as:

The amount of the addition to the reserve for bad debts for an accrual method taxpayer is allowed as a deduction for tax purposes,but is not allowed for a cash method taxpayer.

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?