Exam 6: Deductions and Losses: in General

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

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

Marvin spends the following amounts on a house he owns:

All employment related expenses are classified as deductions for AGI.

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.

Bob and April own a house at the beach.The house was rented to unrelated parties for 8 weeks during the year.April and the children used the house 12 days for their vacation during the year.After properly dividing the expenses between rental and personal use,it was determined that a loss was incurred as follows: What is the correct treatment of the rental income and expenses on Bob and April's joint income tax return for the current year assuming the IRS approach is used if applicable?

Rose's business sells air conditioners which have a one-year warranty.Based on historical data,the warranty costs amount to 14% of sales.During 2012,air conditioner sales are $300,000.Actual warranty expenses paid in 2012 are $37,000.

A political contribution to the Democratic Party or the Republican Party is not deductible,but a contribution to the Presidential Election Campaign Fund is deductible.

Brenda invested in the following stocks and bonds during 2012.

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?

The income of a sole proprietorship are reported on Schedule C (Profit or Loss from Business).

Sandra sold 500 shares of Wren Corporation to Bob,her brother,for its fair market value.She had paid $26,000 for the stock.Calculate Sandra's and Bob's gain or loss under the following circumstances:

The only § 212 expenses that are deductions for AGI are those related to rent and royalty income.

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.