Question 1

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 2

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?

Accepted Answer

​
 @#IMG-DLM& The bribes to po

Question 3

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 1,2017.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 1,2017.How much can Taylor deduct as rent expense for 2017?

Accepted Answer

Taylor is a cash basis taxpayer.Thus,he

Question 4

While she was a college student,Angel lived by a bookstore located near campus.She thinks a bookstore located on the other side of campus would be successful.She incurs expenses of $42,800 (legal fees,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 Angel deduct if:
a.She opens the bookstore on August 1, 2017.
b.She decides not to open the bookstore.

Accepted Answer

The answer of While she was a college student,Angel lived...

Question 5

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 6

Al is single,age 60,and has gross income of $140,000.His deductible expenses are as follows:
​
 
What is Al's AGI?

Accepted Answer

A) $94,100. 
B) $103,000. 
C) $107,000. 
D) $127,000. 
E) None of the above. 
A) $94,100. 
B) $103,000. 
C) $107,000. 
D) $127,000. 
E) None of the above.

Question 7

Tom operates an illegal drug-running operation and incurred the following expenses:
Which of the above amounts reduces his taxable income?

Accepted Answer

A) $0. 
B) $160,000. 
C) $279,000. 
D) $324,000. 
E) None of the above. 
A) $0. 
B) $160,000. 
C) $279,000. 
D) $324,000. 
E) None of the above.

Question 8

Max opened his dental practice (a sole proprietorship) in March 2017.At the end of the year,he has unpaid accounts receivable of $62,000 and no unpaid accounts payable.Should Max use the accrual method or the cash method for his dental practice?

Accepted Answer

A service provider generally should use

Question 9

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 10

Rex,a cash basis calendar year taxpayer,runs a bingo operation which is illegal under state law.During 2017,a bill designated H.R.9 is introduced into the state legislature which,if enacted,would legitimize bingo games.In 2017,Rex had the following expenses:
Of these expenditures,Rex may deduct:

Accepted Answer

A) $247,000. 
B) $250,000. 
C) $258,000. 
D) $282,000. 
E) None of the above. 
A) $247,000. 
B) $250,000. 
C) $258,000. 
D) $282,000. 
E) None of the above.

Question 11

Priscella pursued a hobby of making bedspreads in her spare time.Her AGI before considering the hobby is $40,000.During the year she sold the bedspreads for $10,000.She incurred expenses as follows:
​
 
Assuming that the activity is deemed a hobby,how should she report these items on her tax return?

Accepted Answer

A) Include $10,000 in income and deduct $11,000 for AGI. 
B) Ignore both income and expenses since hobby losses are disallowed. 
C) Include $10,000 in income, deduct nothing for AGI, and claim $11,000 of the expenses as itemized deductions. 
D) Include $10,000 in income and deduct interest of $500 for AGI. 
E) None of the above. 
A) Include $10,000 in income and deduct $11,000 for AGI. 
B) Ignore both income and expenses since hobby losses are disallowed. 
C) Include $10,000 in income, deduct nothing for AGI, and claim $11,000 of the expenses as itemized deductions. 
D) Include $10,000 in income and deduct interest of $500 for AGI. 
E) None of the above.

Question 12

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

Accepted Answer

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

Question 13

Why are there restrictions on the recognition of gains and losses resulting from transactions between related parties?

Accepted Answer

Sham transactions can be structured betw

Question 14

Are there any circumstances under which lobbying expenditures are deductible?

Accepted Answer

Yes.Lobbying expenditures are deductible

Question 15

Which of the following is incorrect?

Accepted Answer

A) Alimony is a deduction for AGI. 
B) The expenses associated with royalty property are a deduction from AGI. 
C) Contributions to a traditional IRA are a deduction for AGI. 
D) Property taxes on taxpayer's personal residence are a deduction from AGI 
E) All of the above are correct. 
A) Alimony is a deduction for AGI. 
B) The expenses associated with royalty property are a deduction from AGI. 
C) Contributions to a traditional IRA are a deduction for AGI. 
D) Property taxes on taxpayer's personal residence are a deduction from AGI 
E) All of the above are correct.

Question 16

Describe the circumstances under which a taxpayer can receive rent income from a personal residence,but does not have to report it as gross income.

Accepted Answer

If the personal residence is r

Question 17

Can a trade or business expense be deductible if it is necessary but not ordinary?

Accepted Answer

No.To be deductible

Question 18

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 19

Purchased goodwill must be capitalized,but can be amortized over a 60-month period.

Accepted Answer

A) True 
 B)False

Question 20

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

The answer of Agnes operates a Christmas Shop in Atlantic...

Exam 6: Deductions and Losses: in General

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.

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?

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.

Al is single,age 60,and has gross income of $140,000.His deductible expenses are as follows: ​ What is Al's AGI?

Tom operates an illegal drug-running operation and incurred the following expenses: Which of the above amounts reduces his taxable income?

Max opened his dental practice (a sole proprietorship) in March 2017.At the end of the year,he has unpaid accounts receivable of $62,000 and no unpaid accounts payable.Should Max use the accrual method or the cash method for his dental practice?

Which of the following are deductions for AGI?

Rex,a cash basis calendar year taxpayer,runs a bingo operation which is illegal under state law.During 2017,a bill designated H.R.9 is introduced into the state legislature which,if enacted,would legitimize bingo games.In 2017,Rex had the following expenses: Of these expenditures,Rex may deduct:

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

Why are there restrictions on the recognition of gains and losses resulting from transactions between related parties?

Are there any circumstances under which lobbying expenditures are deductible?

Which of the following is incorrect?

Describe the circumstances under which a taxpayer can receive rent income from a personal residence,but does not have to report it as gross income.

Can a trade or business expense be deductible if it is necessary but not ordinary?

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

Purchased goodwill must be capitalized,but can be amortized over a 60-month period.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

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

Tax Credits and Payments

Property Transactions: Determination of Gain or Loss, basis Considerations, and Nontaxable Exchanges

Property Transactions, capital Gains and Losses, sec1231, and Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganization

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters

Al is single,age 60,and has gross income of $140,000.His deductible expenses are as follows: What is Al's AGI?