Question 1

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 the above 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 the above are "trade or business" expenses.

Question 2

Walt wants to give his daughter $1,800 for Christmas.As an alternative,she suggests that he pay the property taxes on her residence.If Ralph pays the property taxes,he can deduct them.

Accepted Answer

A) True 
 B)False

Question 3

Bruce owns several sole proprietorships.Must Bruce use the same accounting method for each of these businesses?

Accepted Answer

No.If a taxpayer owns multiple

Question 4

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 5

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

Accepted Answer

A) True 
 B)False

Question 6

None of the prepaid rent paid on September 1 by a calendar year cash basis taxpayer for the next 18 months is deductible in the current period.

Accepted Answer

A) True 
 B)False

Question 7

Aaron,a shareholder-employee of Pigeon,Inc.,receives a $300,000 salary.The IRS classifies $100,000 of this amount as unreasonable compensation.The effect of this reclassification is to decrease Aaron's gross income by $100,000 and increase Pigeon's gross income by $100,000.

Accepted Answer

A) True 
 B)False

Question 8

In distinguishing whether an activity is a hobby or a trade or business,discuss the presumptive rule.

Accepted Answer

The Code provides a rebuttable presumpti

Question 9

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

Accepted Answer

A) The taxpayer's aunt. 
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 aunt. 
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.

Question 10

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 11

The period in which an accrual basis taxpayer can deduct an expense is determined by applying the economic performance and all events tests.

Accepted Answer

A) True 
 B)False

Question 12

During the year,Rita rented her vacation home for twelve days for $2,400 and she used it personally for three months.The following expenses were incurred on the home:
​
   
Calculate her rental gain or loss and itemized deductions.

Accepted Answer

Rita excludes the $2,400 of rental incom

Question 13

Only under limited circumstances can a loss on the sale of a personal use asset be deducted.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Beige,Inc.,an airline manufacturer,is conducting negotiations for the sale of military aircraft.One negotiation is with a U.S.assistant secretary of defense.She can close the deal on the purchase of 50 attack helicopters if she is paid $750,000 under the table.Another negotiation is with the minister of defense of a third world country.To complete the sale of 20 jet fighters to his government,he demands that he be paid a $1 million grease payment.Beige makes the payments and closes the deals.How much of these payments are deductible by Beige,Inc.?

Accepted Answer

The $750,000 payment to the U.S.assistan

Question 16

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 17

Depending on the nature of the expenditure,expenses incurred in a trade or business may be deductible for or from AGI.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

During the year,Jim rented his vacation home for 200 days and lived in it for 19 days.During the remaining days,the vacation home was available for rental use.Is the vacation home subject to the limitation on the deductions of a personal/rental vacation home?

Accepted Answer

The vacation home is not subject to the

Question 20

If a vacation home is a personal/rental residence,no maintenance and utility expenses can be claimed as a deduction.

Accepted Answer

A) True 
 B)False

Exam 6: Deductions and Losses: in General

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

Walt wants to give his daughter $1,800 for Christmas.As an alternative,she suggests that he pay the property taxes on her residence.If Ralph pays the property taxes,he can deduct them.

Bruce owns several sole proprietorships.Must Bruce use the same accounting method for each of these businesses?

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

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

None of the prepaid rent paid on September 1 by a calendar year cash basis taxpayer for the next 18 months is deductible in the current period.

Aaron,a shareholder-employee of Pigeon,Inc.,receives a $300,000 salary.The IRS classifies $100,000 of this amount as unreasonable compensation.The effect of this reclassification is to decrease Aaron's gross income by $100,000 and increase Pigeon's gross income by $100,000.

In distinguishing whether an activity is a hobby or a trade or business,discuss the presumptive rule.

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

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.

The period in which an accrual basis taxpayer can deduct an expense is determined by applying the economic performance and all events tests.

During the year,Rita rented her vacation home for twelve days for $2,400 and she used it personally for three months.The following expenses were incurred on the home: ​ Calculate her rental gain or loss and itemized deductions.

Only under limited circumstances can a loss on the sale of a personal use asset be deducted.

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

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

Depending on the nature of the expenditure,expenses incurred in a trade or business may be deductible for or from AGI.

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

During the year,Jim rented his vacation home for 200 days and lived in it for 19 days.During the remaining days,the vacation home was available for rental use.Is the vacation home subject to the limitation on the deductions of a personal/rental vacation home?

If a vacation home is a personal/rental residence,no maintenance and utility expenses can be claimed as a deduction.

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

During the year,Rita rented her vacation home for twelve days for $2,400 and she used it personally for three months.The following expenses were incurred on the home: Calculate her rental gain or loss and itemized deductions.