Exam 6: Business Expenses

Other Objective Questions Designate whether the following expenses are fully deductible (F), partially deductible (P), or nondeductible (N) in the year paid. -John and his family were living in New Jersey when he accepted a full-time job in Philadelphia. During the week, John lives in a rental apartment in Philadelphia that is within walking distance of his office; on weekends he drives home to be with his family in New Jersey where he also does a few hours of consulting work. Where is John's tax home?

Claudia went to the West Coast to attend several business meetings with clients. She flew out on Wednesday afternoon, spent all day Thursday, Friday, Monday and Tuesday attending meetings, and then spent the rest of the week touring the area, returning home on Saturday. She spent $800 on airfare, $1,600 on hotels (10 nights at $160 per night), $400 for a rental car ($40 per day from Wednesday night through Saturday of the following week), and $300 for meals ($30 per day from Thursday through the following Friday and $15 on each of her travel days). What is her allowable deduction for travel away from home?

Andrew's hobby is painting. During 2018, Andrew sold three of his paintings for a total of $2,200. His related expenses include $800 utilities, $1,200 supplies, and $400 in depreciation. Of these expenses incurred, how much can Andrew deduct in the current year?

Other Objective Questions Designate whether the following expenses are fully deductible (F), partially deductible (P), or nondeductible (N) in the year paid. -A taxpayer may deduct a fine for illegal parking if:

In year 1, Braid Corporation, a calendar-year cash-basis corporation, bought office supplies for the next six months in October for $4,500, paid $6,000 for a three-year insurance policy beginning November 1, and borrowed $200,000 on a five-year 6 percent note receiving proceeds of $198,000 on December 1. What is Braid Corporation's total expense deduction in year 1 for these transactions?

A prepaid expense is always capitalized by a cash-basis taxpayer.

Other Objective Questions Designate whether the following expenses are fully deductible (F), partially deductible (P), or nondeductible (N) in the year paid. -Chico Corporation, a calendar-year accrual-basis corporation, paid $3,000 on April 1 for a property insurance policy for the next three years, prepaid six months interest of $450 on November 1, and paid $2,000 rent for December and January on December 1. What is his deduction in the current year for these expenses?

Expenses of a hobby are deductible to the extent of the gross profit from the hobby, but only as miscellaneous itemized deductions before 2018 and after 2025.

Nick owns a home in Daytona Beach, Florida where his wife and children live. He recently accepted a full-time job in Tampa. During the week, Nick lives in a rental apartment in Tampa and on weekends he drives home to be with his family in Daytona Beach. If Nick continues to maintain and pay all of the expenses of the residence in Daytona, where is Nick's tax home?

Explain the difference between timing differences and permanent differences as related to tax and financial accounting?

The UNICAP rules require inventory to include a prorated portion of advertising and distribution expenses.

Contrast business investigation, start-up, and organization expenses.

Other Objective Questions Designate whether the following expenses are fully deductible (F), partially deductible (P), or nondeductible (N) in the year paid. -Expenses for a vacation home rented for 275 days and used 40 days by the owner.

Other Objective Questions Designate whether the following expenses are fully deductible (F), partially deductible (P), or nondeductible (N) in the year paid. -Transportation expenses on a business trip within the United States if business days exceed personal days.

Taylor Corporation manufactures lawn mowers. Its annual gross receipts are in excess of $25 million. It has 200 factory personnel, 25 office employees, and 10 sales persons. The cost of office staff is $1,000,000. How much of the cost of the office staff must be allocated to inventory.

In 2017, Jasmin loaned her friend Janelle $5,000 to invest in various stocks. Janelle signed a note to repay the principal with interest. In 2018, Janelle made risky stock investments and incurred large losses. In late 2018, Janelle declared personal bankruptcy and Jasmin was unable to collect any of her loan. Jasmin had no other gains or losses in 2017 or 2018. Her income from wages in both 2017 and 2018 was $50,000. The result is:

A deferred tax asset is the result of the taxes paid exceeding the tax expense on the financial statements.

Carey operates Crib as a sole proprietorship, a cash-basis company, that has $50,000 of expenses it could pay this year or it could postpone payment until next year. What is the effect of postponing the payment, using a 6 percent discount rate, if Carey's current marginal tax rate is 22 percent but is expected to be 32 percent next year? How would your answer change if the next year's tax rate is expected to be 10 percent? (The present value of $1 at 6% is .943. Do not consider self-employment tax.

What are the rules regarding the deduction for transportation expenses related to foreign business travel?

What information is required to substantiate a business expense?