Exam 16: Tax Deductions and Travel Expenses for Employees and Self-Employed Individuals

Hal transferred land having a $160,000 FMV and a $75,000 adjusted basis which is subject to a $150,000 mortgage in exchange for a one- third interest in the HEF Partnership. Hal acquired the land ten years ago. The partnership owes no other liabilities. Hal, Ellen, and Felix share profits and losses equally and each has a one- third interest in partnership capital. Hal's basis in the one- third partnership interest is

For corporations, NSTCLs and NLTCLs are treated as STCLs for purposes of the carryback and carryforward rules.

Why are some partnership items separately stated?

Greta, a calendar- year taxpayer, acquires 5- year tangible personal property in 2018 and places the property in service on the following schedule: Greta elects to expense the maximum under Sec. 179, and selects the property placed into service on November 8 property is not eligible for bonus depreciation. Her business's taxable income before Sec. 179 is $790,000. What is total cost recovery deduction (depreciation and Sec. 179) for 2018?

Jenna, who is single, sold her principal residence on December 1, 2017, and excluded the $150,000 gain because she met the ownership and usage requirements under Sec. 121. Jenna purchased another residence in Pensacola on January 1, 2018, that she occupied until July 1, 2018, when she received a new job offer from an employer in Miami. She sells the Pensacola residence on October 1, 2018, and realizes a gain of $40,000. Jenna may exclude what amount of the gain from the sale on October 1, 2018?

The installment sale method can be used for all of the following transactions except

Nana is a self- employed consultant. For the past five years, she has used an extra bedroom (15% of the house) in her home as a qualifying home office and deducted $9,000 of depreciation expense. This year she sells the house for $740,000. The house cost $500,000. Nana is single. She will recognize gain on the sale of the house of

Lewis died during the current year. Lewis owned passive activity property with a FMV of $61,000 and a basis of $48,000. Suspended losses of $15,000 were attributable to the property. How much of the suspended loss is deductible on Lewis's final income tax return?

Norman, a self- employed lawyer, traveled to San Francisco for four days on vacation, and while there spent another two days conducting business. Norman's plane fare for the trip was $500; meals cost $150 per day; hotels cost $300 per day; and a rental car cost $150 per day that was used for all six days. Norman may deduct

Which of the following is not a capital asset?

Parents must provide more than half the support of their child under the age of 19 in order for the child to be considered as a dependent qualifying child.

Generally, the statute of limitations is three years from the later of the date the tax return is filed or the due date.

Paul bought a computer for $15,000 for business use on March 18, 2016. This was his only purchase for that year. Paul used the most accelerated depreciation method available, but did not elect Sec. 179 and the property did not qualify for bonus depreciation. Paul sells the machine in 2018. The depreciation on the computer for 2018 is

A taxpayer may use the FIFO or average cost methods for financial statement purposes, while using the LIFO method for tax purposes.

In year 1 a contractor agrees to build a building for $2,500,000 by the end of year 2. The builder's cost is estimated to be $1,800,000. The actual costs year 1 are $900,000 and year 2's actual costs are $1,100,000. Under the percentage of completion method year 1's gross profit is

An example of an AMT tax preference item is the excess of MACRS depreciation on equipment over depreciation computed by using the 150% declining balance method.

Charlie owns activity B which was considered a passive activity and generated a $17,000 suspended loss. Charlie increases his involvement with activity B so that this year activity B is not considered passive for Charlie. During this year, activity B produces a $9,000 loss. In addition, Charlie acquires an investment in activity X, a passive activity, this year. Charlie's share of activity X's income is $13,000. Charlie's salary this year is $70,000. As a result, this year Charlie must

Vector Corporation has been using an incorrect method in accounting for supplies expense. It can change to the correct method without filing 3115.

A credit for rehabilitation expenditures is available to a business for the purchase price of a building which has received the certified historic structure designation.

Ola owns a cottage at the beach. She and her family use the property for 30 days during the summer season and to unrelated parties for 60 days. The rental receipts amount to $8,000. Total costs of operating the property are as follows: In addition, potential depreciation expense is $9,000. a. Is the cottage subject to the vacation home rental limitations of IRC Sec. 280A? b. How much of expenses can Ola deduct?