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

Connors Corporation sold a warehouse during the current year for $980,000. The building had been acquired in a cost of $830,000. The building is fully depreciated. What is the amount and nature of the gain or loss on the sale of the warehouse?

During the year 2018, a calendar- year taxpayer, Marvelous Munchies, a chain of specialty food shops, purchased equipment as follows: Assume the property is all 5- year property. What is the maximum depreciation that may be deducted for the assets this year, 2018, assuming Sec. 179 expensing and bonus depreciation are not claimed?

Adjusted gross income (AGI) is the basis for a number of phase- outs of deductions.

You may choose married filing jointly as your filing status if you are married and both you and your spouse agree to file a joint return. Which of the following facts would prevent you from being considered married for filing purposes?

An improper election to use a fiscal year automatically places the taxpayer on the calendar year.

Dean exchanges a business storage facility with a $120,000 adjusted basis for $40,000 cash and a parking lot with a $140,000 FMV. What is the amount of gain which Dean recognizes on the exchange?

To claim the Lifetime Learning Credit, a student must take at least one- half of a full- time course load during the year.

Alvin, a practicing attorney who also owns an office supplies store, may use the cash basis for his legal practice and the accrual basis for his office supplies store.

The Deferred Model has all of the following characteristics except for

Small Corporation had the following capital gains and losses during the current year: Taxable income, exclusive of the capital gains and losses above, is $68,000. a. How should the capital gains and losses be treated for the current year? b. What is the taxable income for the current year taking into consideration the capital gains and losses?

Individuals Terry and Jim form TJ Corporation. Terry transfers cash of $930,000 in exchange for 50% of the stock of the TJ Corporation worth $900,000 and a $30,000 note. Jim transfers equipment with a $890,000 adjusted basis and a $930,000 FMV for 50% of the stock worth $900,000 and a note of the TJ Corporation valued at $30,000. The basis of the equipment to TJ Corporation is

Individuals Bert and Tariq form Shark Corporation. Bert transfers equipment with a $290,000 adjusted basis and a $335,000 FMV for 50% of the stock worth $310,000 and a note of Shark Corporation valued at $25,000. Tariq transfers cash of $335,000 in exchange for 50% of the stock of Shark Corporation worth $310,000 and a $25,000 note. Bert's recognized gain is

On its tax return, a corporation will use the same depreciation, amortization and depletion methods used in its financial statements issued to shareholders.

Off- the- shelf computer software that is purchased for use in the taxpayer's trade or business is amortized over 36 months, or it can be immediately expensed under a Sec. 179 election.

Bev owns approximately $13 million of assets primarily composed of a very valuable parcel of real estate and a savings account of $500,000. Bev has four grandchildren and is planning to give them each an annual gift in equal amounts. Bev can gift $56,000 in total in 2018 to her grandchildren without creating taxable gifts.

Imputation of interest could be required on all of the following loans with the exception of

Galaxy Corporation purchases specialty software from a software development firm for use in its business as of January 1 of the current year at a cost of $90,000. No hardware was acquired. How much of the cost can Galaxy deduct this year?

Kors Corporation has 30 employees and $5 million of gross receipts. Kors spends $15,000 for qualified structural improvements for access for the disabled. The disabled access credit is

Diane, a successful accountant with an annual income of $150,000, also enjoys raising and training race horses, an activity in which she spends about 10 hours per week. Over the past five years her winnings from races have amounted to $20,000. She employs neighborhood children to feed the horses but has a professional trainer who works with the horses about 5 hours per week. Discuss some of the factors that might enter into the determination of whether or not this activity is a hobby or a trade/business.

All of the following items are generally excluded from income except