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

Expenses incurred in connection with conducting a trade or business activity or in connection with production of income are generally deductible, but personal expenses are generally not deductible.

Brienne sells land to her brother, Abe, at a loss. A few years later, Abe sells the land to an unrelated party for a substantial gain. Brienne can recognize her realized loss on the land when Abe sells the land to an unrelated party.

Losses incurred on wash sales of stock or securities are generally disallowed in the year of sale.

Taxpayers may deduct lobbying expenses incurred to influence legislation if the legislation is of direct interest to the taxpayer's trade or business.

In 2018, Phuong transferred land having a $150,000 FMV and a $120,000 adjusted basis, which is subject to a $110,000 mortgage in exchange for a one- third interest in the DSF Partnership. Phuong had purchased the land in 2013, but the mortgage was not received until 2014. The partnership owes no other liabilities. Phuong, Austin, and Alison share profits and losses equally and each has a one- third interest in partnership capital. The partnership's holding period for the land transferred by partner Phuong commences in

Tyler and Molly, who are married filing jointly with $210,000 of AGI in 2018, incurred the following expenses in efforts to adopt a child: The adoption was finalized in 2018. What is the amount of the allowable adoption credit in 2018?

Jason owns a warehouse that is used in business. The FMV of the warehouse is $200,000 (basis $120,000), and the warehouse is subject to a mortgage of $40,000. Jason exchanges the warehouse for land valued at $150,000. The other party also pays him $10,000 cash and assumes the mortgage on the warehouse. Jason's basis in the land received will be

Pete sells equipment for $15,000 to Marcel, his son. The equipment cost $20,000 and has accumulated depreciatio $12,000. Marcel will use the equipment in his business. a. What is the amount and character of Pete's gain on the sale? b. How does your answer change if the sales price is $22,000?

Which of the following statements regarding the Sec. 754 adjustment is incorrect?

On April 5, 2018, Joan contributes business equipment (she had purchased on October 24, 2015) having a $45,000 FMV and a $40,000 adjusted basis to the EJK Partnership in exchange for a 25% interest in the capital and profits. The basis of the property and the date the holding period begins for the partnership is

Laura, the controlling shareholder and an employee of Southtown Corporation, receives an annual salary of $750,000. Based on several factors including the size of the corporation's operations and a comparison of salary received by officers of comparably sized corporations, the IRS contends that Laura's salary should be no higher than $600,000. The Court upheld the IRS's position. As a result, which of the following is true?

One requirement for claiming a dependent as a qualifying relative is that the taxpayer provides more than 50 percent of the dependent's support (assuming it is not a multiple support agreement situation).

Dividends paid from most U.S. corporations are taxed at the same rate as the recipients' salaries and wages.

Why was Section 1244 enacted by Congress? Specifically, consider and discuss some of the individual qualifying requirements of Sec. 1244.

On January 31 of this year, Jennifer pays $700 for an option to acquire 100 shares of Lifetime Corporation common stock for $70 per share. Jennifer exercises the option on June 2. Jennifer sells the stock on April 30 of next year for $10,000. Jennifer's basis for the stock immediately before the sale is

Henri likes to invest in land. In a nontaxable exchange, Henri exchanges land having an adjusted basis of $8,500 and a FMV of $10,000, for a another parcel of land having a FMV of $15,000. In addition, Henri paid cash of $5,000. What is Henri's basis in the new land?

Which of the following statements is not correct regarding the compliance requirements of an involuntary conversion?

Kendrick, whose tax rate is 32%, had the following results from transactions during the year: After offsetting the STCL, what is (are) the resulting gain(s)?

A corporation which makes a charitable contribution of property for the care of the needy gets a deduction equal to the adjusted basis of the property.

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