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

Losses are generally deductible if incurred in carrying on a trade or business or incurred in an activity engaged in for profit.

Taxpayers with income below phase- out amounts are allowed a child credit of $2,000 for each qualifying child under age 19 or under age 24 if a full- time student.

Emma, a single taxpayer, obtains permission to change from a calendar year to a fiscal year ending June 30, 2018. During the six months ending June 30, 2018, she earns $40,000 and has $8,000 of itemized deductions. What is the amount of her annualized income?

Ella is a cash- basis sole proprietor providing senior care services to clients. One of her clients passes away owing her $1,500 for services performed. Ella has been notified that there are no assets in the estate to pay her bill. Ella will be able to recognize a business bad debt.

On January l, Grace leases and places into service an automobile with a FMV of $61,000. The business use of the automobile is 60%. The "inclusion amount" for the initial year of the lease from the IRS tables is $30. The annual lease payments are $11,000. What are the tax consequences of this lease?

Mackensie owns a condominium in the Rocky Mountains. During the year, Mackensie uses the condo a total of 23 days. The condo is also rented to tourists for a total of 77 days and generates rental income of $10,900. Mackensie incurs the following expenses in the condo: Using the court's method of allocating expenses, the amount of depreciation that Mackensie may take with respe the rental property will be

If property is involuntarily converted into similar property, the basis and holding period of the converted property carry over to the basis and holding period of the replacement property.

Minna is a 50% owner of a calendar- year S corporation. During the current year, the S corporation had ordinary income of $400,000, short- term capital gain of $150,000 and a charitable contribution of $30,000. What does Minna report for the year from the S corporation?

Individuals are generally allowed to deduct the greater of the standard deduction or itemized deductions.

The installment method is not applicable to sales of inventory and marketable securities.

Vidya can invest $5,000 of after- tax dollars (AT$) directly in a taxable bond outside an IRA, or he can contribute the $5,000 to a nondeductible IRA and invest in the same bond through the IRA vehicle. In either case, the bond yields an annual 5% before- tax rate of return (BTROR). Vidya's marginal tax rate is 15%, and he expects it to remain so for the entire investment horizon of 20 years. What is the after- tax accumulation for the "bond inside the IRA" after 20 years?

A company maintains a qualified pension plan for all of its employees. The company can also establish a qualified profit- sharing plan for its management team.

An S corporation can have both voting and nonvoting common stock as long as the shares of stock have identical rights to share in the profits and assets of the corporation.

All of the following could file partnership tax returns except

If a corporation receives dividends from an 80% or more owned affiliated corporation, the dividends- received deduction is 100%.

Once the business use of listed property falls to 50% or below, the alternative depreciation system must be used for the current year and all subsequent years, even if the business use percentage increases to more than 50% in a subsequent year.

Melanie, a single taxpayer, has AGI of $220,000 which includes $160,000 of salary and $60,000 of investment income. She will pay Medicare tax on the $60,000 of investment income of

Feng, a single 40- year- old lawyer, is covered by a qualified retirement plan at work. His salary is $115,000, and his total AGI is $129,000. The maximum contribution he can make to a Roth IRA in 2018 is

Insurance proceeds received because of the destruction of property are

For purposes of applying the passive loss limitations for rental real estate, active participation requires a greater time commitment by the taxpayer than does material participation.