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

Discuss tax planning considerations which a taxpayer may use to possibly avoid classification of an activity as a hobby.

All casualty loss deductions, regardless of the type of asset, are allowed as itemized deductions.

A loss on the sale of a taxpayer's personal residence is deductible if the taxpayer owned and lived in the home for two of five years.

The largest source of federal revenues is the corporate income tax.

Which of the following is not an objective of the federal income tax law?

Costs of tangible personal business property which are expensed under Sec. 179 are subject to recapture if the property is converted to nonbusiness use before the end of the MACRS recovery period.

If a single taxpayer with a marginal tax rate of 37% has a long- term capital gain, it is taxed at

Joseph has AGI of $170,000 before considering the $20,000 rental loss for property which he actively manages. How much of the rental loss can he deduct?

Bad debt losses from nonbusiness debts are deductible as short- term or long- term capital losses depending on how long the debt was outstanding.

Britney is beneficiary of a $150,000 insurance policy on her father's life. Upon his death, she may elect to receive the proceeds in five yearly installments of $32,000 or may take the $150,000 lump sum. She elects to take the lump sum payment. What are the tax consequences in year one?

Sergio acquires a $100,000 Ternco Corporation bond (5%, 20- year bond) on January 1, 2018 for $75,000. The bond had been issued on January 1, 2016. If Sergio holds the bond to maturity, at redemption he will recognize

Discuss the purposes and scope of temporary regulations.

When a new business is formed, it must request approval from the IRS regarding the adoption of its various accounting methods.

If real property used in a trade or business or held for investment is condemned, it must be replaced with property having a similar functional use.

Kate can invest $4,000 of after- tax dollars (AT$) directly in a taxable bond outside an IRA, or she can contribute the $4,000 to a nondeductible IRA and invest in the same bond through the IRA vehicle. In either case, the bond yields an annual 3% before- tax rate of return (BTROR). Kate's marginal tax rate is 15%, and she expects it to remain so for the entire investment horizon of 25 years. What is the after- tax accumulation for the "bond outside the IRA" after 25 years (assume that bond interest is reinvested at the same rate)?

The destruction of a capital asset due to a casualty will result in recognition of an ordinary loss.

Emily owns land for investment purposes that has a FMV of $300,000 (basis of $260,000). She exchanges the land, plus $40,000 cash, for a warehouse to be used in her business. The warehouse is worth $420,000, but is subject to a mortgage of $80,000 which Emily will assume. The gain realized by Emily on the exchange is

Self- employed individuals may deduct the full self- employment taxes paid as a for AGI deduction.

Gwen, an independent consultant, traveled to New York City on a business trip. Gwen spent 4 days in business meetings and conferences and then spent 2 days sightseeing in the area. Gwen's plane fare for the trip was $250. Meals cost $160 per day. Hotels and other incidental expenses amounted to $250 per day. Gwen may deduct

Jeannie, a single taxpayer, retired during the year, to take over the management of some rental property. She had following items of income and expense: What is Jeannie's adjusted gross income for the year?