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

If a corporation has no E&P, a distribution is ordinary income to the extent of the shareholder's basis with any excess treated as capital gain.

For income tax purposes, a taxpayer must use the same accounting method, either percentage of completion or completed contract method, for all long- term contracts in the same trade or business.

Corporate charitable contributions are limited in any given year to 50% of taxable income.

Speak Corporation, a calendar- year, accrual- basis taxpayer, sell packages of foreign langauge lessons to individuals planning to work overseas. In December 2018, it sold and received payment for $600,000 of 24- month lesson packages to be provided evenly through 2019 and 2020. Speak Corporation will recognize the $600,000 of income

Aamir has $25,000 of net Sec. 1231 gains this year on business assets. In addition, he incurred $18,000 of loss on the sale of stock held six months. Aamir will include in his AGI

A single taxpayer earns substantial income from salary, interest, dividends and capital gains. The taxpayer has a $300,000 passive loss carryover from an investment in a limited partnership which he has now sold. The taxpayer will be able to deduct the full $300,000 passive loss carryover.

Joey and Bob each have a 50% interest in a Partnership. Both Joey and the partnership file returns on a calendar- year basis. Partnership Q had a $12,000 loss in 2017. Joey's adjusted basis in his partnership interest on January 1, 2017, was $5,000. In 2018, the partnership had a profit of $10,000. Assuming there were no other adjustments to Joey's basis in the partnership, what amount of partnership income (loss) should Joey show on his 2017 and 2018 individual income tax returns?

One of the requirements that must be met in order to defer recognition of income for advance payments for goods is

A worker is considered to be in travel status for temporary work assignments of two years or less.

Which of the following statements regarding independent contractors and employees is true?

Sheila sells stock, which has a basis of $12,000, to her daughter for $7,000, the stock's fair market value. Subsequently, the daughter sells the stock to an unrelated party for $5,000. Which of the following is true for Sheila and her daughter?

At the beginning of this year, Edmond and Samuel were equal partners in a partnership that uses the calendar year as its tax year. On October 1, this year, Joan contributed $48,000 cash for a one- third interest in the partnership. The interests of both Edmond and Samuel drop to one- third. The partnership reports a $36,000 ordinary loss for the current tax year ending December 31. The loss allocation to Samuel is (assume the elective proration method with a monthly convention)

A taxpayer goes out of town to a business convention. The 50% reduction applies to the cost of food, entertainment and transportation expenses.

Assume a taxpayer projects that his total income tax for the year will $25,000. A taxpayer with savings should prefer to structure his tax prepayments so that he will receive a tax refund of $2,500 rather than a tax due of $2,500.

Qualified dividends received by individuals are taxed at the same rate as ordinary income.

Stephanie owns a 25% interest in a qualifying S corporation. Stephanie's basis in the stock was $40,000 at the end of the year after adjustments are made for capital contributions and distributions (but not operating results). Stephanie also loaned the S corporation $10,000 this year. The S corporation incurred a $240,000 ordinary loss this year. Assume that next year the S corporation's ordinary income is $160,000. Stephanie's basis in her stock at the end of next year is

Lindsay Corporation made the following payments to the family of Luke Marshall, an employee who died durin year. $5,000 for Luke's final paycheck that he failed to collect $10,000 for accrued vacation days as required by the employment contract $25,000 in admiration of Luke's outstanding service to the community What is the total amount that Luke's family must include in income?

Patrick's records for the current year contain the following information: - He donated stock having a fair market value of $5,000 to a qualified charitable organization. Patrick acquired the stock two years ago at a cost of $3,000. - He donated 20 hours of his time as a professional plumber to a qualified charitable organization. He bills his time to his customers at $50 per hour. - He also donated $7,500 cash to a qualified charitable organization. Patrick's adjusted gross income for the year is $100,000. What is the amount of his charitable contribution deduct

At the beginning of year 1, Sandeep invests $10,000 in a money market fund that pays a 3% annual return before taxes. Sandeep's marginal tax rate is 25%, and he allows the after- tax earnings to remain in the money market fund. That is, he withdraws only enough cash to pay the taxes on the earnings. What is his after- tax accumulation at the end of year 2?

Sec. 1231 property must satisfy a holding period of more than one year.