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

Jacqueline dies while owning a building with a $1,000,000 FMV. The building is classified as Sec. 1245 property acquired in 1985 for $850,000. Cost- recovery deductions of $850,000 have been claimed. Pam inherits the proper a. What is the amount of Pam's basis in the property? b. What is the amount of cost- recovery deductions that Pam must recover if she immediately sells the building

A client placed three new business assets into service in 2018. The client has high taxable income and would like to maximize the deduction by using bonus depreciation. All of the following assets will qualify for bonus depreciation except

A corporation owns many acres of timber, which it acquired three years ago, and which has a $150,000 basis for depletion. The timber is cut during the current year for use in the corporation's business. The FMV of the timber on the first day of the current year is $280,000. If the corporation makes the appropriate election, the tax result is

Why would a taxpayer elect to capitalize and amortize intangible drilling costs (IDCs) rather than expense such costs?

Generally, expenses incurred in an investment activity other than those incurred to produce rent and royalties are deductions from AGI.

Marvin and Pamela are married, file a joint return, and have two children, ages 9 and 11. Their combined AGI is $65,000. Marvin's earned income is $40,000; Pamela's is $25,000. They incur $6,500 of child care expenses to enable them to be employed during the current year. Their child and dependent care credit is

Which of the following is true about H.R.10 (Keogh) plans?

Which of the following courts is not a trial court for tax cases?

Alex, a commercial fisherman, owns a fishing boat with a $1,600,000 basis. The boat is destroyed in a hurricane, and Alex collects $2,000,000 from the insurance company. He purchases another boat for $1,550,000. What is the amount of the gain recognized on the transaction?

In the current year, ABC Corporation had the following items of income, expense, gains, and losses: What is taxable income for the year?

A partner in a partnership will deduct her qualified business income deduction as a deduction for AGI.

On January 31 of this year, Mallory pays $800 for an option to acquire 100 shares of Mesa Corporation common stock for $85 per share. As a result of an increase in the market value of the Mesa stock, the market price of the option increases and Mallory sells the option for $1,000 on August 4. As a result of the sale, Mallory must recognize

Intangible drilling and development costs (IDCs) may be deducted as an expense or may be capitalized.

Expenditures incurred in removing structural barriers in the home of a physically handicapped individual are deductible only to the extent the costs exceed the increase in fair market value to the property attributable to the capital expenditure.

Why did Congress enact restrictions and limitations on losses from passive activities?

The term "Social Security benefits" does not include

Brent must substantiate his travel and entertainment expenses. Which of the following is not required for documentation?

A shareholder transfers a building subject to a mortgage in a Sec. 351 transfer. The corporation assumes the mortgage, and no gain is recognized on the transfer under Sec. 351. The transfer of the liabilities has no effect on the shareholder's stock basis.

Tronco Inc. placed in service a truck costing $40,000 on January 15 of this year. On November 1, the company placed in service $200,000 of construction equipment. Tronco is a calendar- year taxpayer. When calculating MACRS depreciation, Tronco must apply the mid- quarter convention to the construction equipment, but will use the half- year convention for the truck.

The vacation home limitations of Section 280A may also apply to boats and mobile homes.