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

Three years ago, Myriah refinanced her home mortgage and was required to pay two points on the refinanced loan. The loan was secured by the property, and the charging of points was the established lending practice in the area. The term of the loan was 20 years. Myriah sold the house earlier this year and paid off the refinanced mortgage. In this year of the home sale, is Myriah allowed any deduction with respect to the points paid on the refinanced mortgage?

Ron's building, which was used in his business, was destroyed in a fire. Ron's adjusted basis in the building was $210,000, and its FMV was $330,000. Ron filed an insurance claim and was reimbursed $300,000. In that same year, Ron invested $240,000 of the insurance proceeds in another business building. Ron's basis in the new building is

According to the tax formula, individuals can deduct the greater of for AGI deductions or from AGI deductions.

A qualified pension plan requires that employer- provided benefits must be 100 percent vested after five years of service.

The MACRS system requires that residential rental property and nonresidential real property be depreciated using the straight- line method.

Torrie and Laura form a partnership in which they are equal partners. Torrie contributes $100,000 cash. Laura contributes $40,000 cash and a painting worth $60,000. Laura purchased the painting three years ago for $45,000. years the partnership sells the painting for $80,000. a. What is the partnership's basis in the painting? b. When the painting is sold, how much gain is allocated to each partner?

Voluntary revocation of an S corporation election is permitted only if consent is obtained from all shareholders.

A business uses the same inventory method for both financial reporting and tax reporting. Because of the UNICAP requirement, ending inventory is likely to be

Rachel, a self- employed business consultant, has significant expenses for travel business meals with clients in her work, but she has not kept receipts. She will be able to deduct a reasonable amount of these ordinary and necessary expenses under the Cohan rule.

Paul, a business consultant, regularly takes clients and potential clients out to dinner. In order to deduct these expenses, Paul must maintain records substantiating all of the following except

A taxpayer's tax year must coincide with the year used to keep the taxpayer's books and records.

Charles is a single person, age 35, with no dependents. In 2018, Charles has gross income of $75,000 from his sole proprietorship. Charles also incurs $80,000 of deductible business expenses in connection with his proprietorship. He has interest and dividend income of $22,000. Charles has $7,000 of itemized deductions. Charles's taxable income is

The partnership will make all of the elections affecting the computation of partnership income listed below except

Under the MACRS system, automobiles and computers are classified as seven- year property.

Each year a taxpayer must include in gross income the rental value of his or her personal residence.

No deduction is allowed for a partially worthless nonbusiness debt.

Vector Inc.'s office building burns down on October 31, 2017. Vector, a calendar- year taxpayer, finally settles with the insurance company on February 3, 2018. In order to defer the gain realized on the building, Vector must acquire another office building by February 3, 2020.

Alexis and Terry have been married five years and file joint tax returns. Alexis began embezzling funds from her employer during the third year of their marriage. Last year, Alexis suddenly left the country and Terry does not know where she is. In the current year, Terry learned that the IRS had assessed him $27,000 in unpaid taxes due to Alexis's embezzlement. What tax issue(s) are present in Terry's situation? What questions would you ask Terry to determine his appropriate response to the IRS?

Regressive tax rates decrease as the tax base increases.

A loss on business or investment property which is abandoned is deductible as an ordinary loss to the extent of the property's adjusted basis on the date of abandonment.