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

A building used in a business is sold after five years of use for a gain. The gain will be treated as a long- term capital gain.

FIFO Corporation, a public- traded corporation, pays its CFO a basic salary of $900,000 and a $500,000 bonus awarded for exceptional service. Her compensation package is considered reasonable compensation when compared to other similar corporations and her level of responsibilities. FIFO can deduct

Ralph's business records were lost as a result of Hurricane Katrina. CPA Jane prepares Ralph's return using estimates. What do the Statements on Standards for Tax Services state about the use of estimates?

Tara transfers land with a $600,000 adjusted basis and a $700,000 FMV to a corporation in a Sec. 351 transfer. Immediately after the transfer, Tara owns 100% of the corporation- stock with a FMV of $660,000. In addition, Tara's $40,000 principal balance on her student loan is legally assumed by the corporation as part of the overall transfer. No other property is transferred. Tara's recognized gain on the transfer is

Dixie Corporation distributes $31,000 to its sole shareholder, Sally. At the time of the distribution, Dixie's E&P is $25,000 and Sally's basis in her Dixie stock is $10,000. Sally's basis in her Dixie stock after the distribution is

When personal- use property is covered by insurance, no deduction is available for a casualty loss of the property unless the taxpayer timely files an insurance claim for the loss.

Prior Corp. plans to change its method of accounting for supplies. Both the old and new methods are acceptable. Which of the following statements is correct regarding the change?

Stephanie's building, which was used in her business, was destroyed in a fire. Stephanie's adjusted basis in the building was $175,000, and its FMV was $210,000. Stephanie filed an insurance claim and was reimbursed $200,000. In that same year, Stephanie invested $180,000 of the insurance proceeds in another business building. If the proper election is made, Stephanie will recognize gain of

A tax bill introduced in the House of Representatives is then

Which of the following is not an advantage of a limited liability company (LLC)?

The earned income credit is available only to taxpayers with qualifying children.

In year 1 a contractor agrees to build a building for $2,500,000 by the end of year 2. The builder's cost is estimated to be $1,800,000. The actual costs year 1 are $900,000 and year 2's actual costs are $1,300,000. Under the completed contract method the gross profit for year 2 is

The following are gains and losses recognized in 2018 on Ann's business assets that were held for more than one The assets qualify as Sec. 1231 property. A summary of Ann's net Sec. 1231 gains and losses for the previous five- year period is as follows: Describe the specific tax treatment of each of the current year transactions.

Under what circumstances can a taxpayer obtain a partial exclusion if a home is sold before the use and ownership tests are satisfied?

The C Corporation Model is a variation of the Pass- Through Model, where taxation occurs at both the entity and the owner levels.

The health insurance premium assistance credit is designed to help lower and middle income taxpayers who purchase their own health insurance directly from an insurance company or through a state or federal exchange.

Jessica owned 200 shares of OK Corporation with a basis of $12,000 and a FMV of $24,000. Jessica received 20 stock rights as a nontaxable distribution with a total FMV of $8,000. Jessica sold the stock rights for $4,000. Jessica's gain or loss on the sale was

Taxpayers often have to decide between contributing to a traditional nondeductible IRA or a Roth IRA. In making the comparison between the two IRAs, which models should the taxpayer use?

Limited liability company members (owners) are responsible for the liabilities of their limited liability company.

Steve Greene, age 66, is divorced with no dependents. In 2018, Steve had income and expenses as follows: Compute Steve's taxable income for 2018. Show all calculations.