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

All of the following are considered related for purposes of Section 453(e) installment sales except

Except for certain lines of business such as farming, C corporations can choose between the cash method and accrual method of accounting.

The deduction limitation on net business interest expense is applied at the partner, not the partnership, level.

Land, buildings, equipment, and common stock are examples of tangible property.

As long as the rollover from a traditional IRA to a Roth IRA is completed within 60 days, no tax is due.

For purposes of calculating depreciation, property converted from personal use to business use will take on a basis equal to the greater of its FMV or its adjusted basis on the date of the conversion.

Emeril borrows $340,000 to finance taxable and tax- exempt investments. He incurs $18,000 investment interest expense, allocated equally between the taxable and tax- exempt investments. Ignore any possible investment interest expense limitation. How much of the interest expense is deductible, and where is it deductible?

Jackson Corporation granted an incentive stock option to employee Caroline on January 1, two years ago. The option price was $150, and the FMV of the Jackson stock was also $150 on the grant date. The option allowed Caroline to purchase 160 shares of Jackson stock. Caroline exercised the option on August 1, 2017, when the stock's FMV was $250. Unless otherwise stated, assume Caroline is a qualifying employee. If Caroline sells the stock on July 5, 2018, for $400 per share, she must recognize

Hannah is single with no dependents and has a salary of $102,000 for 2018, along with tax exempt interest incom $3,000 from a municipality. Her itemized deductions total $12,600. Required: Compute her taxable income.

When a husband and wife file a joint return and both have self- employment income, the self- employment tax must be computed separately.

Flow- through entities do not have to file tax returns since they are not taxable entities.

Intangible assets are subject to MACRS depreciation.

Premiums paid by an employer for employee disability coverage are excluded from the employee's gross income.

Self- employed individuals may claim, as a deduction for adjusted gross income, 50 percent of their

A calendar- year taxpayer places in service one new piece of equipment this year on March 1. The asset cost $600,000. For this first year, the taxpayer will base the depreciation deduction on 10 months.

Donald sells stock with an adjusted basis of $38,000 to his son, Kiefer, for its fair market value of $30,000. Kiefer sells the stock three years later for $32,000. Kiefer will recognize a gain on the subsequent sale of

Katie, a self- employed CPA, purchased an accident & disability insurance policy. As the result of an auto accident, Katie was unable to work and received $3,000 of disability benefits per month for seven months. The benefits were based on her estimated monthly income and should be reported as gross income.

Mia is self- employed as a consultant. During 2018, Mia earned $180,000 in self- employment income. What is Mia's self- employment tax?

Sec. 1245 applies to gains on the sale of depreciable personal property, but it generally does not apply to depreciable real property.

For purposes of the accumulated earnings tax, reasonable needs of the business include providing working capital for the business.