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

Benefits covered by Section 132 which may be excluded from an employee's gross income do not include

Jack takes a $7,000 distribution from his Health Savings Account. $2,000 is used to pay for X- rays and dental surgery. The other $5,000 is used to make a down payment on a new car. What are the tax consequences to Jack?

Gabe Corporation, an accrual- basis taxpayer that uses the calendar year as its tax year, sells CPE (continuing professional education) courses under contracts ranging from three months to two years. Assume that Gabe Corporation sold three contracts on July 1, 2018: one for six months costing $300; one for one year costing $500; a for two years costing $800. Required: What is the minimum amount of income that must be recognized in 2018 and 2019?

Tom and Shawn own all of the outstanding stock of Brady Corporation (a retail store operated as a C corporation). This year, Brady generates taxable income of $20,000 from active business operations, and also reports investment interest income of $22,000 and losses of $28,000 from a passive activity. As a result, Brady Corporation reports

The unified transfer tax system

Julie sells her manufacturing plant and land originally purchased in 1980. Accelerated depreciation had been tak building, but the building is now fully depreciated. Julie is in the 37% marginal tax bracket. Other information is follows: She has not sold any other assets this year. A review of her file indicates that the only asset dispositions in the past five years was a truck sold for a $10,000 loss last year. What are the tax consequences of the sale (type of gain; rates at which taxed)?

A taxpayer suffers a casualty loss on personal- use property for which he has insurance coverage. However, to avoid a premium increase, the taxpayer fails to make a timely claim. In this situation is the full deduction for the casualty, after the normal floors, available to the taxpayer? Why or why not?

Compare and contrast "interpretative" and "statutory" regulations.

Shaunda has AGI of $90,000 and owns rental property generating a $27,000 loss. She actively manages the property. Her deductible loss is

A self- employed individual has earnings from his business of $300,000 in 2018. For the earnings in excess of $128,400, he will only have to pay the 2.9% Medicare Tax.

Hoyt rented office space two years ago to Harris, receiving the first and last months' rent plus a security deposit of $1,000. In early January of this year, Harris moves and Hoyt refunds $250 of the deposit and keeps the remainder to cover $500 which is spent for repairs to the office space and one week of unpaid rent that amounts to $250. How would this information be reflected on Hoyt's tax return this year?

If a prepayment is a requirement for the receipt of the medical care, the payment is deductible in the year paid rather than the year in which the care is rendered.

Taxpayers must pay the disputed tax prior to filing a case with the Tax Court.

When a taxpayer contacts a tax advisor requesting advice as to the most advantageous way to dispose of a stock, the tax advisor is faced with

If the standard mileage rate is used in the first year, the actual expense method may not be used in future years.

Douglas bought office furniture two years and four months ago for $25,000 to use in his business and elected to expense all of it under Sec. 179. Depreciation of $3,500 would have been taken under the MACRS rules. If Douglas converts the furniture to nonbusiness use today, Douglas must

Qualified tuition and related expenses eligible for the American Opportunity Tax Credit are limited to those incurred the first two years of postsecondary education.

Discuss the purpose of the imputed interest rules.

In a limited partnership, the limited partners are liable for partnership debts only to the extent of their investment in the partnership plus any amount they commit to contribute to the partnership if called upon.

A controlled group of corporations must apportion tax benefits (e.g., Sec. 179 expense limitation) among the group members as if only one corporation existed.