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

Indicate which courts decided the case cited below. Also indicate on which pages and in which publications the is reported. U.S. v. Maclin P. Davis, 397 U.S. 301, 25 AFTR 2d 70- 827, 70- 1 USTC & 9289 (1970).

On August 1 of this year, Sharon, a cash- method taxpayer, signs a lease for office space and begins business. The lease is for 3 years. At the time the lease is signed, Sharon pays the $12,600 rent for the entire 36- month lease term. How much can Sharon deduct this year?

Husband and wife, who live in a common law state, are eligible to file a joint return for 2018, but elect to file separately. Wife has adjusted gross income of $25,000 and has $2,200 of expenditures which qualify as itemized deductions. Husband deducts itemized deductions of $14,200. What is the taxable income for the wife?

A credit is available to encourage employers to provide child care for employees. The employer can either operate its own child care facility for its employees or pay a separate qualified child care facility under contract.

American Healthcare (AH), an insurance company, is trying to persuade Congress to enact nationwide anti- smoking legislation. As part of this effort, AH paid $500,000 to hire a lobbying firm to discuss its concerns with members of Congress. AH also contributed $100,000 to candidates for political office who support limiting public smoking. What amount of these expenditures can AH deduct?

Natasha, age 58, purchases an annuity for $40,000. Natasha will receive $400 per month for the rest of her life. The expected return multiple is 20.0. At age 65, the amount that Natasha may exclude from income is

If personal- use property is converted to trade or business use, the basis for depreciation is the lesser of adjusted basis or FMV on the date of conversion.

Taxpayers have the choice of claiming either deductions for AGI or the standard deduction.

Michael is an employee of StayHere Hotels, Inc. in Washington, DC. On his vacation, Michael travels to San Francisco and stays at a StayHere Hotel for six nights free of charge. The regular rate for a hotel room at StayHere in San Francisco is $300 a night. His ability to stay in the hotel without charge is based on the availability of empty rooms. How much income must Michael report due to the use of the San Francisco hotel room?

A shareholder sells his S corporation stock and realizes a $500,000 gain. The stock had been held five years. Which of the following statements most completely describes the character of the gain?

Teri pays the following interest expenses during the year: What is the amount of interest expense that can be deducted as an itemized deduction?

Marisa has a 75% interest in the MM Partnership. She sells the partnership a building used in her business for $150,000. Her adjusted basis of the building was $120,000. Marisa had used straight- line depreciation. The partnership will use the building for its offices. What are the tax consequences to Marisa of this transaction?

On July 1, Alexandra contributes business equipment (which she had purchased two years ago) having a $45,000 FMV and a $40,000 adjusted basis to the AX Partnership in exchange for a 25% interest in the capital and profits. The basis of Alexandra's partnership interest is

May an individual deduct a charitable contribution for services rendered to a charitable organization?

Expenditures which do not add to the value or prolong the life of property may be expensed in the year in which they are incurred.

Ivan Trent, age five, receive $2,900 of dividends per year from a mutual fund he owns; it is his only source of taxable income. Ivan's parents plan to gift a corporate bond they currently own to him. The bond pays $4,100 of interest income per year. Ivan's parents are in the 37% tax bracket. The individual income tax rate schedule that generally applies to a single taxpayer indicates a 10% tax rate until taxable income of $9,525. Ivan's family will save tax at the rate of 27% (37% - 10% tax rates) on the bond interest income if the parents transfer the bond to Ivan.

Jorge contributes $35,000 to his church and 100 shares of XYZ stock to the American Red Cross. The shares were purchased three years ago for $10,000 but were worth $18,000 as of the donation date. Jorge's AGI this year is $100,000. Assuming no elections are made, determine his current year charitable contribution deduction and the amount of any carryover to next year?

Summer Corporation has the following capital gains and losses during the current year: The tax result to the corporation is

The holding period of like- kind property received in a nontaxable exchange begins on the day of the exchange.

Ella needs to move her business to a larger facility. She projects a large realized gain on the sale of the old building and prefers not to pay tax on the gain because the sales proceeds are needed to finance the purchase of the new building. In the circumstances, a direct two- or three- party like- kind exchange is not feasible. Ella's sale can still qualify for like- kind treatment if she arranges an appropriate nonsimultaneous exchange. Among other criteria, after the transfer of the old building, the replacement property must be