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

Parents often wish to shift income to young children in order to lower the family tax burden. Tax policies and provisions that limit that practice include all of the following except

Generally, gains resulting from the sale of collectibles such as antiques, stamps, or artwork are taxed to individual taxpayers at a maximum rate of 25%.

Camellia, an accountant, accepts a new job located 1,000 miles away from her current job location. She has to pay a moving company plus the transportation costs for herself to move to the new location. The new employer does not pay moving costs. Camellia will be allowed a deduction for the work- related move.

In computing a corporation's NOL, the dividends- received deduction is allowed in full.

In the Deferred Model

Rick chose the following fringe benefits under his employer's cafeteria plan. Which of his chosen benefits will be taxable?

XYZ Corporation declares a 10 percent stock dividend distributable to all shareholders. There is only the one class of stock outstanding, and shareholders do not have any choices with respect to the distribution. Carol had owned 100 shares of stock, and she received 10 new shares as a result of the stock dividend. The stock is trading at $25 per share as of the distribution. Carol will recognize $250 of dividend income.

The cash receipts and disbursements method of accounting is used by most individual taxpayers and most noncorporate businesses that do not have inventories.

A taxpayer owns 200 shares of stock in a corporation purchased in two blocks of 100 shares for different amounts and at different dates. The taxpayer sells 100 shares. Barring any specific instructions, the brokerage firm will report the cost basis using the higher cost block of stock first.

With regard to taxable gifts after 1976, no gift tax is added to the basis of the property if the donor's basis is greater than the FMV of the property.

Jed sells an office building during the current year for $800,000. The building was purchased in 1980 for $350,000 depreciated the building under an accelerated method, but it is now fully depreciated. Jed has never had any oth 1231 transactions. a. What is the recognized gain or loss on the sale of the building and the character of the gain? b. How will the gain be taxed? c. Assume the building was purchased in 1981 and depreciated under ACRS. How will the gain be taxed?

All of the following deductible expenses are deductions for AGI except

In August 2018, Tianshu acquires and places into service 7- year business equipment for $70,000. This is the only asset that she purchased during the year; her taxable income from her trade or business is $23,000. Tianshu elects out of bonus depreciation, and she decides to limit her Sec. 179 election to the maximum amount currently deductible in her business for the current year. What is her maximum cost recovery (Sec. 179 and depreciation) deduction for 2018?

Kerry is single and has AGI of $25,000 in 2018. During the year he contributes $5,000 to his Roth IRA. What is the amount of qualified retirement savings contributions credit to which he is entitled?

Billy, age 10, found an old baseball glove while exploring his new home. His father, Al, took the glove to a dealer in baseball memorabilia who verified that the glove belonged to Babe Ruth. Al sold the glove for $75,000. What tax issues should Al consider?

Alejandro purchased a building in 1985, which he uses in his manufacturing business. Alejandro used the ACRS statutory rates to determine the cost- recovery deduction for the building. Alejandro's original cost for the building is $500,000 and cost- recovery deductions allowed are $500,000. If the building is sold for $800,000, the tax results to Alejandro are

During the year, Mark reports $90,000 of active business income from his law practice. He also owns two passive activities. From Activity A, he earns $20,000 of income, and from Activity B, he incurs a $30,000 loss. As a result, Mark

Mark owns an unincorporated business and has $20,000 of Sec. 1231 gains and $22,000 of Sec. 1231 losses. He must report a net capital loss of $2,000 on his tax return.

Chloe receives a student loan from a foundation which encourages students to pursue teaching careers. Under the terms of the loan, Chloe will not have to repay the loan if she teaches in a public school for ten years. What tax issues should Chloe consider?

If a taxpayer has gains on Sec. 1231 assets, Secs. 1245 and 1250 must be applied first to determine any amounts recaptured as ordinary income, and any excess gain may then be netted with Sec. 1231 losses for possible long- term capital gain treatment.