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

On January 1 of this year (assume not a leap year), Anne bought 50% of a calendar- year S corporation. Anne purchased the remaining 50% on July 1 (day 181 of the year). Anne's adjusted basis in the stock is $277,000 before any basis adjustments are taken into account. For this year, the corporation had a net operating loss of $365,000. What is the amount of the corporation's loss that Anne can deduct on her current individual income tax return?

During the current year, George recognizes a $30,000 Sec. 1231 gain on sale of land and a $18,000 Sec. 1231 loss on the sale of land. Prior to this, George's only Sec. 1231 item was a $14,000 loss six years ago. George must report a

Classification of a loss as a capital loss is based upon the length of time the asset was held.

Discuss why Congress passed the innocent spouse provision and detail the requirements to be met in order to qualify as an innocent spouse and be relieved of liability for tax on unreported income.

Which of the following conditions would generally not favor the rollover of an untaxed retirement fund (e.g., traditional IRA or 401(k) plan) to a Roth account?

Laurie owns land held for investment. The land's FMV is $150,000. Laurie's basis in the land is $130,000. Laurie exchanges the land, plus $20,000 of cash, for a warehouse owned by Trey. The warehouse is worth $210,000, but is subject to a mortgage of $40,000 which Laurie will assume. Trey's basis in the warehouse is $120,000. Laurie's basis in the warehouse received will be

Losses are disallowed on sales or exchanges between a partner and the partnership if the partner owns directly or indirectly more than a 50% interest in the capital or profits.

Bobbie exchanges farmland (adjusted basis $160,000) for other farmland that has a FMV of $140,000. Bobbie also receives $30,000 cash. Bobbie's basis in the new farmland is

Rob sells stock with a cost of $3,000 to his daughter for $2,200, which is its fair market value. Later the daughter sells the stock for $3,200 to an unrelated party. Which of the following describes the tax treatment to Rob and Daughter?

Becky wins a car and furniture on a television game show. The fair market value of these items is taxable to Becky.

Depreciation recapture does not apply to a transfer coming under Sec. 351 unless the transferor recognizes gain on depreciable property that is transferred.

MN Partnership has two equal partners, Mark and Nadia. In the current year, the MN earns $140,000 of ordinary business income and a $30,000 long- term capital gain. Nadia is single. In addition to the partnership items, she reports $40,000 of dividend income and a long- term capital loss of $13,000 from her personal investment accounts. Nadia does not itemize her deductions. Calculate Nadia's 2018 taxable income.

Rana purchases a 5%, $100,000 corporate bond at issuance on January 1, 2018 for $91,500. The bond matures in five years. In 2018 Rana will recognize interest income of

Ovi is a sales representative for a local company. His sales territory crosses the state so he incurs substantial travel costs as a requirement of his job. Ovi maintains good records, and the travel costs total $3,000 for the year. His company provides him an expense allowance under a nonaccountable plan. How will Ovi treat the $2,000 partial reimbursement and the $3,000 of total business travel costs? A) Reimbursement- exclude from income; travel costs- none are deductible B) Reimbursement- include in income; travel costs- none are deductible C) Reimbursement- include in income; travel costs- $2,000 are deductible and the $1,000 balance is not deductible D) Reimbursement- include in income; travel costs- deduct the full $3,000

In all situations, tax considerations are of primary importance. Do you agree or disagree? Support your answer.

The terms "progressive tax" and "flat tax" are synonymous.

On October 2, 2018, Dave acquired and placed into service 5- year business equipment costing $70,000. No other acquisitions were made during the year. Dave does not apply Sec. 179 expensing or bonus depreciation. The depreciation for this year is

Toni owns a gourmet dog treat shop downtown. She spends $2,800 investigating opening another dog treat shop in Northtown and an additional $3,100 investigating a new location in Southtown. Toni does open the Northtown shop, but does not open the Southtown shop.

In April of 2017, Brandon acquired equipment which is five- year listed property (not an automobile) for $30,000 and used it 70% for business. Brandon did not claim Sec. 179 or bonus depreciation. In 2018, his business use of the property dropped to 40%. Which of the following statements is true?

During the current year, Paul, a single taxpayer, reported the following items: