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

In determining taxable income, "market" for purposes of applying the lower of cost or market method means the price at which the taxpayer can sell the inventory item.

Juanita's mother lives with her. Juanita purchased clothing for her mother costing $1,000 and provided her with a room that Juanita estimates she could have rented for $4,000. Juanita spent $5,000 on groceries she shared with her mother. Juanita also paid $700 for her mother's health insurance coverage. How much of these costs is considered support?

For noncorporate taxpayers, depreciation recapture is not required on real property placed in service after 1986.

One of the requirements which must be met for stock to be considered Section 1244 stock is that the stock must be owned by an individual or a partnership.

Alex is a calendar- year sole proprietor. He began business on December 1, this year. He uses the accrual method accounting. Alex had the following collections in December: • Collected $7,000 in December, from clients who paid cash for services to be performed next year. • Collected $5,000 in December, for services performed during December; deposited in an operating account on December 31, this year. • Collected $12,000 in December; on accounts receivable for services performed in December; deposited in opera account on January 2, next year. What is the amount Alex must include in his income for December?

Bob and Elizabeth Brown, a married couple, sell their personal residence to Tamel. Tamel pays $660,000 and assumes their $90,000 mortgage. To make the sale, the Browns pay $20,000 in commissions and $10,000 in legal costs. The couple has owned and lived in the house for seven years and their tax basis is $200,000. What is the amount of gain recognized on the sale?

Gifts of appreciated depreciable property may trigger recapture of depreciation of cost- recovery deductions to the donor as of the date of gift.

Tom and Alice were married on December 31 of last year. What is their filing status for last year?

Business interest expense is limited for larger businesses. Which of the following statements is not correct with respect to this limitation?

June Corporation has the following income and expense items during the current year: The allowed dividends- received deduction is

Kathleen received land as a gift from her grandfather. At the time of the gift, the land had a FMV of $105,000 and an adjusted basis of $85,000 to Kathleen's grandfather. The grandfather did not have any gift taxes due. One year later, Kathleen sold the land for $110,000. What was her gain or (loss) on this transaction?

Which of the following statements is incorrect?

Don's records contain the following information: 1. Donated stock having a fair market value of $3,600 to a qualified charitable organization. He acquired the st months previously at a cost of $2,400. 2) Paid $700 to a church school as a requirement for the enrollment of his daughter. 3) Paid $200 for annual homeowner's association dues. 4) Drove 400 miles in his personal auto. The travel was directly related to volunteer services he performed for h church. How much can Don deduct as a charitable contribution?

Vincent makes the following gifts during 2018: $15,000 cash gift to wife Gift of automobile valued at $35,000 to his adult son Gift of golf clubs valued at $5,000 to a friend $10,000 contribution to church Although he is married, none of the gifts are considered joint gifts with his wife. What are the total taxable gifts s to the unified transfer tax?

In October 2018, Joy and Paul separated and have not lived with each other since, but they are still legally married. They do not file a joint return. Joy supports their children after the separation and pays the cost of maintaining their home. Joy's filing status in 2018 and 2019 is, respectively

The formula for the after- tax accumulation (ATA) for the Exempt Model is

Roscoe Corporation owns 85% of Vintage Corporation and 25% of Waxtin Corporation. Vintage owns 60% of Waxtin. Each corporation has only one class of stock. The three corporations form a(an)

Which of the following statements is incorrect regarding unfunded deferred compensation plans?

In 2018, Modern Construction Company entered into a contract to construct a building for $5,000,000. The estimated cost to complete the building is $4,000,000 and the project will be completed in 2019. Modern incurred actual construction costs of $1,600,000 and $1,800,000 in 2018 and 2019, respectively. How much gross profit is recognized using the percentage- of- completion method in 2018 and 2019?

Section 1250 does not apply to assets sold or exchanged at a loss.