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

In the current year George, a college photography professor, acquired camera equipment (5- year property) for $1,000 and used the camera equipment 80% for teaching and creative work- related activities and the remaining 20% for personal use. The university provides camera equipment for faculty use, but George prefers his own equipment. Assuming Sec. 179 and bonus depreciation is not applied, the maximum depreciation deduction is

Kelsey enjoys making cupcakes as a hobby and occasionally sells them for parties. Kelsey receives $1,000 in revenues from cupcake sales this year and pays $1,300 for supplies. Kelsey takes the standard deduction each year. The net effect of the cupcake activity on Kelsey's taxable income is

Chuck, who is self- employed, is scheduled to fly from Minneapolis to London on a business trip. His flight schedule included a connection through New York City. When Chuck arrived in New York City, he learned that his flight to London had been cancelled due to a volcanic eruption in Iceland. All air travel to Europe was delayed for five days because of significant amounts of ash in the air, causing Chuck to incur costs for hotel and meals in New York City. Since Chuck had never been to New York City before, he spent the time sightseeing. What tax issues are present?

Section 1221 of the Code includes a comprehensive list of assets properly classified as capital assets.

Rachel invests $5,000 in a money market account which earns a 5% before- tax return. Rachel has a 20% marginal tax rate. Rachel makes the one- time investment and leaves the funds in the account for 10 years. She allows all after- tax earnings to remain in the account. What is her after- tax accumulation after 10 years?

The Lifetime Learning Credit is partially refundable.

Itemized deductions are deductions for AGI.

Richard has a 50% interest in a partnership, and he materially participates in the partnership's business. Richard's adjusted basis in the partnership was $60,000 at the beginning of the year, including his share of partnership liabilities. There were no distributions to Richard during the year. During the current year, the partnership borrowed $160,000 from a local bank to purchase equipment needed in the business. All of the partners are personally liable for all partnership debts. The partnership incurred a $320,000 loss this year. What amount can Richard claim as a loss from the partnership on his individual tax return this year?

Which of the following statements regarding implicit taxes and clienteles is not true?

A partnership plans to set up a retirement plan to benefit the partners and the employees. All of the following retirement plans are appropriate except

Nelda suffered a serious stroke and was admitted to a nursing home for 140 days. Nursing home charges, including physician fees and other related expenses were $33,000. Under Nelda's long- term care insurance contract, she received reimbursements of $36,000. How much of the $36,000 reimbursement must be included in Nelda's gross income in 2018?

A single taxpayer provided the following information for 2018: What is taxable income?

On July 1 of the current year, Marcia purchases a new home and borrows $320,000. Marcia is required to pay two points on the loan. The loan is secured by the residence and the charging of points is an established business practice in the area. The term of the loan is 20 years, beginning on July 1 of the current year. How much, if any, of the points may Marcia deduct in the current year?

Rick sells stock of Ty Corporation, which has an adjusted basis of $20,000, for $22,000. He pays a sales commission of $500. In computing his gain or loss, the amount realized by Rick is $1,500.

A corporation distributes land with a FMV of $85,000 (basis $50,000). The land has a mortgage of $95,000 assumed by the shareholder. Gain to the corporation is

The installment sale method may be used on the sale of property at a loss.

Under the "check- the- box" Treasury Regulations, an LLC with more than one member is treated as a partnership unless the LLC affirmatively elects to be classified as a corporation.

Jamie sells investment real estate for $80,000, resulting in a $15,000 loss. Jamie's loss is

Ben, age 67, and Karla, age 58, have two children who live with them and for whom they provide total support. Their daughter is 21 years old, blind, is not a full- time student and has no income. Her twin brother is 21 years old, has good sight, is a full- time student and has income of $4,800. Which of the following statements is correct regarding Ben and Karla's ability to claim the twins as dependents?

Medical expenses paid on behalf of an individual who could be the taxpayer's dependent except for the gross income or joint return tests are deductible as itemized deductions.