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

Franca has AGI of $130,000 this year. After applying the $100 floor, she has $26,000 of federal disaster losses on personal assets, $12,000 of nonfederal casualty losses on personal assets, and $23,000 of personal casualty gains for the year. What is Franca's deductible casualty loss?

Gross income is limited to amounts received in the form of cash.

Employees receiving nonqualified stock options recognize ordinary income at the grant date or exercise date if there is a readily ascertainable fair market value.

A cash- basis lawyer purchases an office building to use in her legal practice. To acquire the mortgage, the taxpayer must pay $5,000 in points. The taxpayer will deduct the points in the year paid.

All of the following statements are true with regard to the formation of a partnership except

The difference between the BTRORs of fully- taxable and tax- favored investments is called

Fireball Corporation is an S corporation. Leyla owns all of the stock. During the current year, Fireball earned taxable income of $500,000 and paid a $300,000 distribution to Leyla. Which of the following statements is correct?

The sale of inventory results in ordinary gain or loss.

In 2018, the standard deduction for a married taxpayer filing a joint return and who is 67 years old with a spouse who is 65 years old is

Commuting to and from a job location is a deductible expense.

Kareem's office building is destroyed by fire on April 11, 2018. Settlement is reached with the insurance compan November 1, 2018 when he receives a check for $900,000. The property had recently been appraised for $920,000. Kareem's adjusted basis in the building was $800,000. a. What is Kareem's realized gain or loss? b. Assume Kareem wishes to defer the maximum amount of gain. Indicate: (1) the minimum amount that must be spent on a new property. (2) any restrictions on the new property in order for it to qualify. (3) the deadline for placing the new property in service. c. Assume that instead of a fire, the state forces Kareem to sell the property. Indicate how your responses to pa would differ.

Vertical equity means that

Mick owns a racehorse with a $500,000 basis used for breeding purposes. The racehorse is killed in an accident a receives $750,000 from the insurance company. Mick purchases another racehorse for $400,000. a. What is the amount of Mick's realized gain? b. What is the minimum amount of Mick's recognized gain, assuming the appropriate election is made?

Leonard established a trust for the benefit of his son. The principal amount of the trust is $400,000. The trust is pr to earn approximately 5% per year. In the current year, the trust earned $20,000. Expenses of $4,000 were incurre Assume that $14,000 is distributed to Leonard's son. a. How much income is taxed to the trust? b. How much income is taxed to Leonard's son?

The Senate equivalent of the House Ways and Means Committee is the Senate

Joy reports the following income and loss: Activities A, B, and C are all passive activities. Based on this information, Joy has

Bob's income can vary widely from year- to- year because much of his compensation comes from sales commissions and bonuses. It generally is in the $200,000 to $300,000 range. To minimize the risk of underpayment penalties for estimated tax, he should pay in, through payroll withholding and estimated tax payments, 100% of the prior year tax liability.

Luly will report $800,000 of taxable income in 2018. Included in the taxable income is one sale of an investment asset. Luly sold a building she had owned for three years, resulting in a $100,000 unrecaptured Sec. 1250 gain. Her tax on the gain (without consideration of the additional Medicare tax) will be

The alternative minimum tax applies to individuals only if it exceeds the taxpayer's regular income tax liability.

Distinguish between the accrual- method taxpayer and the cash- method taxpayer with regard to basis in a receivable.