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

Takesha paid $13,000 of investment interest expense in a year in which she earned $4,500 in dividends, $5,400 in interest income, and had a short- term capital gain of $1,000 and a long- term capital gain of $2,200. The capital gains resulted from the sale of stock held as an investment. She has no other investment- related expenses. What is her maximum deduction for investment interest expense, assuming Takesha does not make any elections?

A taxpayer is entitled to a deduction for a casualty loss which occurred in a federal disaster area in mid- summer 2018. The taxpayer would prefer to take the casualty loss deduction in 2017 because of the higher tax rates. Since the taxpayer has already filed his 2017 tax return, he will not be able to take advantage of the option.

Lori had the following income and losses during the current year: What is Lori's adjusted gross income?

Which of the following statements is correct, assuming that an extension is not requested?

Drake and Davina are married and file a joint return for 2018 with taxable income of $100,000 and tax preferences and adjustments of $65,000 for AMT purposes. Their regular tax liability is $13,879. What is the amount of their total tax liability?

In 2016 Betty loaned her son, Juan, $10,000 to help him buy a car. In 2018, before he repaid the $10,000, Betty told Juan that she was "tearing up" the $10,000 note as a graduation present. How should Juan treat the amount forgiven?

The election to use ADS is made on a year- by- year, property- class by property- class basis for real and personal property.

In computing AMTI, all of the following must be added back except

A taxpayer owns a cottage at the beach for family vacations, but also rents it out for one month of the summer. Expenses attributable to the rental use of a taxpayer's vacation home are limited to the gross income generated by the property. The residence is considered to fall into the mixed personal and rental dimension.

During the current tax year, Frank Corporation generated gross income of $1,900,000 and had ordinary and necessary deductions of $1,400,000. What is the amount of Frank Corporation's corporate income tax for the year?

Characteristics of profit- sharing plans include all of the following with the exception of:

All realized gains and losses are recognized for tax purposes.

A business plans to sell its office building which it acquired and placed in service in 1995. Sec. 1250 requires a portion of gain realized on the sale of a building used in a business and depreciated under MACRS to be recaptured as ordinary gain.

Bert, a self- employed attorney, is considering either purchasing or leasing a $80,000 automobile for use in his business. What are the issues he should consider in making his decision?

If a taxpayer owns more than one home, she can designate the home that will be considered her principal residence for purposes of the Sec. 121 exclusion.

What is "forum- shopping"?

Mark receives a nonliquidating distribution of $10,000 cash and a parcel of land having an adjusted basis of $18, fair market value of $25,000. a. Mark's basis in his partnership interest prior to the distribution is $50,000. (1) How much income will the partnership recognize due to the distribution? (2) How much income will Mark recognize due to the distribution? (3) What is Mark's basis in his partnership interest after the distribution? (4) What is Mark's basis in the land? b. Assume Mark's basis in his partnership interest is instead $22,000 and redetermine the responses to question through (4).

Emma owns a small building ($120,000 basis and $123,000 FMV) and equipment ($35,000 basis and $22,000 FMV). Both assets were acquired three years ago, are used in Emma's business, and are depreciated using straight- line depreciation. Both are destroyed by fire. Insurance proceeds were equal to their FMVs. Only one other transfer of an asset occurs during the year, and a $3,000 LTCL is recognized. After considering all transactions, the tax result to Emma is a

For purposes of the AMT, only the foreign tax credit and refundable personal credits are allowed to reduce the tentative minimum tax.

In a common law state, jointly owned property left to the surviving spouse will have a basis after the estate is settled equal to