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

Peyton has adjusted gross income of $2,000,000 on his 2018 tax return, filed April 17, 2019, the due date. He accidentally failed to include $200,000 that he received for a television advertisement. How long does the IRS have to audit Peyton's federal tax return?

In 2017 Anika Co. adopted the simplified dollar- value LIFO method. Inventory under FIFO in 2017 and 2018 is $400,000 and $600,000, respectively. The Consumer Price Index for 2017 is 115 and the Consumer Price Index in 2018 is 125 percent. How much is Anika's inventory at the end of year 2018 under simplified LIFO?

Hannah, a single taxpayer, sold her primary residence on January 1, 2018. Her total realized gain is $210,000. The house was acquired on January 1, 2008, and rented to tenants until December 31, 2014. Hannah moved in on January 1, 2015, and used the house as her principal residence until the sale. During the rental period, $30,000 of depreciation was deducted. Due to the sale of the house in 2018, Hannah will recognize a gain of

Which one of the following fringe benefits allows for discrimination between highly compensated employees and other employees to be present?

Ahmad's employer pays $10,000 in tuition this year for Ahmad to attend a graduate business program. How much of the employer- provided tuition is taxable to Ahmad?

Doug and Frank form a partnership, D and F Advertising, each contributing $50,000 to start the business. During the first year of operations, D and F earns $80,000, which is allocated $40,000 each to Doug and Frank. At the beginning of the second year, Doug sells his interest to Marcus for $90,000. What is the amount of Doug's taxable gain on the sale?

If an individual is an employee and also has self- employment income, the maximum tax base for computing self- employment tax is reduced by the wages that are subject to the FICA tax.

The Cable TV Company, an accrual- basis taxpayer, allows its customers to pay by the month, by the year, or tw years in advance. In December 2018, the company collected the following amounts applicable to future services:

AAA Corporation distributes an automobile to Alexandria, a shareholder, in lieu of a cash dividend. Alexandria must report the value of the automobile as dividend income.

According to Sec. 121, individuals who sell or exchange their personal residence may exclude part or all of the gain if the house was owned and occupied as a principal residence for

Patricia is a real estate investor. She exchanges land with an adjusted basis of $20,000 for $5,000 cash and land wi market value of $12,000. a. What is the gain or loss realized? b. What is the gain or loss recognized? c. What is the adjusted basis of the new office equipment?

Which of the following is not required substantiation for a noncash charitable contribution?

Briana, who is single, has taxable income for 2018 of $78,000, resulting in a total tax of $13,100. Her total economic income is $98,000. Briana's average tax rate and effective tax rate are, respectively,

Alex is a self- employed dentist who operates a qualifying office in his home. Alex has $180,000 gross income from his practice and $160,000 of expenses directly related to the business, i.e., non- home office expenses. Alex's allocable home office expenses for mortgage interest expenses and property taxes are $14,000 and other home office expenses are $9,000. What is Alex's total allowable home office deduction?

Ron and Fay live in Buffalo. They also own a condominium in Orlando (purchased in 2011) which they rent to vacationers. Ron and Fay will be retiring. They plan to live in the Orlando property for two and a half years. When they sell it, they will be able to exclude the full gain which is expected to be about $200,000.

If realized gain from disposition of business equipment exceeds total depreciation or cost recovery, a portion of the gain will receive Sec. 1231 treatment if the equipment's holding period is more than one year.

If a fully- taxable bond yields a BTROR of 8% (R_b = 8%) and a tax- exempt bond of similar risk earns a BTROR of 5% (R_f = 5%), then the implicit tax is

Which of the following statements regarding voluntary revocation of the S election is incorrect?

In 2017, Grace loaned her friend Paula $12,000 to invest in various stocks. Paula signed a note to repay the principal with interest. Unfortunately the market for that industry sector plunged, and Paula incurred large losses. In 2018, Paula declared personal bankruptcy and Grace was unable to collect any of her loan. Grace had no other gains or losses last year or this year. The result is

A net operating loss can be carried back three years or carried forward five years.