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

Martha transferred property with a FMV of $60,000 (adjusted basis $30,000), which is subject to a $40,000 mortgage in exchange for a one- third interest in a partnership. The partnership has no other liabilities. The partners of MNO own the partnership equally. The partnership's basis in the property contributed is

Unlike an individual taxpayer, the corporate taxpayer does not utilize the 25% and 28% specialty capital gain rates, but it does apply the 15% tax rate to adjusted net capital gain.

Individuals Julie and Brandon form JB Corporation. Julie transfers cash of $425,000 in exchange for 50% of the stock of the JB Corporation worth $410,000 and a $15,000 note. Brandon transfers equipment with a $390,000 adjusted basis and a $425,000 FMV for 50% of the stock worth $410,000 and a note of the JB Corporation valued at $15,000. Brandon's basis in the stock received is

The Tax Court decides an expenditure is deductible in the year the issue was first litigated. The government appealed and won a reversal in the Ninth Circuit Court of Appeals. It is the only appellate decision regarding the issue. If and when the Tax Court encounters this issue again, how will it hold?

Edward, a widower whose wife died in 2015, maintains a household for himself and his 10- year- old daughter. Edward's most favorable filing status for 2018 is

Unused charitable contributions of a corporation are carried forward ten years.

A corporation is starting to produce watches with electronic personal assistant capabilities. Generally, a business producing this type of product will want to elect the LIFO inventory method.

In May 2018, Cassie acquired a machine for $30,000 to use in her business. The machine is classified as 5- year property. Cassie does not expense the property under Sec. 179 or bonus depreciation. Cassie's depreciation on the machine for 2018 is

Limited liability of partners or members is an advantage of all the following with the exception of

Frank loaned Emma $5,000 in 2016 with the agreement that the loan would be repaid in three years. In 2017, Emma filed for bankruptcy and, based on available information from the bankruptcy court, it was estimated that Frank could expect to receive $.65 on the dollar. In 2018, final settlement was made and Frank received $600 a. Assuming the loan is a business bad debt, what is the amount of and the nature of Frank's deduction in 2017 b. Assuming the loan is a business bad debt, what is the amount of and the nature of Frank's deduction in 2018 c. Assuming instead that the loan is a nonbusiness bad debt, what is the amount of and the nature of Frank's de in 2017 and 2018?

All of the following payments for medical items are deductible with the exception of the payment for

The investment models discussed in the text include all of the following except for

Real property exchanged for personal property, both held for productive use in a business, qualifies as a like- kind exchange.

Topaz Corporation had the following income and expenses during the current year: What is Topaz's taxable income?

Julia provides more than 50 percent of the support for three individuals: Theresa, an unrelated child who lives with Julia all year long; Margaret, Julia's cousin, who lives in another city; and Emma, Julia's daughter, who lives in her own home. Each of the potential dependents earned less than $4,150. How many dependents can Julia claim?

Mary Ann pays the costs for her Aunt Hazel to live in a nursing home. Aunt Hazel receives Social Security benefits of $7,000 a year which are turned over to the nursing home. Mary Ann pays the remaining cost of $33,000. Hazel has no other income. Mary Ann visits Hazel twice a week and meets with doctors and nurses regarding Hazel's medical care. What tax issues should Mary Ann consider?

Which of the following statements is incorrect regarding qualifying criteria for the health insurance premium tax credit?

If a self- employed individual is not "away from home," expenses related to local transportation are never deductible.

Steven and Susie Tyler have three children ages 13, 15, and 19. The 19- year- old is in the military and not a dependent. Their modified AGI is $108,000. What is the amount of the child credit to which they are entitled?

The term "tax law" includes