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

The filing status in which the rates increase most rapidly is

Which one of the following items is not considered gross income for tax purposes?

Marinda exchanges an office building worth $800,000 (basis is $820,000) for a warehouse worth $850,000. As part exchange she also transfers $50,000 worth of securities which she purchased for $40,000. a. What are Marinda's realized and recognized gains (losses) on the two assets exchanged? b. What is Marinda's basis in the warehouse acquired?

Which of the following statements regarding corporate tax return schedules is correct?

Mia is a 50% partner in a partnership with a beginning of the year adjusted basis in her partnership interest of $50,000. For the current year, no distributions are made to partners, and there is no change in partnership liabilities. The partnership incurred a $140,000 ordinary loss for the year. How does Mia treat her loss in excess of basis?

Charishma, a CPA, paid the following expenses in pursuing her profession in 2018: - Professional society dues - $450 - Tax and accounting journals - $250 How much of these expenses can be deducted if she is an employee of an accounting firm, and how much is ded she is a self- employed CPA? Ignore any potential limitations based on AGI.

Sylvia makes a one- time $2,000 deductible contribution into a deductible traditional IRA account, which will earn 8% annually before taxes. Twenty- five years later, at age 65, she withdraws all of the accumulation from the IRA when she is in the 15% marginal tax bracket. What is the total of her after- tax accumulated proceeds from the IRA?

Discuss the basis rules of property received in a nontaxable like- kind exchange.

Jimmy acquires an oil and gas property interest for $600,000. Jimmy expects to recover 200,000 barrels of oil. Intangible drilling and development costs are $160,000 and are charged to expense. Other expenses are $40,000. During the year, 25,000 barrels of oil are sold for $800,000. Jimmy's depletion deduction is

A business bad debt gives rise to an ordinary deduction while a nonbusiness bad debt is treated as a short- term capital loss.

Renee is single and has taxable income of $480,000 without considering the sale of a capital asset (land held for investment) in September of 2018 for $25,000. That asset was purchased six years earlier and has a tax basis of $5,000. The tax liability applicable to only the capital gain (without consideration of the additional Medicare tax) is

Brad owns 100 shares of AAA Corporation with a basis of $6,000 and a FMV of $24,000. Brad receives 15 stock rights as a nontaxable distribution with a total FMV of $6,000. Brad allows the stock rights to expire. Brad's loss recognized and the basis of the original 100 shares after expiration of the stock rights is

Leslie, who is single, finished graduate school this year and began repaying her student loan. The proceeds of the loan were used to pay her qualified higher education expenses. She has not received any type of educational assistance or scholarships. The amount of interest paid during the year amounted to $3,800. What is the amount and classification of her student loan interest education deduction if her modified AGI is $40,000?

Christopher, a cash- basis taxpayer, borrows $1,000 from ABC Bank by issuing a 3- month note on December 1, 2018. Christopher receives $940 but must repay $1,000 on the due date. The amount of interest expense deductible in 2018 is $20.

CT Computer Corporation, an accrual- basis taxpayer, sells service contracts on the computers it sells. At the beginning of January of this year, CT Corporation sold contracts with service to begin immediately: The amount of income CT Corporation must report for this year is

Kai owns an apartment building held for investment purposes. The apartment building is worth $500,000, although it is subject to a mortgage of $100,000. Kai's basis in the apartment building is $380,000. Kai exchanges the apartment building for an office building. The office building has an FMV of $350,000. Kai receives $50,000 cash in addition to receiving the office building, and the other party assumes the apartment building mortgage. What is Kai's recognized gain on this exchange?

PG LLC is an accrual method partnership, manufacturing drones. Patty, 75% partner in PG and a cash method taxpayer, lends $100,000 to PG as a working capital loan on January 1, 2018, with interest due at an arms- length rate. PG accrues, and reports on its income statement, $5,000 of interest expense on this loan. PG pays the interest due to Patty on January 2, 2019. On PG LLC's 2018 tax return, it will deduct the $5,000 interest expense.

Desi Corporation incurs $5,000 in travel, market surveys, and legal expenses to investigate the feasibility of open new coffee house in one of the new suburban malls in town. Desi already owns a similar coffee house downtown a. What is the proper tax treatment of these expenses if Desi decides not to open the new coffee house? b. What is the proper tax treatment of these expenses if Desi decides to open the new coffee house? c. Assume that Desi Corp is currently in the cleaning services business and incurs the noted expenses because i considering opening a coffee house. Reconsider your responses to parts a and b.

The Internal Revenue Code of 1986 contains the current version of the tax law.

Taxpayers often have to decide between contributing to a traditional deductible IRA or a Roth IRA. In making the comparison between the two IRAs, which models should the taxpayer use?