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

Dozen Corporation is owned equally by twelve unrelated individuals. Its taxable income this year is $100,000 and its regular federal income tax liability is $21,000. The company claims a $20,000 dividends- received deduction and pays $25,000 dividends to its shareholders. The corporation had accumulated earnings and profits of $900,000 at the end of the preceding year. The company has no reasonable needs of the business. The accumulated earnings tax is

Leonard owns a hotel which was damaged by a hurricane. The hotel had an adjusted basis of $1,000,000 before the hurricane. A recent appraisal determined that the hotel's FMV was $1,500,000 before the hurricane and $700,000 afterwards. Leonard received insurance proceeds of $500,000. His AGI is $60,000. What is the amount of his deductible casualty loss?

The Section 179 expensing election is available on an annual basis for property purchased during the year.

A sale of property and subsequent purchase of like- kind property may be treated as a like- kind exchange if the two transactions are interdependent.

Except as otherwise provided, gross income means all income from whatever source derived.

The purpose of Sec. 1245 is to eliminate the advantage taxpayers would have if they were able to reduce ordinary income by depreciation deductions and also receive favorable Sec. 1231 treatment when the asset was sold.

Andrew sold land to Becca, Andrew's daughter. The fair market value of the land was $300,000 (basis $250,000). Becca agreed to pay Andrew $300,000 over 8 years. Becca immediately sold the land to Olga for $300,000 cash. The gain of $50,000 must be recognized

Xerxes Manufacturing, in its first year of operations, produces solar panels which are sold through large building supply and home improvement stores. Xerxes' year- end results include the following: You are preparing Xerxes' first year tax return. Xerxes has elected a calendar year as its tax accounting period an accrual method. What additional information would you need to prepare the tax return?

James and Sharon form an equal partnership in the current year. No special allocation is provided for in the partnership agreement. During the year James contributes land having a $80,000 basis and a $100,000 FMV in exchange for the initial partnership interest. In addition, the partnership earns $100,000 of ordinary income while partnership liabilities increase from zero to $60,000 by the end of the tax year. Also, the partnership earns $10,000 of tax- exempt interest during the year and makes charitable contributions of $6,000. James withdraws $3 from the partnership. What is James's basis at the end of the current year?

Assuming a calendar tax year and the conventional 15th of the month due date, all of the following business entities must file their 2018 tax returns by the March 15, 2019 except

A partnership may elect to use a fiscal year if the business recognizes 25% or more of its annual gross receipts in the last two months of the fiscal year for three consecutive 12- month periods.

Tyler has rented a house from Camarah since last year. The rent is usually $1,200 per month, but Camarah reduced the monthly rent down to $200 for all twelve months this year in exchange for Tyler putting in an inground pool in the backyard. The improvement has a fair market value of $20,000. How much total rental income must Camarah report this year?

A charitable contribution deduction is allowed for the FMV of services rendered to a qualified charitable organization.

Which of the following taxes is regressive?

Cafeteria plans are valuable to employers because

Which of the following partnerships can use the cash method of accounting?

Doris donated a diamond brooch recently appraised at $25,000 to her local church. Doris had purchased it many years ago for $10,000. The church sold the brooch to provide funding for church programming. Doris' AGI is $40,000. Doris will be able to take a charitable deduction of

Discuss when expenses are deductible under the accrual method of accounting.

Empire Corporation purchased an office building for $500,000 cash on April 1. Prior to renting it out to tenants on July 1, Empire spent $200,000 on materials and labor to renovate the property. It funded $50,000 of the renovation cost with its own funds and borrowed the remaining $150,000. As of July 1, $2,000 of interest had been paid to the bank, but none of the principal had been repaid. The basis of the building on July 1 is

Doug is going to sell land for $100,000. The terms of the sale include $20,000 down and $20,000 plus interest for the next 4 years. He wishes to recognize income using the installment method. Both his brother and his son wish to buy the land from him. What are the tax considerations?