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

Felice is in the hotel management field. She rents an apartment near the hotel so she can walk to work. She pays $1,000 per month for rent. Felice has just been offered a similar position at a different hotel. The salary will be $14,000 lower, but they do require she live in the hotel to be on call and provide her with suite to live in. Felice has a marginal tax rate of 32%. She will be financially ahead by accepting the new position.

Joycelyn gave a diamond necklace to her granddaughter Emma. Joycelyn had purchased the necklace in 1980 for $20,000. The FMV of the necklace at the time of the gift was $50,000. After deducting the annual exclusion, the amount of the gift was $35,000. Gift taxes of $10,000 were paid. What is Emma's adjusted basis in the necklace?

An employee travels out of town as required by his job, and he is not reimbursed. The employee can deduct these work- related travel costs.

A taxpayer can receive innocent spouse relief if

During the current year, Don's aunt Natalie gave him a house. At the time of the gift, the house had a FMV of $145,000 and his aunt's adjusted basis was $134,000. After deducting the annual exclusion, the amount of the gift was $130,000. His aunt paid a gift tax of $20,000 on the house. What is Don's basis in the house for purposes of determining gain?

Ivan has generated the following taxes and credits this year: How much general business credit will he apply to the current year tax liability?

One of the requirements which must be met for stock to be considered Section 1244 stock is that the corporation cannot have more than $10 million of total capital and paid in surplus as of the stock issuance.

David gave property with a basis of $133,000 to Hannah when the property had a FMV of $100,000 and paid gift taxes of $8,000. If Hannah later sells the property for $140,000, Hannah's basis (to determine gain) in the property immediately before the sale is

A change to adjusted gross income cannot affect a taxpayer's itemized deductions.

Appeals from the U.S. Tax Court are to the Court of Appeals for the Federal Circuit.

Taxpayers may use the standard mileage rate method when five vehicles are used simultaneously for business.

Rocky owns The Palms Apartments. During the year, Molly Ann, a tenant, moved to another state. Molly Ann paid Rocky $1,500 to cancel the two- year lease she had signed. Rocky then rented the apartment to Elvis who paid the first and last months' rents of $500 each and a security deposit of $800. Rocky also owns a building used as a dance club. The owner of the club requested that Rocky add on another room to be used for private parties. Rocky refused but allowed the club owner to make the addition at a cost of $20,000. What amount should be included in Rocky's income with regard to these items?

Bob transfers assets with a $100,000 FMV (basis $60,000) and $70,000 of business- related liabilities to a corporation in exchange for 100% of the corporation's stock with a FMV of $30,000. The corporation assumes the $70,000 mortgage. The transfer qualifies under Sec. 351. What is Bob's gain recognized on the transfer?

Discuss how the partnership form of organization or the S corporation form may be used to shift income.

For livestock to be considered Sec. 1231 property,

Rita, who has a marginal tax rate of 37%, is planning to make a gift to her grandson who is in the lowest tax bracket. Which of the following holdings of stock would be the most tax advantageous gift from Rita's perspective?

Lana owned a house used as a rental property for three years. During this rental period, she took $60,000 of depreciation deductions. Lana moved into the house and has used it as her principal residence for the past two years. Lana has just sold the house and realized a $200,000 gain. She will recognize gain of

If a single taxpayer with a marginal tax rate of 24% has a long- term capital gain, it is taxed at

Etta transfers property with an adjusted basis of $60,000 in exchange for a 50% partnership interest. The property is subject to a $70,000 mortgage which the partnership will assume. The partnership has no other liabilities. Etta will recognize a $10,000 gain on the exchange due to the negative basis limitation.

Which of the following will be separately stated by a partnership reporting its operations for the year to the IRS?