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

A taxpayer sells her principal residence of five years and qualifies to exclude her full $100,000 gain. The taxpayer must report this excluded gain on her tax return for the year of sale.

Silver Inc. is an S corporation. This year it earned $60,000 of taxable income and paid a $10,000 distribution to Daisy, its sole shareholder. Daisy has a marginal tax rate of 24%. Due to the corporation's results and the distribution paid, the IRS will receive total taxes of

Amanda has two dependent children, ages 10 and 12. She earned $30,000 from her job, and her income tax before credits is $1,200. How much of her child credit is refundable?

When the cost of replacement property is less than the amount realized on an involuntary conversion, gain will be recognized. The recognized gain will be equal to the amount realized over the cost of the replacement property, but not more than the total realized gain.

A taxpayer is selling land held for investment purposes. Payments will be received under the terms of a five- year installment note. Which of the following circumstances would suggest consideration of an election out of the installment method?

Lara started a self- employed consulting business in the last part of the year and earned $60,000 of self- employment earnings. She had been employed as manager in a consulting firm prior to starting her own busines had earned $175,000. a. What is Lara's Additional Medicare Tax for 2018, if any? b. What is Lara's deduction for AGI for the Additional Medicare Tax?

Under the terms of their divorce agreement executed in August of this year, Clint transferred Beta, Inc. stock to his former wife, Rosa, as a property settlement. At the time of the transfer, the stock had a basis to Clint of $55,000 and a fair market value of $68,000. Rosa subsequently sold the stock for $75,000. What is the tax consequence of first the stock transfer and then the stock sale to Rosa?

A taxpayer is calculating this year's depreciation deduction on equipment placed in service in 2015. For AMT purposes, depreciation must be recalculated using the straight- line method over the same recovery period used for regular tax purposes.

Daniel has accepted a new job and is reviewing the retirement plan information. He has a choice of participating in the company's conventional Sec. 401(k) plan or a Roth 401(k) plan. Explain the difference between the two plans in terms of employee contributions and retirement distributions from the plan.

Margaret died on September 16, 2018, when she owned securities with a basis of $50,000 and a FMV of $60,000. Caroline inherited the property and sold it on December 19, 2018 for $67,000. What is Caroline's reported gain on this sale?

Child support is

Which of the following individuals is not considered a relative for purposes of the related parties loss disallowance rules under Sec. 267?

Heather purchased undeveloped land to drill for oil and gas. She spent $800,000 on intangible drilling costs during the year of purchase, which she elected to immediately deduct. During the three years of the well's operation, Heather deducted $1.2 million of cost depletion. Heather has sold the property for a $3 million gain. The gain will be treated as

The maximum tax deductible contribution to a traditional IRA in 2018 is $5,500 ($6,500 for a taxpayer age 50 or over).

An installment sale is best defined as

One characteristic of the Exempt Model is the fact that, like the Current and Deferred Models, only after- tax dollars are invested.

Roma Company pays for group term life insurance on a non- discriminatory basis for all 100 of its workers. Which of the following individuals, all of whom work in the business, will be allowed to exclude the value of the coverage from her gross income?

A taxpayer has a traditional IRA and is considering converting it to a Roth. Which of the following factors does not bias the decision towards the Roth conversion?

Which of the following statements regarding Health Savings Accounts is incorrect?

The installment method may be used for sales of all kinds of property with the exception of