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

A business which provides a warranty on goods sold will deduct a reserve for warranty expense consistent with the reporting on its financial statements.

Joel has four transactions involving the sale of capital assets during the year resulting in a STCG of $5,000, a STCL of $12,000, a LTCG of $1,800 and a LTCL of $1,000. As a result of these transactions, Joel will

Johanna is single and self- employed as a technology consultant. She wants to set money aside for her retirement. What tax and financial issues should she consider?

Mr. and Mrs. Thibodeaux (both age 35), who are filing a joint return, have adjusted gross income of $100,000 in 2018. During the tax year, they paid the following medical expenses for themselves and for Mrs. Thibodeaux's mother, Mrs. Watson (age 63). Mrs. Watson provided over one- half of her own support. Mr. and Mrs. Thibodeaux received no reimbursement for the above expenditures. What is the amount of their deductible itemized medical expenses?

James and Ellen Connors, who are both 50 years old and married, sell their personal residence on July 25, 2018, for $950,000. They have lived in the home for 20 years. The basis of the home is $350,000. They purchased a new home for $1,000,000 in August 2018. After living in that home for 219 days, the Connors were forced to sell their new home in 2019 for $1,300,000 and move to another climate due to Ellen's severe health problems. a. What is the amount of gain recognized on the home sale in 2018? b. What is the amount of the gain recognized on the home sale in 2019?

Amy's employer provides her with several fringe benefits. Which of the following are included in her taxable income?

Identify which of the following statements is true.

Nikki is a single taxpayer who owns a vacation cottage on the lake. During the year, she rented it for $2,000 for 14 days, lived in it for 56 days, and left it vacant the remainder of the year. The year's expenses amounted to $5,000 interest expense, $800 property taxes, $1,500 utilities and maintenance, and $2,400 depreciation. Using the IRS method of allocating expenses, how much of the property- related expenses will be deductible for AGI?

All of the following are accurate statements about corporations, except

Tax Court memorandum decisions

Charlie makes the following gifts in the current year: $40,000 to his spouse, $30,000 to his church, $18,000 to his nephew, and $25,000 to a friend. Assuming Charlie does not elect gift splitting with his wife, his taxable gifts in the current year will be

Sam received a scholarship for room and board. This scholarship is excludible from income.

Patrick acquired a 50% interest in a partnership by contributing property that had an adjusted basis of $8,000 and a fair market value of $29,000. The property was subject to a liability of $22,000, which the partnership assumed for legitimate business purposes. Which of the following statements is correct?

A child credit is a partially refundable credit.

On June 11, of last year, Derrick sold land with a cost of $15,000 for $45,000. Derrick collected $20,000 last year and is scheduled to receive $5,000 each year for five years starting this year plus an acceptable rate of interest. Derrick receives the $5,000 installment required this year. Derrick's recognized gain this year is

In December 2018, Max, a cash- basis taxpayer, rents an apartment to Kadeem. Max receives both the first and last months' rent totaling $1,800 plus a security deposit of $400. The amount of income reported by Max as taxable in 2018 is

Melody inherited 1,000 shares of Corporation Zappa stock from her mother who died on March 4 of the current year. Her mother paid $30 per share for the stock on September 2, 2005. The FMV of the stock on the date of death was $65 per share. On September 4 of the current year, the FMV of the stock was $70 per share. Melody sold the stock for $85 per share on December 3. The estate qualified for, and the executor elected, the alternate valuation method for these and other assets in the estate. An estate tax return was filed. What was Melody's basis in the stock on the date of the sale?

Capital expenditures add to the value, substantially prolong the useful life, or restore the life of the property.

The annual tax reporting form filed with the IRS by C corporations is the Schedule C.

A corporation realizes a NLTCL this year. The loss cannot be deducted in the current year. It must be carried back two years and then carried forward 20 years.