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

Under the MACRS system, depreciation rates for real property must always use the mid- month convention in the year of acquisition.

Generally, 50% of the cost of business gifts is deductible up to $25 per donee per year for self- employed individuals.

With respect to options to accelerate depreciation deductions for new qualifying assets, a taxpayer must elect into Sec. 179 expensing, but elect out of bonus depreciation.

Expenses paid with a credit card are deductible at the time a cash- basis taxpayer pays for the charge.

Gertie has a NSTCL of $9,000 and a NLTCG of $5,500 during the current taxable year. After gains and losses are offset, Gertie reports

A taxpayer can deduct a casualty loss on a personal asset destroyed in a car accident, but only to the extent the taxpayer has personal casualty gains for the year.

A key factor in determining tax treatment of distributions from qualified retirement plans is whether the employee made pre- tax or after- tax contributions.

Trestle Corp. received $100,000 of dividend income from minor holdings (less than 20%) in U.S. publicly traded corporations. Determine the allowable dividend- received deduction under the following assumptions of net inc from operations: a. Net income from operations is $600,000. b. Net income from operations is ($10,000). c. Net income from operations is ($150,000).

A couple was divorced in 2016, resulting in the payment of alimony. Alimony paid in 2018 is

Arthur uses a Chevrolet Suburban (GVWR 7,500 pounds) 100% for business. He acquired and placed the vehicle in service in his business in January of the current year. The vehicle cost $65,000. The maximum deduction allowed this year is

A corporation sold a warehouse during the current year. The straight- line depreciation method was used. Information about the building is presented below: How much gain should the corporation report as Sec. 1231 gain?

For purposes of the limitation on qualifying expenses for the child and dependent care credit, a spouse who is either a full- time student or is incapacitated is deemed to have earned income of $250 per month, or $500 per month if there are two or more qualifying individuals in the household.

Travel expenses related to foreign conventions are disallowed unless the meeting is directly related to the taxpayer's business, and it is reasonable for the meeting to be held outside of North America.

In order for an asset to be depreciated in the year of purchase, it must be placed in service before year's end.

Generally, itemized deductions are personal expenses specifically allowed by the tax law.

Satish, age 11, is a dependent of his parents. His only source of income in 2018 is $8,000 of interest income on bonds given him by his grandparents, resulting in taxable income of $6,950. Under kiddie tax rules, calculation of tax requires dividing taxable income between net unearned income and earned taxable income. Satish's taxable income will be divided as follows:

Sec. 1231 property will generally have all the following characteristics except

Gifts made during a taxpayer's lifetime may affect the amount of estate tax paid by the taxpayer's estate.

What is the purpose of Sec. 1245 and what is its significance?

In April 2018, Amelia exchanges a commercial fishing boat with a $350,000 adjusted basis for a similar boat with $560,000 fair market value. Both assets are for her business use. a. What is the amount of gain or loss realized by Amelia? b. What is the amount of gain or loss recognized by Amelia?