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

During the current year, Danika recognizes a $30,000 Sec. 1231 gain and a $22,000 Sec. 1231 loss. Prior to this, Danika's only Sec. 1231 item was a $15,000 loss two years ago. Danika must report a(n)

During the course of an audit, a CPA discovers an error in a prior return. According to the Statements on Standards for Tax Services, the CPA should

Jill is considering making a donation to her church. She wants to give $50,000 for the new church building. She has some stock with a FMV of $50,000 and an adjusted basis of $10,000 that she has held for 3 years. She is planning to sell the stock and donate the $50,000 proceeds to the church. What should she consider before taking that action?

Carl filed his tax return, properly claiming the head of household filing status. Carl's employer paid or provided following to Carl: How much of this income should Carl report (assume benefits are provided on a nondiscriminatory basis)?

Expenditures for long- term care insurance premiums qualify as a medical expense deduction subject to an annual limit based upon the age of an individual.

Medical expenses incurred on behalf of children of divorced parents are deductible by the parent who pays the expenses but only if that parent also is entitled to the dependency exemption.

Two separate business operations conducted at the same location may be treated as separate activities under the passive activity rules.

In computing AMTI, tax preference items are

A client wants to take a tax return position with less than a 10% probability of being upheld in court. The CPA should

In 2016, Toni purchased 100 shares of common stock in Blue Corporation for $5,280. In 2017, Blue declared a stock dividend of one share of its common stock for each 10 shares held. In 2018, Blue's common stock split 2- for- 1 at a time when the FMV was $80 a share. What is Toni's basis in each of her shares of the Blue Corporation stock if both of the earlier stock dividends were tax- free?

Margo and Jonah have two children, ages 13 and 17. Their modified AGI is $410,500. What is their child tax credit?

Nonrefundable tax credits are allowed to reduce or totally eliminate a taxpayer's tax liability but any credits in excess of the tax liability are lost.

Jimmy owns a trucking business. During the current year he incurred the following: The fines for speeding were a necessary cost because missing deadlines would cause lost business and are ordina industry. What is the total amount of deductible expenses?

A citator enables tax researchers to locate authorities (e.g., cases and IRS pronouncements) that have cited a particular case.

Investment interest expense is deductible when incurred to purchase tax- exempt securities.

Steve and Marian purchase a new condominium in Manhattan on February 1, 2018 to use as their primary residence. The purchase price of the condominium is $1.5 million. The couple obtained a $1.0 million mortgage from the bank and paid the balance in cash. On their joint tax return the couple will be allowed an itemized deduction for interest expense on a principal balance of up to

Dividends paid from E&P are taxable to shareholders and are, therefore, deductible by the corporation.

If the U.S. District Court for Rhode Island, the Tax Court, and the Eleventh Circuit have all ruled on a particular issue, then what precedents have been set for which courts in the future?

Inventory may be valued on the tax return at the lower of cost or market unless

Identify which of the following statements is false.