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

Identify which of the following statements is false.

Taj Corporation has started construction of a new mall with a cost estimate of $50 million. The mall is expected to be ready to open in 18 months. Taj cannot deduct the interest expense on the construction loan.

Discuss the tax treatment of a nonqualified stock option plan.

Any Section 179 deduction that is not allowed currently due to the taxable income limitation may be carried over and deducted in future years.

When the Tax Court follows the opinion of the circuit court of appeals to which the case is appealable, the court is following the

What is the primary purpose of Form 1065, Partnership Tax Return?

Darla sold an antique clock in 2018 for $3,000. She had purchased the clock in 2009 for $2,000. If she is otherwise in the 32% marginal tax bracket, what is the maximum tax rate on the capital gain on the sale of the clock?

Galvin Corporation has owned all of the stock of Rialto Corporation for five years. Rialto Corporation has been actively engaged in manufacturing in Kansas, but it is now bankrupt, and the stock is worthless. Galvin Corporation will recognize a long- term capital loss.

A couple has filed a joint tax return since they were first married. Because of self- employment income and significant investment income, they have made joint quarterly estimated tax payments. Before year- end the couple has divorced, and they will each file their own individual returns. The estimated payments made jointly while still married earlier in the year will be divided evenly between the two individual returns.

Unless an election is made to expense research and experimental expenditures or to defer and amortize the expenditures, these costs must be capitalized.

Jarrett owns a mountain chalet that he purchased in 2008 for $175,000. This year, the home appraised at $300,000. Shortly after the appraisal, a severe blizzard hit the area in spring of the current year, destroying trees and severely damaging several homes, including Jarrett's chalet. The blizzard was declared a federal disaster. The chalet's value was reduced to $135,000. Jarrett does not have insurance. Jarrett's AGI is $200,000. Jarrett's deductible loss after limitations is

Julia suffered a severe stroke and has been admitted to a private hospital where she is expected to remain for the rest of her life. She is certified by a licensed health care practitioner as being a "chronically ill individual." Her hospital expenses amount to $350 per day. She will receive $340 per day from a $500,000 life insurance policy as an accelerated death benefit. In 2018, she was in the hospital for 10 days and received $3,400. How much of this amount is taxable?

On May 1, 2008, Empire Properties Corp., a calendar- year taxpayer, purchased an apartment building for $1,000,000, of which $400,000 was allocable to the land. The corporation sold the property this year on Septembe 2018. a. What was the corporation's depreciation for the building in 2008, using statutory percentages under MACRS b. What was the corporation's depreciation for the building in 2018, using statutory percentages under MACRS

The fair value of lodging cannot be excluded from gross income unless the employee is required to accept the lodging as a condition of employment.

Tanya has earnings from self- employment of $240,000, resulting in self- employment tax of $22,350 and Additional Medicare Tax of $360. Due to these taxes, Tanya will be allowed a deduction for AGI of

Which of the following statements is correct regarding limitations on employer's contributions to qualified retirement plans in 2018?

Passive activity loss limitations apply to S corporation shareholders in the same manner as partners.

What must an individual taxpayer prove to receive a worthless security deduction?

The Smiths owned and occupied their principal residence, with an adjusted basis of $250,000, for ten years. The destroyed by a tornado and the Smiths receive insurance proceeds of $800,000. Six months later, they purchase a residence for $850,000. a. What is the amount of gain the Smiths must recognize? b. What is the basis of the new residence?

A deduction will be allowed for an expenditure unless the Internal Revenue Code specifically disallows it.