Exam 3: Business Income and Expenses

Curt is self-employed as a real estate salesman and drives his car frequently to take clients to see homes for sale. Curt drove his car 20,000 miles for business purposes and 25,000 miles in total. His actual expenses for operating the auto including depreciation are $10,000 since he drove it so much during the year. Curt has used the actual cost method since he started his business in 2015. How much is Curt's deductible auto expense for the year?

Taxpayers who use their country club more than 50 percent for business may deduct the total amount of their membership dues

Janine is a sole proprietor owning a small specialty store. The business records show that the cost of the store's individual inventory items has been steadily increasing. The cost of the end of the year inventory is $125,000 and the cost of the beginning of the year inventory was $150,000. Janine uses the LIFO method of inventory valuation. Which of the following statements is true?

Teachers at the kindergarten through high school level may deduct a maximum of $225 of education supplies and materials cost each year ($450 if married filing jointly and both spouses are educators).

Christine is a self-employed tax accountant who drives her car to visit clients occasionally throughout the year. She drives her car 1,000 miles for business, 5,000 miles for commuting and 5,000 miles for personal use. Assuming that Christine uses the standard mileage method, how much is her auto expense for 2019? Where in her tax return should Christine claim this deduction?

Deductible transportation expenses:

Sherri is a tax accountant. She prepared a large corporate tax return 2 years ago and billed $5,000 to her client. After 2 years of attempting to collect the money, it is clear that she will not be able to collect anything since the business has gone bankrupt. She reports income on her tax return on the accrual basis as she bills it, so the $5,000 was included in her taxable income 2 years ago. Can she claim a bad debt deduction for the $5,000? Explain.

Sally is a high school math teacher. In 2019, she purchases $400 worth of supplies related to her teaching. Her spouse, Gabe, is a high school math teacher and spends $100 in education supplies for his classes. If married filing jointly, what is the 2019 for AGI educator's expenses deduction?

Peter is a self-employed attorney. He gives the following information about his business to his CPA for use in preparing his 2019 tax return: Income Fees from law practice \1 53,000 Expenses Malpractice insurance \ 8,000 Office rent 12,000 Office supplies 5,600 Travel expense 2,000 Meals 3,800 Entertainment 4,000 Paral egal wages 25,500 Country club dues (Peter uses the club for business entertainment) 2,500 Peter also drove his car 5,850 miles for business and used the standard mileage method for computing transportation costs. How much will Peter show on his Schedule C for 2019 for: a.Income b.Tax deductible expenses c.Taxable income

Wanda is a single taxpayer and an elementary school teacher. She also tutors students in her home as a small business. During 2019, Wanda purchased $300 in school supplies for her classroom. She also purchased $400 in supplies and materials for her tutoring business. Lastly, she uses a 200 square feet spare bedroom in her house to tutor her clients. Occasionally, her mother also stays in that room during holidays. If Wanda elects to use the simplified method for her home office, what are her deductions that she may claim on her tax return based on the information provided (ignore any income limitations) and where can she claim these deductions?

Natasha is a self-employed private language tutor. In 2019, she obtained her teaching credentials, hoping to receive a job as a seventh grade public school English teacher. She had the following education expenses for the year: Tuition to finish her credentials program \5 ,000 Review course for the Teacher Certification Exam 1,000 Natasha also attended a seminar in Washington, D.C., titled "The Motivated Student." Her expenses for the trip are as follows: Fee for the course \ 700 Airplane ticket 500 Hotel 1,000 Meals Total \ 2,600 Determine how much of the above expenses are deductible on her Schedule C.

Choose the correct answer.

If the taxpayer does not maintain adequate records of car expenses (i.e., gas, tires, car insurance, etc.), the standard mileage rate cannot be used. ​

When a taxpayer uses the FIFO inventory valuation method, the assumption on which the method is based is that the inventory on hand at the end of the year consists of the most recently acquired items.

If an employer chooses a per diem method of substantiation for travel expenses,

Terry is a practicing attorney who decides to become an agent for musical groups on the side. Terry engages in the activity and has the following revenue and expenses: Agent fees from clients \ 500 Travel to concert sites around the country 6,500 Business entertainment 5,000 Depreciation on video and TV equipment used to showcase clients 3,000 a. What are four of the factors the IRS will consider when evaluating whether her activity is a hobby? b. If the activity is deemed to be a regular business, what is the amount of Terry's net income or loss from the activity? c. If the activity is deemed to be a hobby, what is the amount (if any) of Terry's expenses from the activity that may be deducted?

Carol, a CPA, is always required by her employer to wear to work either a gray or a blue business suit with matching shoes. Carol would never consider wearing her gray or blue suits and matching shoes anywhere other than work since she considers them uncomfortable as well as unattractive. Can Carol deduct the cost of the suits and shoes as special work clothing or uniforms? Explain

Rick is a business adviser who lives in Escondido, California and works in San Diego. He makes a 70-mile round trip commute to his job every workday, for a total of 14,000 miles a year. In addition, he drives 1,000 miles throughout the year to visit clients from his office in San Diego. If Rick uses the standard mileage method for computing automobile expenses, what is his automobile expense deduction for 2019?

A business gift with a value of $35 presented to a client and his nonclient spouse is fully deductible by the donor.

Which of the following would be a business bad debt if it were uncollectible?