Question 1

Once the election to use the LIFO inventory method has been made by a taxpayer, the inventory method may be changed only with the consent of the IRS.

Accepted Answer

A) True 
 B)False

Question 2

In which of the following situations may the taxpayer take an education expense on Schedule C?

Accepted Answer

A) John, a plumber by trade, is taking classes to qualify as an electrician so he may take on more complex contractor jobs. 
B) Henry, a self-employed administrative assistant, is taking an advanced Word computer program class through an adult school program. 
C) Barbie is flying on numerous commercial airplanes in order to observe the flight attendants so that she may improve her public relations skills. 
D) Ann Marie is taking a review course in order to pass the certified financial planner examination. 
A) John, a plumber by trade, is taking classes to qualify as an electrician so he may take on more complex contractor jobs. 
B) Henry, a self-employed administrative assistant, is taking an advanced Word computer program class through an adult school program. 
C) Barbie is flying on numerous commercial airplanes in order to observe the flight attendants so that she may improve her public relations skills. 
D) Ann Marie is taking a review course in order to pass the certified financial planner examination.

Question 3

David purchases a yacht solely for the purpose of entertaining real estate clients. He wishes to position himself as a high-end real estate salesperson specializing in very expensive residences and uses the yacht only for business entertainment. During 2019, his expenses for maintaining and operating the yacht, including depreciation, were $28,000. In addition, he incurred $9,000 of catering expenses for meals he provided to business clients on the yacht. What is David's tax deduction in 2019?

Accepted Answer

The answer of David purchases a yacht solely for the...

Question 4

Which of the following factors are considered by the IRS in evaluating whether an activity is classified as a business or a hobby?

Accepted Answer

A) The expertise of the taxpayer 
B) The time and effort expended by the taxpayer 
C) Financial status of the taxpayer 
D) Income and loss history from the activity 
E) All of these 
A) The expertise of the taxpayer 
B) The time and effort expended by the taxpayer 
C) Financial status of the taxpayer 
D) Income and loss history from the activity 
E) All of these

Question 5

In his spare time, Fred likes to restore old furniture and sell it to his friends. He is a lawyer by trade. During 2019, he sells $500 worth of furniture and has $21,000 worth of marketing and equipment rental expenses. Which one of the following is true?

Accepted Answer

A) Fred may deduct all $21,000 of his expenses because Fred is engaged in a hobby. 
B) Fred may deduct all $21,000 of his expenses because Fred is engaged in a trade or business. 
C) Fred cannot deduct any of the expenses because he is engaged in a hobby. 
D) Fred's deductions are limited to the income from selling furniture because he is engaged in a hobby. 
E) None of these 
A) Fred may deduct all $21,000 of his expenses because Fred is engaged in a hobby. 
B) Fred may deduct all $21,000 of his expenses because Fred is engaged in a trade or business. 
C) Fred cannot deduct any of the expenses because he is engaged in a hobby. 
D) Fred's deductions are limited to the income from selling furniture because he is engaged in a hobby. 
E) None of these

Question 6

Tim loaned a friend $4,000 to buy a used car. In the current year, Tim's friend declares bankruptcy and the debt is considered totally worthless. What amount may Tim deduct on his individual income tax return for the current year as a result of the worthless debt, assuming he has no other capital gains or losses for the year?

Accepted Answer

A) $4,000 ordinary loss 
B) $4,000 short-term capital loss 
C) $2,000 short-term capital loss 
D) $3,000 ordinary loss 
E) $3,000 short-term capital loss 
A) $4,000 ordinary loss 
B) $4,000 short-term capital loss 
C) $2,000 short-term capital loss 
D) $3,000 ordinary loss 
E) $3,000 short-term capital loss

Question 7

Taxpayers who make a combined business and pleasure trip:

Accepted Answer

A) Must allocate the travel cost between the business and pleasure parts of the trip if the travel is within the United States. 
B) Must allocate the travel cost between the business and pleasure parts of the trip if the travel is outside the United States. 
C) Can deduct the cost of meals, lodging, local transportation, and incidental expenses in full. 
D) Can take a tax deduction only for the personal part of the trip. 
A) Must allocate the travel cost between the business and pleasure parts of the trip if the travel is within the United States. 
B) Must allocate the travel cost between the business and pleasure parts of the trip if the travel is outside the United States. 
C) Can deduct the cost of meals, lodging, local transportation, and incidental expenses in full. 
D) Can take a tax deduction only for the personal part of the trip.

Question 8

Brandi operates a small business and employs three staff members, all of which perform the same tasks with more or less the same level of skill. Two of the staff members are paid wages of $10 per hour; however, the third staff member, Whiski, is Brandi's sister and earns $17 per hour. What amount per hour can Brandi deduct for wages paid to Whiski?

Accepted Answer

Brandi will only be able to de

Once the election to use the LIFO inventory method has been made by a taxpayer, the inventory method may be changed only with the consent of the IRS.

In which of the following situations may the taxpayer take an education expense on Schedule C?

Which of the following factors are considered by the IRS in evaluating whether an activity is classified as a business or a hobby?

In his spare time, Fred likes to restore old furniture and sell it to his friends. He is a lawyer by trade. During 2019, he sells $500 worth of furniture and has $21,000 worth of marketing and equipment rental expenses. Which one of the following is true?

Taxpayers who make a combined business and pleasure trip:

The Individual Income Tax Return

Gross Income and Exclusions

Additional Income and the Qualified Business Income Deduction

Deductions for and From AGI

Accounting Periods and Other Taxes

Tax Credits

Depreciation and Sale of Business Property

Payroll, Estimated Payments and Retirement Plans

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

Exam 3: Business Income and Expenses

Once the election to use the LIFO inventory method has been made by a taxpayer, the inventory method may be changed only with the consent of the IRS.

In which of the following situations may the taxpayer take an education expense on Schedule C?

Which of the following factors are considered by the IRS in evaluating whether an activity is classified as a business or a hobby?

In his spare time, Fred likes to restore old furniture and sell it to his friends. He is a lawyer by trade. During 2019, he sells $500 worth of furniture and has $21,000 worth of marketing and equipment rental expenses. Which one of the following is true?

Taxpayers who make a combined business and pleasure trip:

The Individual Income Tax Return

Gross Income and Exclusions

Additional Income and the Qualified Business Income Deduction

Deductions for and From AGI

Accounting Periods and Other Taxes

Tax Credits

Depreciation and Sale of Business Property

Payroll, Estimated Payments and Retirement Plans

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters