Exam 6: Self-Employed Business Income

A sole proprietor's trade or business income or loss is reported on Schedule C,Form 1040.

Alan owns a ranch in Kansas.During the year,a tornado damaged one of his barns and destroyed some equipment.The following information provides the details of the losses Alan suffered from the tornado.

Della purchased a warehouse on February 25,2014,for $350,000.$45,000 of the price was for the land.What is her cost recovery deduction for 2014 rounded to the nearest dollar?

The significance of meeting the "travel away from home" standard is that it allows the deduction of meals,lodging,and other incidental expenses such as dry cleaning.

In July 2014,Cassie purchases equipment for $55,000 to be used in her business.Assuming Cassie has a small net loss from her business prior to the deduction,what is the maximum amount of cost recovery Cassie can deduct?

For 2014,what is the social security tax rate and income limit for a self-employed individual?

Bob took a business trip from Chicago to London.He was away 12 days of which he spent six days on business (including two travel days)and six days vacationing.His expenses are as follows:

Lateefah purchased a new office building on April 1,2014,for $3,000,000.On August 20,2018,the building was sold.What is the cost recovery deduction for the year of purchase and the year of sale?

Paola purchased an office building on January 5,2012,for $450,000.$30,000 of the price was for the land.On September 25,2014,he sold the office building.What is the cost recovery deduction for 2014 rounded to the nearest dollar?

Which of the following properties is not eligible for the §179 expense election when purchased?

Transportation costs are deductible when a taxpayer goes to a business meeting away from his or her regular workplace.

The standard mileage rate encompasses depreciation or lease payments,maintenance and repairs,gasoline,oil,insurance,and vehicle registration fees.

Fines paid that are ordinary and necessary in a trade or business generally are deductible.

Shante is employed by a local pharmaceutical company where she earned $48,000 in 2014.During the year,she also had self-employment income of $18,000.Her self-employment tax rounded to the nearest dollar is:

List and define the criteria for an expenditure to be deductible on Schedule C. An expense should be ordinary,necessary,and reasonable.For an expense to be ordinary,it must be customary or usual in the taxpayer's particular business.The "necessary" criterion refers to an expense that is appropriate and helpful rather than one that is essential to the taxpayer's business.The expense must also be reasonable in amount and reasonable in relation to its purpose.

A business bad debt is treated as a short-term capital loss and can be deducted only when it becomes completely worthless.

On May 26,2010,Jamal purchased machinery for $30,000 to be used in his business.He did not elect to expense the equipment under §179 or the bonus.On October 10,2014,he sells the machinery to a scrap metal dealer.What is his cost recovery deduction for 2014 rounded to the nearest dollar?

Kiri acquires equipment (7-year property)on August 14,2014,for $80,000.She does not elect to expense the asset under Section 179 or the 50% bonus.She sells the asset on January 15,2018. a.What is Kiri's cost recovery deduction related to the equipment in 2014 and 2018? b.What is Kiri's cost recovery deduction related to the equipment in 2014 and 2018 if the 50% bonus is elected?

Once the more-than-50% business-use test is met for listed property,it does not matter if the business use falls below 50% in subsequent years.

Nancy purchased a computer on July 15,2014,for $5,000.The computer was used 70% of the time in her business and the rest of the time her children used the computer to surf the Web.In 2015,the computer was used 40% for business and 60% for personal use.What are the cost recovery deductions for 2014 and 2015? (No §179 or bonus).Is there any recapture of depreciation in 2015?