Exam 3: Additional Income Part 1

Lew started a business writing a popular syndicated Japanese gardening column in the current year and will report a profit for his first year.His results of operations are as follows: Gross income \ 38,000 Travel expense 4,000 Business suits, to visit magazine editors 1,000 Transportation, 884 miles (at 54.5 cents per mile) 482 Entertainment 800 Subscription to bonsai and Japanese gardening magazines 500 Gifts: 8 at \ 100 each; 2 at \ 20 each 840 Rent and utilities for apartment, in total 10,000 (15 percent is used for a home office) What is the net income Lew should show on his Schedule C? Show the calculation of his taxable income.​ Gross income Expenses (describe each) Taxable income \ \

Kendra is a self-employed taxpayer working exclusively from her home office.Before the home office deduction, Kendra has $6,000 of net income.Her allocable home expenses are $10,000 in total.How are the home office expenses treated on her current year tax return?

In his spare time, Fred likes to restore old furniture and sell it to his friends.He is a lawyer by trade.During 2018, 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 use their country club more than 50 percent for business may deduct the total amount of their membership dues

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

What income tax form does a self-employed sole proprietor usually use to report business income and expense?

A gift to a foreman by a worker is considered business related and therefore subject to the $25 limit.

Indicate which of the following dues, subscriptions, and publications are deductible and which are not deductible: 1.Subscription to "The New England Journal of Medicine" for an electrician 2.Ford truck shop manual for an auto mechanic 3.Subscription to "Shape" magazine for an aerobics teacher 4.Dues for a hairstyle video club for a hairdresser 5.Movie of the Month club for an appraiser

Generally, for an activity to be treated as a trade or business, which of the following is required:

The cost of a blue wool suit for an accountant is a deductible expense.

Mikey is a self-employed computer game software designer.He takes a week-long trip to Maui, primarily for business.He takes 2 personal days at the beach.How should he treat the expenses related to this trip?

If a taxpayer takes a trip within the United States which is primarily for business, the cost of travel to and from the destination need not be prorated between the business and personal portion of the trip.

The home office deduction is an easy way for a taxpayer to show a loss on his or her tax return.

If an employee is transferred to a distant location for an indefinite period of time, the new location typically will be considered the employee's new tax home.

Which of the following is deductible as dues, subscriptions, or publications?

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

Under the specific charge-off method, a deduction for a bad debt is taken when the debt is determined to be worthless.

Hope Springs, a teacher, loaned Hugh Owens, a friend, $10,000 to invest in real estate.Hugh declared bankruptcy in 2018 and cannot repay the $10,000. a.What is the nature of Hope's loss? b.Assuming Hope has no other capital transactions, is there a limit on the amount she may deduct for 2018? Explain. c.What amount of the loss may Hope deduct in 2018?

Gene is a self-employed taxpayer working from his home.His net business profit is $7,000 before home office expenses.His allocable home office expenses are $8,000 in total.How are the home office expenses treated on his current year tax return?

In the current year, Johnice started a profitable bookkeeping business as a sole proprietor.Johnice made $38,000 in her first year of operation.What two forms must Johnice file for her business?