Exam 3: Additional Income Part 1

Nancy owns a small dress store.During the year, Nancy gives business gifts having the indicated cost to the following individuals: Mrs. Johns (a customer) \ 37plus \ 3 shipping Mr. Johns (nonclient husband of Mrs. Johns) \1 0 Ms. B rown (a customer) \2 2 What is the amount of Nancy's deduction for business gifts?

Peter operates a dental office in his home.The office occupies 250 square feet of his residence, which is a total of 1,500 square feet.During 2018, Peter pays rent for his home of $12,000, utilities of $4,800, and maintenance expenses of $1,200.What amount of the total expenses should be allocated to the home office?

Stone Pine Corporation, a calendar year taxpayer, has ending inventory of $150,000 on December 31, 20X2.During the year 20X2, the corporation purchased additional inventory of $375,000.If cost of goods sold for 20X2 is $470,000, what was the beginning inventory at January 1, 20X2?

Greg, a self-employed plumber, commutes from his home to his office which is 10 miles away.At his office, he loads his truck for the day with the parts that he needs.Then he is off to see his first customer of the day, Mr.Smith.Mr.Smith is 5 miles away from the office.After Mr.Smith's job, Greg goes to his next plumbing client, Martin's Dry Cleaning, which is 21 miles away from Mr.Smith.Greg spends the rest of the day at Martin's Dry Cleaning.From Martin's Dry Cleaning, Greg goes home which is now only 7 miles away.How much can Greg count as deductible transportation miles?

The standard mileage rate for automobiles in 2018 is 56 cents per mile.

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 2018, 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 2018?Explain.

Terry is a policeman employed by the city.He must purchase and maintain his uniforms.The total cost of purchasing and maintaining uniforms is $1,000 for the current year.How much may he deduct, why, and where on his tax return?

If a home office is used for both business and personal purposes, the home office expenses, such as rent or depreciation, should be allocated between the business and personal use and then deducted.

In determining whether an activity should be classified as a hobby, the tax law provides a rebuttable presumption with regard to the profits or losses of an activity.Which of the following statements describes the profit/loss test which must be satisfied in order to meet the presumption that the activity is not a hobby?

Deductible transportation expenses:

To be deductible as the cost of special work clothing or uniforms:

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 \5 00 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?

Which of the following is not a factor that the IRS looks at to determine if a loss is from a hobby or from a business?

A taxpayer who adopts the LIFO method of inventory valuation for tax purposes may use the FIFO method for preparing financial statements.

Jezebel loaned her friend $7,000 to buy a used car.She had her friend sign a note with repayment terms and set a reasonable interest rate on the note because she wanted her friend to understand that this was purely a loan and not a gift.Her friend is now on disability and has made it clear she has no way of paying back the loan.How should Jezebel treat the bad loan for tax purposes?

Larry qualifies for a home office deduction.The amount of space devoted to the business is 500 square feet of the total 2,000 square feet in his house.Larry's total rent on the house is $7,000, and he pays utilities (other than telephone)of $4,500 for the year.Calculate Larry's deductions for home office expenses before the gross income limitationRent expenseUtilitiesTotal home office expenses

Choose the correct statement:

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).

To file a Schedule C-EZ, the taxpayer must:

Sally and Martha are tax accountant partners operating a tax firm in San Diego.Every year, they attend the Tax Planning Forum in Las Vegas featuring nationally renowned tax experts.The Forum lasts for 2 days.One evening Sally and Martha attend a show and another evening they lose $10 gambling on the nickel slot machines.Their expenses are as follows: Airfare \ 400 Hotels 300 Meals 180 Forum registration 1,000 Tickets to show 100 Gambling loss 10 Calculate the firm's deduction for attending this event.