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

Katie operates a ceramics studio from her garage.She incurs the following expenses: $\begin{array}{llcc}
  \text {Clay and paints  } &\$3,500  \
 \text {Painting technique seminars  } &400\
 \text {Pottery wheel  } &75\
 \text {Utiliti es for the ceramic studio  } &375\
 \text {Personal property taxes on ceramic equipment  } &50\
\end{array}$
 Katie's gross receipts from her business were $2,000. 
a.If the studio is deemed to be a hobby, then calculate the amount of expenses Katie may deduct, and describe how she may report the income and expenses on her tax return.
b.If the studio is not a hobby, then calculate the amount of expenses Katie may deduct, and describe how she may report the income and expenses on her tax return.

Accepted Answer

a.If the business is deemed to be a hobb

Question 3

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 4

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

Accepted Answer

A) The Regular Federal Rate method allows employees the same per diem rate no matter where they travel in the United States. 
B) The high-low method averages the high-cost locality and low-cost locality per diem rates to arrive at an average rate. 
C) The meals and incidental expenses method requires actual cost records to substantiate lodging expenses. 
D) Actual expense records substantiating the business reason for the trip and the dates of arrival and departure are not required. 
E) The employer need not use an accountable plan for reimbursing employees for travel expenses. 
A) The Regular Federal Rate method allows employees the same per diem rate no matter where they travel in the United States. 
B) The high-low method averages the high-cost locality and low-cost locality per diem rates to arrive at an average rate. 
C) The meals and incidental expenses method requires actual cost records to substantiate lodging expenses. 
D) Actual expense records substantiating the business reason for the trip and the dates of arrival and departure are not required. 
E) The employer need not use an accountable plan for reimbursing employees for travel expenses.

Question 5

Paul is a self-employed investment adviser who uses his automobile for business.Paul drove his automobile a total of 20,000 miles during 2018; 75 percent was business mileage.The actual cost of gasoline, oil, depreciation, repairs, and insurance for the year was $6,200.
a.How much is Paul's transportation deduction based on the standard mileage method?
b.How much is Paul's transportation deduction based on the actual cost method?
c.​Which method should Paul use to calculate his transportation deduction, assuming he used the standard mileage method in the prior tax year? Why?
d.Where should he deduct the transportation expense on his current year tax return?

Accepted Answer

a.$8,175 = 20,000 miles × 75%

Question 6

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 2018? Where in her tax return should Christine claim this deduction?

Accepted Answer

The business auto expense is $

Question 7

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.

Accepted Answer

Yes.A business bad debt deduct

Question 8

What is the purpose of Schedule C?

Accepted Answer

Schedule C is used by self-employed taxp

Question 9

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 10

Splashy Fish Store allows qualified customers to purchase items on credit.During the current year, Lisa, the owner of the store, determines that $3,500 of accounts receivable are not collectible.Which of the following statements is true with respect to Splashy Fish Store's deduction for the uncollectible accounts receivable?

Accepted Answer

A) Splashy is not allowed a deduction for the uncollectible accounts if the income arising from the accounts has not been previously included in taxable income. 
B) Any deduction for the uncollectible accounts receivable will be treated as a short-term capital loss. 
C) Only $3,000 of the uncollectible accounts receivable may be deducted in the current year. 
D) All of the above statements are true. 
E) Two of the above statements are true. 
A) Splashy is not allowed a deduction for the uncollectible accounts if the income arising from the accounts has not been previously included in taxable income. 
B) Any deduction for the uncollectible accounts receivable will be treated as a short-term capital loss. 
C) Only $3,000 of the uncollectible accounts receivable may be deducted in the current year. 
D) All of the above statements are true. 
E) Two of the above statements are true.

Question 11

Michael has a very successful business as a financial consultant.Michael attends the following seminars: $$\begin{array} { l r } 
\text { "Zen Your Way to Riches" } & \$ 800 \
\text { "Backyard Gardening" } & 50 \
\text { "Computer Marketing Tools" } & 200 \
\text { "Passing the Legal Bar Exam" } & 500 \
\text { "Beating the Market" } & 300
\end{array}$$ How much can Michael deduct as business education expenses?

Accepted Answer

The "Backyard Gardening" semin

Question 12

Wanda is a single taxpayer and an elementary school teacher.She also tutors students in her home as a small business.During 2018, 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 based on the information provided (ignore any income limitations)?

Accepted Answer

$650.Wanda may deduct $250 (2018 limit)a

Question 13

Ruth is a self-employed surgeon and is required to take a week of continuing medical education every year to keep her license.This year she paid $2,000 in course fees for her continuing medical education in Honolulu.She also paid $1,500 for airfare and a hotel room and $400 for meals.What is the total amount she can deduct on her Schedule C related to these expenses?

Accepted Answer

Ruth may deduct 100 percent of

Question 14

If a per diem method is not used, which of the following items is not required as substantiation for the deduction of a travel expense?

Accepted Answer

A) Amount spent 
B) Destination 
C) Business reason for the trip 
D) Departure and return dates 
E) All of the above must be substantiated 
A) Amount spent 
B) Destination 
C) Business reason for the trip 
D) Departure and return dates 
E) All of the above must be substantiated

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.

Taxpayers who make a combined business and pleasure trip:

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

What is the purpose of Schedule C?

If a per diem method is not used, which of the following items is not required as substantiation for the deduction of a travel expense?

The Individual Income Tax Return

Gross Income and Exclusions

Additional Income Part 2

Deductions and Adjustments to Income

Accounting Methods and 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: Additional Income Part 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.

Taxpayers who make a combined business and pleasure trip:

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

What is the purpose of Schedule C?

If a per diem method is not used, which of the following items is not required as substantiation for the deduction of a travel expense?

The Individual Income Tax Return

Gross Income and Exclusions

Additional Income Part 2

Deductions and Adjustments to Income

Accounting Methods and 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