Exam 6: Deductions and Losses

Sacha,a dentist,has significant investment assets.She holds corporate bonds,municipal bonds,stocks and mutual funds.Sacha paid $1,500 to an investment adviser to conduct a portfolio review and to prepare a recommendation for rebalancing her portfolio.Which of the following statements is correct regarding the tax treatment of the $1,500 fee?

During 2017 and 2018,Danny pays property taxes of $3,500 each year on a piece of land.During 2017,the land is vacant and unproductive.In 2018,Danny uses the land as a parking lot and generates $16,000 in income.Which of the following is true regarding the property taxes?

Which of the following individuals is not considered a relative for purposes of the related parties loss disallowance rules under Sec.267?

The vacation home limitations of Section 280A may also apply to boats and mobile homes.

On Form 1040,deductions for adjusted gross income include the amounts paid for all of the following except

A deduction will be allowed for an expenditure unless the Internal Revenue Code specifically disallows it.

Maria pays the following legal and accounting fees during the year: What is the total amount of her for AGI deduction for these fees?

During the current year,Charlene borrows $10,000 to purchase Kansas City bonds.Charlene incurs $800 of interest on her outstanding loan.How much interest expense may Charlene deduct in the current year?

Under the wash sale rule,if all of the sold shares are not repurchased within the relevant time period,a portion of the loss on the sale is allowed.

All of the following deductible expenses are deductions for AGI except

An accrual-basis taxpayer may elect to accrue real property taxes ratably over the period to which the taxes relate.

Discuss when expenses are deductible under the accrual method of accounting.

A change to adjusted gross income cannot affect a taxpayer's itemized deductions.

Super Development Company purchased land in the current year from Riverside Chemicals,Inc.The land was contaminated with harmful pollutants,so Super Development paid $1,000,000 to remove the contaminants.What tax issue(s) should be considered before Super files its current year tax return?

Abigail's hobby is sculpting.During the current year,Abigail sold three of her sculptures for a total of $3,200.Her related expenses include $1,500 in utilities,$1,200 in supplies and $900 in depreciation.Of the total expenses incurred,Abigail may deduct

Discuss why the distinction between deductions for AGI and from AGI is important to individuals.

A small business uses the accrual method of accounting for its financial statements.It must also use the accrual method for computing taxable income.

Business investigation expenses incurred by a taxpayer who is already involved in a similar business and who enters the new business are deductible currently.

A single taxpayer has adjusted gross income of $325,000 and has total itemized deductions in various categories totaling $20,000.The taxpayer discovers some additional deductions for AGI.The extra deductions will not affect his itemized deductions.

A wash sale occurs when a taxpayer realizes a loss on the sale of stock or securities and the taxpayer acquires substantially identical stock or securities within a 61-day period after the date of sale.