Question 1

List those criteria necessary for an expenditure to be deductible as business or investment expenses.

Accepted Answer

To be deductible as business or investme

Question 2

The term "principal place of business" includes a home office used by a taxpayer for administrative or management activities of the business if no fixed location exists where the taxpayer conducts these activities.

Accepted Answer

A) True 
 B)False

Question 3

Diane,a successful accountant with an annual income of $150,000,also enjoys raising and training race horses,an activity in which she spends about 10 hours per week.Over the past five years her winnings from races have amounted to $20,000.She employs neighborhood children to feed the horses but has a professional trainer who works with the horses about 5 hours per week.Discuss some of the factors that might enter into the determination of whether or not this activity is a hobby or a trade/business.

Accepted Answer

There is no direct way to prove a profit

Question 4

If an activity produces a profit for at least two years during a consecutive five-year period,the burden of proof shifts to the IRS to show that the activity is not profit-motivated.

Accepted Answer

A) True 
 B)False

Question 5

Various criteria will disqualify the deduction of a business or investment related expenditure.Which of the following criteria will not disqualify a business or investment expenditure?

Accepted Answer

A)  capital expenditure 
B)  expenses related to tax-exempt income 
C)  expenses are not incurred annually 
D)  expenses are illegal or in violation of public policy 
A)  capital expenditure 
B)  expenses related to tax-exempt income 
C)  expenses are not incurred annually 
D)  expenses are illegal or in violation of public policy

Question 6

According to the tax formula,individuals can deduct the greater of for AGI deductions or from AGI deductions.

Accepted Answer

A) True 
 B)False

Question 7

Toby,owner of a cupcake shop in New York,had been considering opening a similar business (i.e.,a cupcake shop) in Phoenix.After spending $6,800 investigating such possibilities in Phoenix,Toby decided against opening the store on July 1.What is the maximum amount of deduction for the current year attributable to these expenditures?

Accepted Answer

A)  $0 
B)  $5,000 
C)  $5,600 
D)  $6,800 
A)  $0 
B)  $5,000 
C)  $5,600 
D)  $6,800

Question 8

Which of the following statements is false?

Accepted Answer

A)  A tax deduction is allowed to a taxpayer for estimated warranty expense. 
B)  A tax deduction is allowed in association with a warranty only in the year in which warranty work is performed. 
C)  A tax deduction is allowed for a contested amount if the amount is paid prior to final settlement. 
D)  No tax deduction is allowed to an accrual-basis taxpayer for the amount of a down payment for a non-recurring expense when the work is to be performed in a subsequent period. 
A)  A tax deduction is allowed to a taxpayer for estimated warranty expense. 
B)  A tax deduction is allowed in association with a warranty only in the year in which warranty work is performed. 
C)  A tax deduction is allowed for a contested amount if the amount is paid prior to final settlement. 
D)  No tax deduction is allowed to an accrual-basis taxpayer for the amount of a down payment for a non-recurring expense when the work is to be performed in a subsequent period.

Question 9

In which of the following situations are points paid on a home mortgage loan not deductible in the year of payment?

Accepted Answer

A)  purchase 
B)  refinance 
C)  construction 
D)  improvement 
A)  purchase 
B)  refinance 
C)  construction 
D)  improvement

Question 10

Mark and his brother,Rick,each own farms.Rick is experiencing severe financial difficulties and cannot afford to buy feed for his cattle.Mark purchases $2,000 of feed and gives Rick one-half of the feed.Mark tells Rick that there is no need to repay him and to consider the feed a gift.Which of the following statements is true?

Accepted Answer

A)  Mark can deduct $2,000 for the feed. 
B)  Mark can deduct $1,000 for the feed. 
C)  Rick must report $1,000 as income. 
D)  None of the above is true. 
A)  Mark can deduct $2,000 for the feed. 
B)  Mark can deduct $1,000 for the feed. 
C)  Rick must report $1,000 as income. 
D)  None of the above is true.

Question 11

To be tax deductible by an accrual-basis taxpayer,an expense must be all of the following except

Accepted Answer

A)  ordinary and necessary. 
B)  paid in cash. 
C)  reasonable in amount. 
D)  an expense of the taxpayer. 
A)  ordinary and necessary. 
B)  paid in cash. 
C)  reasonable in amount. 
D)  an expense of the taxpayer.

Question 12

Anita has decided to sell a parcel of land she had been holding for investment purposes.She purchased the land 5 years ago for $10,000.The current fair market value is $6,000.Anita's sister,Kathy,is interested in buying the land as is Anita's friend,Marcia.What tax issues should Anita consider when deciding to whom the land should be sold?

Accepted Answer

A taxpayer must consider the Section 267

Question 13

If a loss is disallowed under Section 267,a gain on a subsequent sale of the property by the related purchaser may be offset by the previously unrecognized loss.

Accepted Answer

A) True 
 B)False

Question 14

During the current year,the United States files criminal and civil actions against Joe,the CEO of Box Corporation,and Jane,the president of Cable Corporation,for price fixing.Both enter pleas of no contest and appropriate judgments are entered.Subsequent to this action,Square Corporation sues both Box and Cable for treble damages of $6,000,000.In settlement,Box and Cable each pay Square $1,200,000.What is the maximum amount that Box and Cable may each deduct?

Accepted Answer

A)  $400,000 
B)  $1,200,000 
C)  $2,000,000 
D)  $6,000,000 
A)  $400,000 
B)  $1,200,000 
C)  $2,000,000 
D)  $6,000,000

Question 15

What must a taxpayer do to properly document a deductible travel or entertainment expense?

Accepted Answer

A TAXPAYER MUST SUBSTANTIATE THE FOLLOWI

Question 16

A single individual with no dependents can deduct the larger of his itemized deductions or his personal exemption.

Accepted Answer

A) True 
 B)False

Question 17

Bart owns 100% of the stock of Octo Corporation,which uses the accrual method.Bart's sister Samantha,a cash-method taxpayer,did some advertising work for Octo in November 2017.In December,Octo received a billing statement from Samantha for $5,000 and paid Samantha the $5,000 in January 2018.Samantha is a calendar-year taxpayer.When may Octo deduct the $5,000?

Accepted Answer

A)  2017 
B)  2018 
C)  Either 2017 or 2018 
D)  The expense is not deductible since Samantha is Bart's sister. 
A)  2017 
B)  2018 
C)  Either 2017 or 2018 
D)  The expense is not deductible since Samantha is Bart's sister.

Question 18

In 2017,Sean,who is single and age 44,received $55,000 of gross income and had $5,000 of deductions for AGI and $4,600 of itemized deductions.Sean's taxable income is

Accepted Answer

A)  $39,600. 
B)  $43,450. 
C)  $45,400. 
D)  $44,650. 
A)  $39,600. 
B)  $43,450. 
C)  $45,400. 
D)  $44,650.

Question 19

Which of the following factors is not used to determine whether an activity is a hobby or a business?

Accepted Answer

A)  the taxpayer's expertise in the activity 
B)  the taxpayer's financial status 
C)  the personal pleasure derived from the activity 
D)  the success of the taxpayer in other dissimilar activities 
A)  the taxpayer's expertise in the activity 
B)  the taxpayer's financial status 
C)  the personal pleasure derived from the activity 
D)  the success of the taxpayer in other dissimilar activities

Question 20

Chana purchased 400 shares of Tronco Corporation stock for $40,000 in 2014.On December 27,2017,Chana sells the 400 shares for $24,000.Chana purchases 300 shares of Tronco Corporation stock on January 16,2018 for $8,000.Chana's recognized loss on sale of the 400 shares in 2017 and her basis in her 300 new shares are

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

List those criteria necessary for an expenditure to be deductible as business or investment expenses.

The term "principal place of business" includes a home office used by a taxpayer for administrative or management activities of the business if no fixed location exists where the taxpayer conducts these activities.

If an activity produces a profit for at least two years during a consecutive five-year period,the burden of proof shifts to the IRS to show that the activity is not profit-motivated.

Various criteria will disqualify the deduction of a business or investment related expenditure.Which of the following criteria will not disqualify a business or investment expenditure?

According to the tax formula,individuals can deduct the greater of for AGI deductions or from AGI deductions.

Which of the following statements is false?

In which of the following situations are points paid on a home mortgage loan not deductible in the year of payment?

To be tax deductible by an accrual-basis taxpayer,an expense must be all of the following except

If a loss is disallowed under Section 267,a gain on a subsequent sale of the property by the related purchaser may be offset by the previously unrecognized loss.

What must a taxpayer do to properly document a deductible travel or entertainment expense?

A single individual with no dependents can deduct the larger of his itemized deductions or his personal exemption.

In 2017,Sean,who is single and age 44,received $55,000 of gross income and had $5,000 of deductions for AGI and $4,600 of itemized deductions.Sean's taxable income is

Which of the following factors is not used to determine whether an activity is a hobby or a business?

An Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, cost Recovery, amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Property Transactions: Sec1231 and Recapture

Special Tax Computation Methods, tax Credits, and Payment of Tax

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

Filters

Exam 6: Deductions and Losses

List those criteria necessary for an expenditure to be deductible as business or investment expenses.

The term "principal place of business" includes a home office used by a taxpayer for administrative or management activities of the business if no fixed location exists where the taxpayer conducts these activities.

If an activity produces a profit for at least two years during a consecutive five-year period,the burden of proof shifts to the IRS to show that the activity is not profit-motivated.

Various criteria will disqualify the deduction of a business or investment related expenditure.Which of the following criteria will not disqualify a business or investment expenditure?

According to the tax formula,individuals can deduct the greater of for AGI deductions or from AGI deductions.

Which of the following statements is false?

In which of the following situations are points paid on a home mortgage loan not deductible in the year of payment?

To be tax deductible by an accrual-basis taxpayer,an expense must be all of the following except

If a loss is disallowed under Section 267,a gain on a subsequent sale of the property by the related purchaser may be offset by the previously unrecognized loss.

What must a taxpayer do to properly document a deductible travel or entertainment expense?

A single individual with no dependents can deduct the larger of his itemized deductions or his personal exemption.

In 2017,Sean,who is single and age 44,received $55,000 of gross income and had $5,000 of deductions for AGI and $4,600 of itemized deductions.Sean's taxable income is

Which of the following factors is not used to determine whether an activity is a hobby or a business?

An Introduction to Taxation

Determination of Tax

Gross Income: Inclusions

Gross Income: Exclusions

Property Transactions: Capital Gains and Losses

Itemized Deductions

Losses and Bad Debts

Employee Expenses and Deferred Compensation

Depreciation, cost Recovery, amortization, and Depletion

Accounting Periods and Methods

Property Transactions: Nontaxable Exchanges

Property Transactions: Sec1231 and Recapture

Special Tax Computation Methods, tax Credits, and Payment of Tax

Tax Research

Corporations

Partnerships and S Corporations

Taxes and Investment Planning

Filters