Question 1

A sole proprietor paid legal fees in connection with the acquisition of a building that he uses in his business.The sole proprietor can deduct the legal fees for AGI.

Accepted Answer

A) True 
 B)False

Question 2

During the current year,Ivan begins construction of an office building and a hotel.He incurs $10,000 in property taxes during the construction of the office building and $15,000 for the hotel.Which of the following statements is true of the property taxes during the construction period?

Accepted Answer

A)  Ivan must capitalize the property taxes on both properties each year if an election is made. 
B)  Ivan must deduct the property taxes on both properties each year. 
C)  Ivan may elect to capitalize the property taxes on one of the properties while deducting the property taxes on the other for each year. 
D)  Ivan may elect to capitalize the property taxes for the properties in one year and then deduct the property taxes on the properties the next year. 
A)  Ivan must capitalize the property taxes on both properties each year if an election is made. 
B)  Ivan must deduct the property taxes on both properties each year. 
C)  Ivan may elect to capitalize the property taxes on one of the properties while deducting the property taxes on the other for each year. 
D)  Ivan may elect to capitalize the property taxes for the properties in one year and then deduct the property taxes on the properties the next year.

Question 3

Pat,an insurance executive,contributed $1,000,000 to the reelection campaign of Governor Stephens,in hopes that Stephens will appoint her to a coveted position on the State Board of Insurance.How much of the contribution can Pat deduct?

Accepted Answer

A)  $0 
B)  $100,000 
C)  $500,000 
D)  $1,000,000 
A)  $0 
B)  $100,000 
C)  $500,000 
D)  $1,000,000

Question 4

Kaitlyn owns a hotel in Phoenix,Arizona.The Arizona legislature has proposed legislation to increase the hotel room tax.Kaitlyn incurs $1,000 of lobbying expenses to discourage passage of the legislation.Kaitlyn can deduct the $1,000.

Accepted Answer

A) True 
 B)False

Question 5

In 2017,Venkat,who is single and age 37,received $60,000 of gross income and had $6,800 of itemized deductions.Venkat's taxable income is

Accepted Answer

A)  $49,150. 
B)  $53,200. 
C)  $55,950. 
D)  $49,600. 
A)  $49,150. 
B)  $53,200. 
C)  $55,950. 
D)  $49,600.

Question 6

Capital expenditures add to the value,substantially prolong the useful life,or restore the life of the property.

Accepted Answer

A) True 
 B)False

Question 7

Lindsey Forbes,a detective who is single,operates a small pottery activity on a part-time basis.This year she reported the following income and expenses from this activity:
   
In addition,she had salary of $70,000 and itemized deductions,not including expenses listed above,of $6,800.
a. What is the amount of Lindsey's taxable income assuming the activity is classified as a hobby?
b. What is the amount of Lindsey's taxable income assuming the activity is classified as a trade or business?

Accepted Answer

The answer of Lindsey Forbes,a detective who is single,operates a...

Question 8

Expenses attributable to the rental use of a taxpayer's personal residence are limited to the gross income generated by the property.

Accepted Answer

A) True 
 B)False

Question 9

Three years ago,Myriah refinanced her home mortgage and was required to pay two points on the refinanced loan.The loan was secured by the property,and the charging of points was the established lending practice in the area.The term of the loan was 20 years.Myriah sold the house earlier this year and paid off the refinanced mortgage.In this year of the home sale,is Myriah allowed any deduction with respect to the points paid on the refinanced mortgage?

Accepted Answer

A)  Yes, she can deduct the full amount of the refinanced loan points in the year of sale because none of these points have been previously deducted. 
B)  Yes, she can deduct the unamortized balance of the refinanced loan points in the year of sale. 
C)  No, the full amount of the refinanced loan points were already deducted in the year the home mortgage was refinanced. 
D)  No, points paid to refinance a home mortgage are never deductible. 
A)  Yes, she can deduct the full amount of the refinanced loan points in the year of sale because none of these points have been previously deducted. 
B)  Yes, she can deduct the unamortized balance of the refinanced loan points in the year of sale. 
C)  No, the full amount of the refinanced loan points were already deducted in the year the home mortgage was refinanced. 
D)  No, points paid to refinance a home mortgage are never deductible.

Question 10

Losses incurred on wash sales of stock or securities are generally disallowed in the year of sale.

Accepted Answer

A) True 
 B)False

Question 11

Dana purchased an asset from her brother for $15,000.Her brother's basis was $20,000.If Dana sells the asset to an unrelated party for $12,000,she will recognize

Accepted Answer

A)  $0. 
B)  ($1,000) loss. 
C)  ($3,000) loss. 
D)  ($4,000) loss. 
A)  $0. 
B)  ($1,000) loss. 
C)  ($3,000) loss. 
D)  ($4,000) loss.

Question 12

Jones,Inc.,a calendar-year taxpayer,is in the air conditioner repair business.The business uses the cash method.In December of the current year,Jones charged $100 of supplies at Refrigeration,Inc.,(he will pay the credit card bill in January) and also purchased $600 of supplies at XYZ on open account (he will make a payment on the open account in January).What is the amount that is deductible by Jones,Inc.,in the current year?

Accepted Answer

A)  $100 
B)  $600 
C)  $700 
D)  The amounts must be capitalized and charged to expense as used. 
A)  $100 
B)  $600 
C)  $700 
D)  The amounts must be capitalized and charged to expense as used.

Question 13

Donald sells stock with an adjusted basis of $38,000 to his son,Kiefer,for its fair market value of $30,000.Kiefer sells the stock three years later for $32,000.Kiefer will recognize a gain on the subsequent sale of

Accepted Answer

A)  $0. 
B)  $2,000. 
C)  ($6,000). 
D)  ($8,000). 
A)  $0. 
B)  $2,000. 
C)  ($6,000). 
D)  ($8,000).

Question 14

Losses on the sale of property between a taxpayer and his/her more than 50-percent-owned corporation are disallowed.

Accepted Answer

A) True 
 B)False

Question 15

Gabby owns and operates a part-time art gallery,now in its fifth year.She views it as a business activity,but she is concerned that the IRS will challenge her classification and consider it a hobby.Her business results,using the cash method of accounting,were net losses in the first and fourth years and small profits in the second and third years.It is now almost year-end and based on projections,the business is showing a small profit of $6,000.Repairs to the security system and to the heating/cooling system were recently completed and these bills total $7,000.When should Gabby pay these bills?

Accepted Answer

A)  before year-end to get the current year deduction 
B)  next year 
C)  split into $6,000 this year and $1,000 next year 
D)  It does not matter when she pays the bills. The work was performed this year, so the costs will be deducted this year. 
A)  before year-end to get the current year deduction 
B)  next year 
C)  split into $6,000 this year and $1,000 next year 
D)  It does not matter when she pays the bills. The work was performed this year, so the costs will be deducted this year.

Question 16

Fines and penalties are tax deductible if related to the taxpayer's trade or business.

Accepted Answer

A) True 
 B)False

Question 17

Rob sells stock with a cost of $3,000 to his daughter for $2,200,which is its fair market value.Later the daughter sells the stock for $3,200 to an unrelated party.Which of the following describes the tax treatment to Rob and Daughter?

Accepted Answer

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

Question 18

Rachel has significant travel and entertainment expenses for her work,but she has not kept receipts.She will be able to deduct a reasonable amount of these ordinary and necessary expenses under the Cohan rule.

Accepted Answer

A) True 
 B)False

Question 19

Under the accrual method,recurring liabilities may be deducted currently and paid in the next period if all of the following are present except for

Accepted Answer

A)  the all-events test is met. 
B)  the expense is recurring. 
C)  the expense is material. 
D)  economic performance occurs within the shorter of 8 1/2 months after the close of the year or a reasonable period after the close of the year. 
A)  the all-events test is met. 
B)  the expense is recurring. 
C)  the expense is material. 
D)  economic performance occurs within the shorter of 8 1/2 months after the close of the year or a reasonable period after the close of the year.

Question 20

During the current year,Paul,a single taxpayer,reported the following items:
   
Compute Paul's taxable income for the year.

Accepted Answer

@#IMG-DLM& *The home equity interest is

A sole proprietor paid legal fees in connection with the acquisition of a building that he uses in his business.The sole proprietor can deduct the legal fees for AGI.

During the current year,Ivan begins construction of an office building and a hotel.He incurs $10,000 in property taxes during the construction of the office building and $15,000 for the hotel.Which of the following statements is true of the property taxes during the construction period?

Pat,an insurance executive,contributed $1,000,000 to the reelection campaign of Governor Stephens,in hopes that Stephens will appoint her to a coveted position on the State Board of Insurance.How much of the contribution can Pat deduct?

Kaitlyn owns a hotel in Phoenix,Arizona.The Arizona legislature has proposed legislation to increase the hotel room tax.Kaitlyn incurs $1,000 of lobbying expenses to discourage passage of the legislation.Kaitlyn can deduct the $1,000.

In 2017,Venkat,who is single and age 37,received $60,000 of gross income and had $6,800 of itemized deductions.Venkat's taxable income is

Capital expenditures add to the value,substantially prolong the useful life,or restore the life of the property.

Expenses attributable to the rental use of a taxpayer's personal residence are limited to the gross income generated by the property.

Losses incurred on wash sales of stock or securities are generally disallowed in the year of sale.

Dana purchased an asset from her brother for $15,000.Her brother's basis was $20,000.If Dana sells the asset to an unrelated party for $12,000,she will recognize

Donald sells stock with an adjusted basis of $38,000 to his son,Kiefer,for its fair market value of $30,000.Kiefer sells the stock three years later for $32,000.Kiefer will recognize a gain on the subsequent sale of

Losses on the sale of property between a taxpayer and his/her more than 50-percent-owned corporation are disallowed.

Fines and penalties are tax deductible if related to the taxpayer's trade or business.

Rob sells stock with a cost of $3,000 to his daughter for $2,200,which is its fair market value.Later the daughter sells the stock for $3,200 to an unrelated party.Which of the following describes the tax treatment to Rob and Daughter?

Rachel has significant travel and entertainment expenses for her work,but she has not kept receipts.She will be able to deduct a reasonable amount of these ordinary and necessary expenses under the Cohan rule.

Under the accrual method,recurring liabilities may be deducted currently and paid in the next period if all of the following are present except for

During the current year,Paul,a single taxpayer,reported the following items: Compute Paul's taxable income for the year.

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

A sole proprietor paid legal fees in connection with the acquisition of a building that he uses in his business.The sole proprietor can deduct the legal fees for AGI.

During the current year,Ivan begins construction of an office building and a hotel.He incurs $10,000 in property taxes during the construction of the office building and $15,000 for the hotel.Which of the following statements is true of the property taxes during the construction period?

Pat,an insurance executive,contributed $1,000,000 to the reelection campaign of Governor Stephens,in hopes that Stephens will appoint her to a coveted position on the State Board of Insurance.How much of the contribution can Pat deduct?

Kaitlyn owns a hotel in Phoenix,Arizona.The Arizona legislature has proposed legislation to increase the hotel room tax.Kaitlyn incurs $1,000 of lobbying expenses to discourage passage of the legislation.Kaitlyn can deduct the $1,000.

In 2017,Venkat,who is single and age 37,received $60,000 of gross income and had $6,800 of itemized deductions.Venkat's taxable income is

Capital expenditures add to the value,substantially prolong the useful life,or restore the life of the property.

Expenses attributable to the rental use of a taxpayer's personal residence are limited to the gross income generated by the property.

Losses incurred on wash sales of stock or securities are generally disallowed in the year of sale.

Dana purchased an asset from her brother for $15,000.Her brother's basis was $20,000.If Dana sells the asset to an unrelated party for $12,000,she will recognize

Donald sells stock with an adjusted basis of $38,000 to his son,Kiefer,for its fair market value of $30,000.Kiefer sells the stock three years later for $32,000.Kiefer will recognize a gain on the subsequent sale of

Losses on the sale of property between a taxpayer and his/her more than 50-percent-owned corporation are disallowed.

Fines and penalties are tax deductible if related to the taxpayer's trade or business.

Rob sells stock with a cost of $3,000 to his daughter for $2,200,which is its fair market value.Later the daughter sells the stock for $3,200 to an unrelated party.Which of the following describes the tax treatment to Rob and Daughter?

Rachel has significant travel and entertainment expenses for her work,but she has not kept receipts.She will be able to deduct a reasonable amount of these ordinary and necessary expenses under the Cohan rule.

Under the accrual method,recurring liabilities may be deducted currently and paid in the next period if all of the following are present except for

During the current year,Paul,a single taxpayer,reported the following items: Compute Paul's taxable income for the year.

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