Exam 6: Deductions and Losses

Victor,a calendar-year taxpayer,owns 100 shares of AB Corporation stock,which was purchased three years ago for $5,000.Victor sells all 100 shares on December 27,of the current year,for $4,000 and on January 5,of the following year,purchases 60 shares of AB Corporation stock.Victor's recognized loss will be

Margaret,a single taxpayer,operates a small pottery activity in her spare time.During the current year,she reported the following income and expenses from this activity which is classified as a hobby: In addition,she had salary of $75,000 and itemized deductions,not including those listed above,of $2,200. What is the amount of her taxable income?

In 2017 the IRS audits a company's 2015 tax return and determines that the president's salary was excessive and disallowed $100,000 of the salary deduction.Under the terms of the hedge (payback) agreement in the corporate bylaws,the president repays $100,000 of her salary to her employer in 2017.The president will amend her 2015 tax return to get a refund of the taxes paid on the excess salary.

Ronna is a professional golfer.In order to correct her vision,Ronna has eye surgery.The costs of the surgery and subsequent medical care are not covered by insurance.What tax issues should Ronna consider?

Interest expense on debt incurred to purchase or carry tax-exempt securities is not tax deductible.

Kickbacks and bribes paid to federal officials are deductible only if related to the taxpayer's trade or business.

Expenses incurred in a trade or business generally are deductions for AGI.

Generally,deductions for adjusted gross income on an individual's tax return include all the following types of expenses except those

Liz,who is single,lives in a single family home and owns a second single family home that she rented for the entire year at a fair rental rate.Liz had the following items of income and expense during the current year. Income: Expenses: What is her adjusted gross income for the year?

Expenses paid with a credit card are deductible at the time a cash-basis taxpayer pays for the charge.

Toni owns a gourmet dog treat shop downtown.She spends $2,800 investigating opening another dog treat shop in Northtown and an additional $3,100 investigating a new location in Southtown.Toni does open the Northtown shop,but does not open the Southtown shop.

For the years 2013 through 2017 (inclusive) Max,a surgeon,has been involved in bowling competitions.Only in 2016 and 2017 did his revenue exceed the expenses from the activity.Which statement is correct?

Erin,Sarah,and Timmy are equal partners in EST Partnership.Sarah also owns 40% of Elton Corporation.The remaining shareholders of Elton Corporation are: Erin (24%) and Sarah's uncle (36%).What percent ownership does Sarah directly or constructively own in Elton Corporation?

If property that qualifies as a taxpayer's residence is rented for less than 15 days per year,the taxpayer includes no rental income in gross income and similarly may claim no expenses related to the property other than interest and taxes.

On August 1 of the current year,Terry refinances her home and borrows $240,000.Terry is required to pay two points on the loan.The loan is secured by the residence and the charging of points is an established business practice in the area.The term of the loan is 20 years,beginning on August 1 of the current year.How much,if any,of the points may Terry deduct in the current year?

Losses on sales of property between a taxpayer and his/her siblings are disallowed.

Mackensie owns a condominium in the Rocky Mountains.During the year,Mackensie uses the condo a total of 23 days.The condo is also rented to tourists for a total of 77 days and generates rental income of $10,900.Mackensie incurs the following expenses in the condo: Using the court's method of allocating expenses,the amount of depreciation that Mackensie may take with respect to the rental property will be

A sole proprietor contributes to the election campaign of a state governor.The candidate has promised to change a law that severely limits the growth of the sole proprietor's business.Given the direct benefit,the sole proprietor can deduct the contribution.

RollerQueens Inc.,a calendar-year accrual method taxpayer,enters into a contract each September with a cleaning service to clean the arena after each game during the team's October through March season.Under the criteria of the economic performance test,the RollerQueens Inc.'s deduction for cleaning expense

Individuals are allowed to deduct the greater of the standard deduction or itemized deductions.