Exam 6: Deductions and Losses

American Healthcare (AH),an insurance company,is trying to persuade Congress to enact nationwide anti-smoking legislation.As part of this effort,AH paid $500,000 to hire a lobbying firm to discuss its concerns with members of Congress.AH also contributed $100,000 to candidates for political office who support limiting public smoking.What amount of these expenditures can AH deduct?

(Multiple Choice)

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Question 121

Generally,Section 267 requires that the deduction of unpaid (accrued) expenses be deferred until the year in which the related payee recognizes the amount as income.

(True/False)

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Question 122

Carole owns 75% of Pet Foods,Inc.As CEO,Carole must travel extensively and does so on the company jet.In addition,she also uses the jet to take several personal vacations.Carole reports the value of the personal use of the jet,$40,000,as additional compensation.Which of the following is true in terms of the corporation?

(Multiple Choice)

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Question 123

Troy incurs the following expenses in his business,an illegal gambling establishment: His deductible expenses are

(Multiple Choice)

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Question 124

Accrual-basis taxpayers are allowed to deduct expenses when they meet either the economic performance test or the all-events test.

(True/False)

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Question 125

Expenses related to a hobby are deductible only to the extent of the gross income from the hobby.

(True/False)

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Question 126

Brienne sells land to her brother,Abe,at a loss.A few years later,Abe sells the land to an unrelated party for a substantial gain.Brienne can recognize her realized loss on the land when Abe sells the land to an unrelated party.

(True/False)

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Question 127

Assume Congress wishes to encourage healthy eating and is considering a deduction for broccoli purchases.In order to maximize the value of this tax deduction for taxpayers,Congress should provide for a

(Multiple Choice)

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Question 128

Jimmy owns a trucking business.During the current year he incurred the following: The fines for speeding were a necessary cost because missing deadlines would cause lost business and are ordinary in the industry.What is the total amount of deductible expenses?

(Multiple Choice)

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Question 129

Adjusted gross income (AGI) is the basis for a number of phase-outs of deductions.

(True/False)

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Question 130

Ben is a well-known professional football quarterback.His team's owners expect him to be a role model for young people.Any endorsement contracts that he receives are based on his reputation.In the current year,Ben is charged with assault.Ben hires an attorney to represent him in this matter.Ultimately,the charges are dismissed.What tax issues should Ben consider?

(Essay)

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Question 131

Taxpayers may deduct lobbying expenses incurred to influence legislation at any governmental level if the legislation is of direct interest to the taxpayer's trade or business.

(True/False)

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Question 132

Fees paid to prepare a taxpayer's Schedule C of the tax return (Profit or Loss from Business) are for AGI deductions.

(True/False)

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Question 133

During the current year,Martin purchases undeveloped land as an investment.Martin intends to rent the land as pastureland and hopefully sell it later for a profit.In the current year,Martin receives no rent but he does pay taxes of $2,800,mortgage interest of $900 and liability insurance of $500.How much of these expenses can Martin deduct (before any limitations) on his current tax return?

(Multiple Choice)

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Question 134

Deductions for AGI may be located

(Multiple Choice)

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Question 135

Laura,the controlling shareholder and an employee of Southtown Corporation,receives an annual salary of $750,000.Based on several factors including the size of the corporation's operations and a comparison of salary received by officers of comparably sized corporations,the IRS contends that Laura's salary should be no higher than $600,000.The Court upheld the IRS's position.As a result,which of the following is true?

(Multiple Choice)

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Question 136

Points paid in connection with the purchase of a principal residence may be deducted in the year paid.

(True/False)

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Question 137

Explain the rules for determining whether a home is considered a rental property or a vacation home and the tax consequences of this classification.

(Essay)

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Question 138

Abby owns a condominium in the Great Smokey Mountains.During the year,Abby uses the condo a total of 21 days.The condo is also rented to tourists for a total of 79 days and generates rental income of $12,500.Abby incurs the following expenses: Using the IRS method of allocating expenses,the amount of depreciation that Abby may take with respect to the rental property will be

(Multiple Choice)

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Question 139

Self-employed individuals may claim,as a deduction for adjusted gross income,50 percent of their

(Multiple Choice)

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Question 140

Showing 121 - 140 of 146

Generally,Section 267 requires that the deduction of unpaid (accrued) expenses be deferred until the year in which the related payee recognizes the amount as income.

Troy incurs the following expenses in his business,an illegal gambling establishment: His deductible expenses are

Accrual-basis taxpayers are allowed to deduct expenses when they meet either the economic performance test or the all-events test.

Expenses related to a hobby are deductible only to the extent of the gross income from the hobby.

Brienne sells land to her brother,Abe,at a loss.A few years later,Abe sells the land to an unrelated party for a substantial gain.Brienne can recognize her realized loss on the land when Abe sells the land to an unrelated party.

Assume Congress wishes to encourage healthy eating and is considering a deduction for broccoli purchases.In order to maximize the value of this tax deduction for taxpayers,Congress should provide for a

Jimmy owns a trucking business.During the current year he incurred the following: The fines for speeding were a necessary cost because missing deadlines would cause lost business and are ordinary in the industry.What is the total amount of deductible expenses?

Adjusted gross income (AGI) is the basis for a number of phase-outs of deductions.

Taxpayers may deduct lobbying expenses incurred to influence legislation at any governmental level if the legislation is of direct interest to the taxpayer's trade or business.

Fees paid to prepare a taxpayer's Schedule C of the tax return (Profit or Loss from Business) are for AGI deductions.

Deductions for AGI may be located

Points paid in connection with the purchase of a principal residence may be deducted in the year paid.

Explain the rules for determining whether a home is considered a rental property or a vacation home and the tax consequences of this classification.

Self-employed individuals may claim,as a deduction for adjusted gross income,50 percent of their

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

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Partnerships and S Corporations

Taxes and Investment Planning

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