Question 1

Are there any exceptions to the rule that personal expenditures cannot be deducted?

Accepted Answer

Generally personal expenditures cannot be deducted.However, the Code provides that for a personal expenditure to be deductible the taxpayer must be able to identify a particular section of the Code that permits the deduction (e.g., charitable contributions, medical expenses, certain taxes, certain interest).

Question 2

Arnold and Beth file a joint return.Use the following data to calculate their deduction for AGI.

Accepted Answer

Arnold and Beth's deduction for AGI is $18,000 and consists of the following items:
   All of the other items are itemized deductions.Note that the taxpayer must choose between the state income taxes and the sales taxes.

Question 3

Larry, a calendar year cash basis taxpayer, has the following transactions:   Based on this information, Larry has:

Accepted Answer

A) AGI of $46,500. 
B) AGI of $51,000. 
C) AGI of $60,000. 
D) Deduction for medical expenses of $0. 
E) None of the above. 
A) AGI of $46,500. 
B) AGI of $51,000. 
C) AGI of $60,000. 
D) Deduction for medical expenses of $0. 
E) None of the above. B

Question 4

For purposes of the § 267 loss disallowance provision, a taxpayer's aunt is a related party.

Accepted Answer

A) True 
 B)False

Question 5

Salaries are considered an ordinary and necessary expense of a trade or business if they meet what other requirement? What are the tax consequences if this requirement is not met?

Accepted Answer

"Reasonableness" is an additional requir

Question 6

Which of the following is correct?

Accepted Answer

A) A personal casualty loss is classified as a deduction from AGI. 
B) Real estate taxes on a taxpayer's personal residence are classified as deductions from AGI. 
C) An expense associated with rental property is classified as a deduction from AGI. 
D) Only a.and b.are correct. 
E) a., b., and c., are correct. 
A) A personal casualty loss is classified as a deduction from AGI. 
B) Real estate taxes on a taxpayer's personal residence are classified as deductions from AGI. 
C) An expense associated with rental property is classified as a deduction from AGI. 
D) Only a.and b.are correct. 
E) a., b., and c., are correct.

Question 7

What losses are deductible by an individual taxpayer?

Accepted Answer

Generally deductible losses of individua

Question 8

Because it has only one owner, any sole proprietorship is permitted to elect the cash method of accounting.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following must be capitalized by a business?

Accepted Answer

A) Replacement of a windshield of a business truck which was broken in an accident. 
B) Repair of a roof of a building used in business. 
C) Amount paid for a covenant not to compete. 
D) Only b.and c.must be capitalized. 
E) a., b., and c.can be expensed rather than capitalized. 
A) Replacement of a windshield of a business truck which was broken in an accident. 
B) Repair of a roof of a building used in business. 
C) Amount paid for a covenant not to compete. 
D) Only b.and c.must be capitalized. 
E) a., b., and c.can be expensed rather than capitalized.

Question 10

Generally, a closely-held family corporation is not permitted to take a deduction for a salary paid to a family member in calculating corporate taxable income.

Accepted Answer

A) True 
 B)False

Question 11

Janet is the CEO for Silver, Inc., a closely held corporation. Her total compensation for 2012 is $5 million. Of this amount, $2 million is a salary and $3 million is a bonus. The bonus was calculated as 5% of Silver's net income before the bonus and before taxes ($60 million X 5% = $3 million). The bonus provision has been in effect since Janet became CEO five years ago and is related to Silver's performance.It is approved annually by the entire board of directors (1 of the 5 directors is an outside director) of Silver. How much of Janet's compensation can Silver deduct for 2012?

Accepted Answer

All of the $5 million is deductible by S

Question 12

Priscella pursued a hobby of making bedspreads in her spare time.Her AGI before considering the hobby is $40,000.During the year she sold the bedspreads for $10,000.She incurred expenses as follows:   Assuming that the activity is deemed a hobby, how should she report these items on her tax return?

Accepted Answer

A) Include $10,000 in income and deduct $11,000 for AGI. 
B) Ignore both income and expenses since hobby losses are disallowed. 
C) Include $10,000 in income, deduct nothing for AGI, and claim $10,000 of the expenses as itemized deductions. 
D) Include $10,000 in income and deduct interest of $500 for AGI. 
E) None of the above. 
A) Include $10,000 in income and deduct $11,000 for AGI. 
B) Ignore both income and expenses since hobby losses are disallowed. 
C) Include $10,000 in income, deduct nothing for AGI, and claim $10,000 of the expenses as itemized deductions. 
D) Include $10,000 in income and deduct interest of $500 for AGI. 
E) None of the above.

Question 13

Which of the following can be claimed as a deduction for AGI?

Accepted Answer

A) Personal casualty losses. 
B) Investment interest expenses. 
C) Moving expenses. 
D) Property taxes on personal use real estate. 
E) None of the above. 
A) Personal casualty losses. 
B) Investment interest expenses. 
C) Moving expenses. 
D) Property taxes on personal use real estate. 
E) None of the above.

Question 14

Marvin spends the following amounts on a house he owns:

Accepted Answer

The answer of Marvin spends the following amounts on a...

Question 15

In a related party transaction where realized loss is disallowed, when can the disallowed loss be used by the buyer on the subsequent sale of the property? In the case of a related party disallowed loss transaction, can the related party seller's disallowed loss be used by a taxpayer other than the related party buyer?

Accepted Answer

The related party buyer is permitted to

Question 16

Are all personal expenses disallowed as deductions?

Accepted Answer

No.Selected personal expenses can be ded

Question 17

If a vacation home is a personal/rental residence, no maintenance and utility expenses can be claimed as a deduction.

Accepted Answer

A) True 
 B)False

Question 18

Assuming an activity is deemed to be a hobby, discuss the order and limits in which expenses must be deducted.

Accepted Answer

Amounts deductible under other Code sect

Question 19

On January 2, 2012, Fran acquires a business from Chuck.Among the assets purchased are the following intangibles: patent with a 7-year remaining life, a covenant not to compete for 10 years, and goodwill. Of the purchase price, $140,000 was paid for the patent and $60,000 for the covenant.The amount of the excess of the purchase price over the identifiable assets was $100,000.What is the amount of the amortization deduction for 2012?

Accepted Answer

A) $10,667. 
B) $16,000. 
C) $20,000. 
D) $32,667. 
E) None of the above. 
A) $10,667. 
B) $16,000. 
C) $20,000. 
D) $32,667. 
E) None of the above.

Question 20

Iris, a calendar year cash basis taxpayer, owns and operates several TV rental outlets in Florida, and wants to expand to other states.During 2012, she spends $14,000 to investigate TV rental stores in South Carolina and $9,000 to investigate TV rental stores in Georgia.She acquires the South Carolina operations, but not the outlets in Georgia.As to these expenses, Iris should:

Accepted Answer

A) Capitalize $14,000 and not deduct $9,000. 
B) Expense $23,000 for 2012. 
C) Expense $9,000 for 2012 and capitalize $14,000. 
D) Capitalize $23,000. 
E) None of the above. 
A) Capitalize $14,000 and not deduct $9,000. 
B) Expense $23,000 for 2012. 
C) Expense $9,000 for 2012 and capitalize $14,000. 
D) Capitalize $23,000. 
E) None of the above.

Exam 6: Deductions and Losses: in General

Are there any exceptions to the rule that personal expenditures cannot be deducted?

Arnold and Beth file a joint return.Use the following data to calculate their deduction for AGI.

Larry, a calendar year cash basis taxpayer, has the following transactions: Based on this information, Larry has:

For purposes of the § 267 loss disallowance provision, a taxpayer's aunt is a related party.

Salaries are considered an ordinary and necessary expense of a trade or business if they meet what other requirement? What are the tax consequences if this requirement is not met?

Which of the following is correct?

What losses are deductible by an individual taxpayer?

Because it has only one owner, any sole proprietorship is permitted to elect the cash method of accounting.

Which of the following must be capitalized by a business?

Generally, a closely-held family corporation is not permitted to take a deduction for a salary paid to a family member in calculating corporate taxable income.

Priscella pursued a hobby of making bedspreads in her spare time.Her AGI before considering the hobby is $40,000.During the year she sold the bedspreads for $10,000.She incurred expenses as follows: Assuming that the activity is deemed a hobby, how should she report these items on her tax return?

Which of the following can be claimed as a deduction for AGI?

Marvin spends the following amounts on a house he owns:

Are all personal expenses disallowed as deductions?

If a vacation home is a personal/rental residence, no maintenance and utility expenses can be claimed as a deduction.

Assuming an activity is deemed to be a hobby, discuss the order and limits in which expenses must be deducted.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

A: Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 1

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 2

Property Transactions: Capital Gains and Losses, 1231, Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S: Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

Income Taxation of Trusts and Estates

Filters