Question 1

Deductible transportation expenses:

Accepted Answer

A) Include meals and lodging. 
B) Include only costs incurred while away from home. 
C) Do not include the normal costs of commuting. 
D) Do not include daily expenses for transportation between the taxpayer's home and temporary work locations if the taxpayer has a regular place of business. 
A) Include meals and lodging. 
B) Include only costs incurred while away from home. 
C) Do not include the normal costs of commuting. 
D) Do not include daily expenses for transportation between the taxpayer's home and temporary work locations if the taxpayer has a regular place of business.

Question 2

A gift to a foreman by a worker is considered business related and therefore subject to the $25 limit.

Accepted Answer

A) True 
 B)False

Question 3

If an employee is transferred to a distant location for an indefinite period of time, the new location typically will be considered the employee's new tax home.

Accepted Answer

A) True 
 B)False

Question 4

To file a Schedule C-EZ, the taxpayer must:

Accepted Answer

A) Have gross receipts of $25,000 or less from the business. 
B) Have business expenses of $5,000 or less. 
C) Have inventory of less than $2,000 during the year. 
D) Have no more than 2 businesses. 
E) Have no more than 5 employees during the year. 
A) Have gross receipts of $25,000 or less from the business. 
B) Have business expenses of $5,000 or less. 
C) Have inventory of less than $2,000 during the year. 
D) Have no more than 2 businesses. 
E) Have no more than 5 employees during the year.

Question 5

Splashy Fish Store allows qualified customers to purchase items on credit. During the current year, Lisa, the owner of the store, determines that $3,500 of accounts receivable are not collectible. Which of the following statements is true with respect to Splashy Fish Store's deduction for the uncollectible accounts receivable? ​

Accepted Answer

A) Splashy is not allowed a deduction for the uncollectible accounts if the income arising from the accounts has not been previously included in taxable income. 
B) Any deduction for the uncollectible accounts receivable will be treated as a short-term capital loss. 
C) Only $3,000 of the uncollectible accounts receivable may be deducted in the current year. 
D) All of the above statements are true. 
E) Two of the above statements are true. 
A) Splashy is not allowed a deduction for the uncollectible accounts if the income arising from the accounts has not been previously included in taxable income. 
B) Any deduction for the uncollectible accounts receivable will be treated as a short-term capital loss. 
C) Only $3,000 of the uncollectible accounts receivable may be deducted in the current year. 
D) All of the above statements are true. 
E) Two of the above statements are true.

Question 6

Carol, a CPA, is always required by her employer to wear to work either a gray or a blue business suit with matching shoes. Carol would never consider wearing her gray or blue suits and matching shoes anywhere other than work since she considers them uncomfortable as well as unattractive. Can Carol deduct the cost of the suits and shoes as special work clothing or uniforms? Explain.

Accepted Answer

No. The suits and shoes can be

Question 7

The cost of a blue wool suit for an accountant is a deductible expense.

Accepted Answer

A) True 
 B)False

Question 8

Karen was ill for most of the current year. She received tax-free disability income that covered most of her expenses. She paid the deductible expense of owning her home, interest on the mortgage, and property taxes out of this income. Her tax return shows negative taxable income of $25,000. Can this loss be carried back to prior years or carried forward to future years? Why or why not?

Accepted Answer

Karen's loss may not be carried to previ

Question 9

If a home office is used for both business and personal purposes, the home office expenses, such as rent or depreciation, should be allocated between the business and personal use and then deducted.

Accepted Answer

A) True 
 B)False

Question 10

Mikey is a self-employed computer game software designer. He takes a week-long trip to Maui, primarily for business. He takes 2 personal days at the beach. How should he treat the expenses related to this trip?

Accepted Answer

A) None of the expenses are deductible since there was an element of personal enjoyment in the trip. 
B) 100 percent of the trip should be deducted as a business expense since the trip was primarily for business. 
C) 50 percent of the trip should be deducted as a business expense. 
D) The cost of all of the airfare and the expenses related to the business days should be deducted, while the expenses related to the personal days are not deductible. 
A) None of the expenses are deductible since there was an element of personal enjoyment in the trip. 
B) 100 percent of the trip should be deducted as a business expense since the trip was primarily for business. 
C) 50 percent of the trip should be deducted as a business expense. 
D) The cost of all of the airfare and the expenses related to the business days should be deducted, while the expenses related to the personal days are not deductible.

Question 11

A deduction for a business bad debt is allowed to the extent that income related to the debt was previously included in taxable income.

Accepted Answer

A) True 
 B)False

Question 12

To be deductible as the cost of special work clothing or uniforms:

Accepted Answer

A) The clothing must not be suitable for everyday use and must be required as a condition of the job. 
B) The clothing must be required as a condition of the job, but can also be suitable for everyday use. 
C) The clothing need not be required as a condition of the job, but must not be suitable for everyday use. 
D) Only the cost of the clothing is included; upkeep is not deductible. 
A) The clothing must not be suitable for everyday use and must be required as a condition of the job. 
B) The clothing must be required as a condition of the job, but can also be suitable for everyday use. 
C) The clothing need not be required as a condition of the job, but must not be suitable for everyday use. 
D) Only the cost of the clothing is included; upkeep is not deductible.

Question 13

The expense of a sales luncheon may be deductible (50 percent in the current year) even if no sale is made.

Accepted Answer

A) True 
 B)False

Question 14

In which of the following situations may the taxpayer take an education expense on Schedule C?

Accepted Answer

A) John, a plumber by trade, is taking classes to qualify as an electrician so he may take on more complex contrator jobs. 
B) Henry, an administrative assistant, is taking an advanced Word computer program class through an adult school program. 
C) Barbie is flying on numerous commercial airplanes in order to observe the flight attendants so that she may improve her public relations skills. 
D) Ann Marie is taking a review course in order to pass the certified financial planner examination. 
A) John, a plumber by trade, is taking classes to qualify as an electrician so he may take on more complex contrator jobs. 
B) Henry, an administrative assistant, is taking an advanced Word computer program class through an adult school program. 
C) Barbie is flying on numerous commercial airplanes in order to observe the flight attendants so that she may improve her public relations skills. 
D) Ann Marie is taking a review course in order to pass the certified financial planner examination.

Question 15

Greg, a self-employed plumber, commutes from his home to his office which is 10 miles away. At his office, he loads his truck for the day with the parts that he needs. Then he is off to see his first customer of the day, Mr. Smith. Mr. Smith is 5 miles away from the office. After Mr. Smith's job, Greg goes to his next plumbing client, Martin's Dry Cleaning, which is 21 miles away from Mr. Smith. Greg spends the rest of the day at Martin's Dry Cleaning. From Martin's Dry Cleaning, Greg goes home which is now only 7 miles away. How much can Greg count as deductible transportation miles? ​

Accepted Answer

A) None of it 
B) 21 miles 
C) 26 miles 
D) 43 miles 
A) None of it 
B) 21 miles 
C) 26 miles 
D) 43 miles

Question 16

The standard mileage rate for automobiles in 2016 is 56 cents per mile.

Accepted Answer

A) True 
 B)False

Question 17

Chris opens a chiropractic office in Houston on January 1, 2016. In 2016, Chris drives a total of 4,200 miles from his office to clients' homes to do chiropractic adjustments. In addition, he drives a total of 3,000 miles for commuting between his home and his office in 2016. He elects to use the standard mileage method. On January 1, 2016, Chris purchases an annual subscription to a chiropractic journal for $200 and a 1-year medical reference service for $500. Calculate Chris's deduction for the above items for the 2016 tax year.

Accepted Answer

The answer of Chris opens a chiropractic office in Houston...

Question 18

Patricia is a business owner who is trying to determine her cost of goods sold for 2016. She bought 20 units of inventory at $11, then 26 units at $10, and finally 18 units at $14. She sold 30 units at an average price of $16 per unit in 2016 and uses FIFO for her inventory valuation. What was her cost of goods sold in 2016, assuming that there was no inventory at the beginning of the year? ​

Accepted Answer

A) $320 
B) $330 
C) $480 
D) $732 
E) None of the above 
A) $320 
B) $330 
C) $480 
D) $732 
E) None of the above

Question 19

Taxpayers who make a combined business and pleasure trip:

Accepted Answer

A) Must allocate the travel cost between the business and pleasure parts of the trip if the travel is within the United States. 
B) Must allocate the travel cost between the business and pleasure parts of the trip if the travel is outside the United States. 
C) Can deduct the cost of meals, lodging, local transportation, and incidental expenses in full. 
D) Can take a tax deduction only for the personal part of the trip. 
A) Must allocate the travel cost between the business and pleasure parts of the trip if the travel is within the United States. 
B) Must allocate the travel cost between the business and pleasure parts of the trip if the travel is outside the United States. 
C) Can deduct the cost of meals, lodging, local transportation, and incidental expenses in full. 
D) Can take a tax deduction only for the personal part of the trip.

Question 20

Which of the following is not a test to deduct business expenses:

Accepted Answer

A) ​The expense must be ordinary and necessary 
B) ​The expense must have a legitimate business purpose 
C) ​The expense must be reasonable 
D) ​The expense must be lavish and extravagant 
A) ​The expense must be ordinary and necessary 
B) ​The expense must have a legitimate business purpose 
C) ​The expense must be reasonable 
D) ​The expense must be lavish and extravagant

Deductible transportation expenses:

A gift to a foreman by a worker is considered business related and therefore subject to the $25 limit.

If an employee is transferred to a distant location for an indefinite period of time, the new location typically will be considered the employee's new tax home.

To file a Schedule C-EZ, the taxpayer must:

The cost of a blue wool suit for an accountant is a deductible expense.

If a home office is used for both business and personal purposes, the home office expenses, such as rent or depreciation, should be allocated between the business and personal use and then deducted.

Mikey is a self-employed computer game software designer. He takes a week-long trip to Maui, primarily for business. He takes 2 personal days at the beach. How should he treat the expenses related to this trip?

A deduction for a business bad debt is allowed to the extent that income related to the debt was previously included in taxable income.

To be deductible as the cost of special work clothing or uniforms:

The expense of a sales luncheon may be deductible (50 percent in the current year) even if no sale is made.

In which of the following situations may the taxpayer take an education expense on Schedule C?

The standard mileage rate for automobiles in 2016 is 56 cents per mile.

Taxpayers who make a combined business and pleasure trip:

Which of the following is not a test to deduct business expenses:

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Capital Gains and Losses

Withholding Estimated Payments and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

Exam 3: Business Income and Expenses Part I

Deductible transportation expenses:

A gift to a foreman by a worker is considered business related and therefore subject to the $25 limit.

If an employee is transferred to a distant location for an indefinite period of time, the new location typically will be considered the employee's new tax home.

To file a Schedule C-EZ, the taxpayer must:

The cost of a blue wool suit for an accountant is a deductible expense.

If a home office is used for both business and personal purposes, the home office expenses, such as rent or depreciation, should be allocated between the business and personal use and then deducted.

Mikey is a self-employed computer game software designer. He takes a week-long trip to Maui, primarily for business. He takes 2 personal days at the beach. How should he treat the expenses related to this trip?

A deduction for a business bad debt is allowed to the extent that income related to the debt was previously included in taxable income.

To be deductible as the cost of special work clothing or uniforms:

The expense of a sales luncheon may be deductible (50 percent in the current year) even if no sale is made.

In which of the following situations may the taxpayer take an education expense on Schedule C?

The standard mileage rate for automobiles in 2016 is 56 cents per mile.

Taxpayers who make a combined business and pleasure trip:

Which of the following is not a test to deduct business expenses:

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Capital Gains and Losses

Withholding Estimated Payments and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters