Question 1

Which of the following expenses is not deductible for AGI?

Accepted Answer

A) Alimony paid. 
B) Contributions to an IRA. 
C) 50% of self-employment tax 
D) Interest on qualified student loans. 
E) Interest expense related to an investment. 
A) Alimony paid. 
B) Contributions to an IRA. 
C) 50% of self-employment tax 
D) Interest on qualified student loans. 
E) Interest expense related to an investment. E

Question 2

Match each statement with the correct term below.
-Nonbusiness bad debt

Accepted Answer

A) Not deductible. 
B) Short-term capital loss. 
C) Limited to $25 per person. 
D) Deductible as an ordinary loss 
E) Only 50% of the cost is deductible.
F)Must be away from tax home overnight to be deductible.
G)General area where a taxpayer conducts principal activity.
H)Certain deductions are disallowed if taxpayer fails to comply. 
A) Not deductible. 
B) Short-term capital loss. 
C) Limited to $25 per person. 
D) Deductible as an ordinary loss 
E) Only 50% of the cost is deductible.
F)Must be away from tax home overnight to be deductible.
G)General area where a taxpayer conducts principal activity.
H)Certain deductions are disallowed if taxpayer fails to comply. B

Question 3

Penny owns her own business and drives her car 12,000 miles a year for business and 3,000 miles a year for commuting and personal use. She wants to claim the largest tax deduction possible for business use of her car. Her total expenses related to her auto for 2018 are as follows:
?
$$\begin{array} { l r } 
\text { Gas, oil, and maintenance } & \$ 4,050 \
\text { Insurance } & 720 \
\text { Interest on car loan } & 500 \
\text { Depreciation } & 2,960 \
\text { License } & 80 \
\text { Parking fees and tolls (100\% business) } & 130
\end{array}$$
Penny's total deduction for business use of the auto in 2018 is:

Accepted Answer

A) $6,540 
B) $6,670 
C) $6,778 
D) $6,940 
E) $7,070 
A) $6,540 
B) $6,670 
C) $6,778 
D) $6,940 
E) $7,070 E

Question 4

Kevin, single, is an employee of the Colonial Company and is an active participant in its pension plan. Kevin's adjusted gross income for the current year is $62,000. Kevin contributes $1,000 to his conventional individual retirement account. Which of the following statements about Kevin contributions and deduction amounts is (are) true?
I.He is allowed to deduct his $1,000 contribution to his conventional IRA.
II.Kevin can also contribute but not deduct $4,500 to his Roth IRA.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 5

Discovery, Inc., a cash-basis consulting firm, can deduct a twelve-month insurance premium in the year the premium is paid even though the policy remains in effect into the following year.

Accepted Answer

A) True 
 B)False

Question 6

Marshall and Michelle are married with salaries of $80,000 and $64,000, respectively. Their combined AGI is $186,000. Michelle is an active participant in her company's qualified pension plan while Marshall is not. Determine the maximum combined IRA contribution and deduction amounts?
?
$\begin{array} { c c } 
\text { Maximum }&\text { Maximum } \
\text { Contribution }&\text { Deduction }
\end{array} $
A)$\begin{array} { c c } \$ 5,500 &&&& \$ 2,750 \\end{array}$
B)$\begin{array} { c c } \$ 11,000 &&&& \$5,500 \\end{array}$
C)$\begin{array} { c c }  \$5,500 &&&& \$ 5,500 \\end{array}$
D)$\begin{array} { c c }  \$ 11,000 &&&& \$ 7,500 \\end{array}$
E)$\begin{array} { c c }\$ 11,000 &&&& \$ 11,000
\end{array}$
Contribution Deduction

Accepted Answer

The answer of Marshall and Michelle are married with salaries...

Question 7

Oliver owns Wifit, an unincorporated sports store. In 2018, Wifit earned $100,000, before Oliver drew out a salary of $60,000. What is Oliver's 2016 deduction for self-employment taxes?

Accepted Answer

A) $2,826 
B) $7,065 
C) $7,650 
D) $14,130 
E) $15,300 
A) $2,826 
B) $7,065 
C) $7,650 
D) $14,130 
E) $15,300

Question 8

Darlene and Devin are married. Darlene earns $48,000 and Devin earns $41,000. Their adjusted gross income is $97,000. Darlene's employer provides her with a qualified pension plan, Devin's does not. What are Darlene and Devin's maximum combined IRA contribution and deduction amounts?
​
Contribution Deduction

Accepted Answer

A) $11,000 $5,000 
B) $11,000 $6,000 
C) $11,000 $8,000 
D) $11,000 $10,725 
E) $11,000 $11,000 
A) $11,000 $5,000 
B) $11,000 $6,000 
C) $11,000 $8,000 
D) $11,000 $10,725 
E) $11,000 $11,000

Question 9

Brenda travels to Cleveland on business for her employer. She spends 4 days in meetings with a client. Brenda's plane fare for the trip is $400. Meals cost $40 per day. Hotel and incidental costs amount to $150 per day. Brenda receives no reimbursement for any expenses. Brenda's adjusted gross income for the year is $40,000. What is Brenda's deduction for the trip?

Accepted Answer

A) $- 0 - 
B) $280 
C) $1,080 
D) $1,160 
E) $2,320 
A) $- 0 - 
B) $280 
C) $1,080 
D) $1,160 
E) $2,320

Question 10

In July of this year, Sam performs financial consulting services for William. On August 1, Sam sends William a bill for $1,200. As of September 30, Sam had not heard from William. After repeated efforts to collect the fee, Sam discovers in November that William has left the state and cannot be found. If Sam is an accrual basis taxpayer, for the current year he can deduct

Accepted Answer

A) $- 0 - 
B) A $800 ordinary loss 
C) A $1,200 ordinary loss 
D) A $1,200 short-term capital loss 
E) A $1,200 long-term capital loss 
A) $- 0 - 
B) A $800 ordinary loss 
C) A $1,200 ordinary loss 
D) A $1,200 short-term capital loss 
E) A $1,200 long-term capital loss

Question 11

Which of the following taxpayers can claim a business bad debt deduction for the current year?
I.Sylvia lent her neighbor $4,000 to put a new roof on his home. Because they have been friends for over 15 years, Sylvia trusted her neighbor to pay her back and didn't make him sign a note with interest. The neighbor has left town and Sylvia will not get any of her money back. Her loss is properly related to this year using the cash basis of accounting.
II.Saul is an attorney using the cash basis of accounting. One of his clients is short of money to pay the utilities in the office building Saul rents from him. Saul advances the client $5,000. Saul has just learned that the client has filed bankruptcy and that Saul will not be repaid for any part of the loan.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 12

Eloise is a sales representative for a video production company. While at an exposition, she incurs $1,200 in lodging expenses and $400 for meals. The expenses occur while she is away from home overnight for business reasons and Eloise makes an adequate accounting to her employer. She reimbursed $1,200 by her employer. How much may Eloise deduct?

Accepted Answer

A) $- 0 - 
B) $1,200 for AGI and $0 from AGI. 
C) $1,200 for AGI and $200 from AGI. 
D) $1,200 for AGI and $300 from AGI. 
E) $1,200 for AGI and $400 from AGI. 
A) $- 0 - 
B) $1,200 for AGI and $0 from AGI. 
C) $1,200 for AGI and $200 from AGI. 
D) $1,200 for AGI and $300 from AGI. 
E) $1,200 for AGI and $400 from AGI.

Question 13

Deloris, a single taxpayer, operated a manufacturing business during 2018 as a S corporation in which she owned 100% of the stock. Information related to the business and Deloris is presented below.
What is her Qualified Business Income deduction?
- Qualified business income from the manufacturing business was $ \$ 300,000 $.
- Taxable income before the Qualified Business Income deduction was $ \$ 350,000 $.
- W- 2 wages of the manufacturing business were $ \$ 280,000 $..
- Unadjusted depreciable property was $ \$ 1,000,000 $

Accepted Answer

A) $0 
B) $60,000 
C) $70,000 
D) $95,000 
E) $140,000 
A) $0 
B) $60,000 
C) $70,000 
D) $95,000 
E) $140,000

Question 14

Match each statement with the correct term below.
-Business bad debt expense

Accepted Answer

A) Not deductible. 
B) Short-term capital loss. 
C) Limited to $25 per person. 
D) Deductible as an ordinary loss 
E) Only 50% of the cost is deductible.
F)Must be away from tax home overnight to be deductible.
G)General area where a taxpayer conducts principal activity.
H)Certain deductions are disallowed if taxpayer fails to comply. 
A) Not deductible. 
B) Short-term capital loss. 
C) Limited to $25 per person. 
D) Deductible as an ordinary loss 
E) Only 50% of the cost is deductible.
F)Must be away from tax home overnight to be deductible.
G)General area where a taxpayer conducts principal activity.
H)Certain deductions are disallowed if taxpayer fails to comply.

Question 15

Roscoe is a religion professor. During the summer, he spends 3 months in Israel touring historical landmarks. The cost of the summer trip includes $1,300 for airfare, $2,750 for lodging, $1,175 for meals, and $850 for incidental expenses. The following semester he incorporates many of the items he collected and the knowledge he gained from his experiences into his lectures. How much of the travel costs can Roscoe deduct? Explain.

Accepted Answer

None of the costs that Roscoe

Question 16

Mathew works for Levitz Mortgage Company. The company has an accountable reimbursement plan. During the year Levitz reimburses Mathew $5,400 for his business expenses. Mathew's adjusted gross income for the year is $45,000. His business expenses are as follows:
?
$$\begin{array} { l r } 
\text { Airfare } & \$ 2,900 \
\text { Hotel } & 1,900 \
\text { Meals } & 2,400
\end{array}$$
What amount will Mathew be able to deduct as a deduction from adjusted gross income?

Accepted Answer

A) $- 0 - 
B) $600 
C) $1,200 
D) $1,500 
E) $1,800 
A) $- 0 - 
B) $600 
C) $1,200 
D) $1,500 
E) $1,800

Question 17

Aaron is a 34-year-old head of household and a self-employed taxpayer. He contributed the maximum amount to his IRA account during the current year, and his net earnings from his business totaled $29,000. How much can Aaron deduct for AGI this year?

Accepted Answer

A) $- 0 - 
B) $3,200 
C) $3,800 
D) $5,000 
E) $5,500 
A) $- 0 - 
B) $3,200 
C) $3,800 
D) $5,000 
E) $5,500

Question 18

Which of the following legal expenses paid by the Sutton Corporation can be deducted in the current year?
I.Legal fees to initiate a lawsuit against a competitor who is using its patent.
II.Legal fees to settle a lawsuit filed by a delivery person who slipped on the ice delivering a package to Sutton's office.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 19

Melissa is a corporate sales representative for Computer City. Melissa receives a monthly travel allowance from Computer City to cover her travel costs (transportation, food, lodging, etc.). If Melissa is required to account to Computer City for the use of the travel advance and to return any excess travel advance
I.Melissa will not have to show any aspect of the travel reimbursement or expenses incurred if she spends all of the reimbursement on valid travel expenses.
II.Melissa will have gross income to the extent her travel allowance used for travel expenses reimbursed.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Question 20

Which of the following legal expenses paid by the Kerr Corporation can be deducted in the current year?
I.Legal fees to resolve a tax dispute with the Internal Revenue Service.
II.Legal fees to purchase land that will be used to expand its warehouse.
​

Accepted Answer

A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct. 
A) Only statement I is correct. 
B) Only statement II is correct. 
C) Both statements are correct. 
D) Neither statement is correct.

Which of the following expenses is not deductible for AGI?

Match each statement with the correct term below. -Nonbusiness bad debt

Discovery, Inc., a cash-basis consulting firm, can deduct a twelve-month insurance premium in the year the premium is paid even though the policy remains in effect into the following year.

Oliver owns Wifit, an unincorporated sports store. In 2018, Wifit earned $100,000, before Oliver drew out a salary of $60,000. What is Oliver's 2016 deduction for self-employment taxes?

Match each statement with the correct term below. -Business bad debt expense

Aaron is a 34-year-old head of household and a self-employed taxpayer. He contributed the maximum amount to his IRA account during the current year, and his net earnings from his business totaled $29,000. How much can Aaron deduct for AGI this year?

Which of the following legal expenses paid by the Kerr Corporation can be deducted in the current year? I.Legal fees to resolve a tax dispute with the Internal Revenue Service. II.Legal fees to purchase land that will be used to expand its warehouse.

Federal Income Taxation-An Overview

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Losses-Deductions and Limitations

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation, Depletion, and Amortization

Property Dispositions

Non-Recognition Transactions

Choice of Business Entity-General Tax and Nontax Factorsformation

Choice of Business Entity-Operations and Distributions

Choice of Business Entity-Other Considerations

Tax Research

Filters

Exam 6: Business Expenses

Which of the following expenses is not deductible for AGI?

Match each statement with the correct term below. -Nonbusiness bad debt

Discovery, Inc., a cash-basis consulting firm, can deduct a twelve-month insurance premium in the year the premium is paid even though the policy remains in effect into the following year.

Oliver owns Wifit, an unincorporated sports store. In 2018, Wifit earned $100,000, before Oliver drew out a salary of $60,000. What is Oliver's 2016 deduction for self-employment taxes?

Match each statement with the correct term below. -Business bad debt expense

Aaron is a 34-year-old head of household and a self-employed taxpayer. He contributed the maximum amount to his IRA account during the current year, and his net earnings from his business totaled $29,000. How much can Aaron deduct for AGI this year?

Which of the following legal expenses paid by the Kerr Corporation can be deducted in the current year? I.Legal fees to resolve a tax dispute with the Internal Revenue Service. II.Legal fees to purchase land that will be used to expand its warehouse. ​

Federal Income Taxation-An Overview

Income Tax Concepts

Income Sources

Income Exclusions

Introduction to Business Expenses

Losses-Deductions and Limitations

Taxation of Individuals

Acquisitions of Property

Cost Recovery on Property: Depreciation, Depletion, and Amortization

Property Dispositions

Non-Recognition Transactions

Choice of Business Entity-General Tax and Nontax Factorsformation

Choice of Business Entity-Operations and Distributions

Choice of Business Entity-Other Considerations

Tax Research

Filters

Which of the following legal expenses paid by the Kerr Corporation can be deducted in the current year? I.Legal fees to resolve a tax dispute with the Internal Revenue Service. II.Legal fees to purchase land that will be used to expand its warehouse.