Exam 6: Business Expenses

Three years ago Edna loaned Carol $80,000 to help her get started in the TV repair business. Carol gave Edna a 5-year, 9% note with semiannual repayment terms. Edna and Carol have been friends for over 35 years. Edna is a recently retired college professor with a significant portfolio of investments. During the current year, Carol became ill and couldn't continue operating the business. She has repaid $10,000 of the debt owed Edna. Because Carol has no remaining assets, no additional payments will be made to any of her creditors. For the current year, Edna realizes a

Caroline is a doctor in Little Rock. She travels to Atlanta to attend a two-day seminar for health professionals about investing in real estate. Transportation expenses are $400, the hotel cost $104/day, and meals cost $50/day. How much can Caroline deduct for travel to the seminar?

Walter recently received a notice of an income tax deficiency of $21,000 from the IRS. He hires an attorney to handle his IRS problems. Walter's legal expenses are $4,000. Can Walter deduct the legal expenses? I.He can deduct the full amount if the tax deficiency relates to his business. II.He can deduct the full amount if the tax deficiency relates to rental income other than business income. III.He can deduct the legal fees if the income tax deficiency is personal in nature. ​

Danielle graduated from State University in 2017. She paid $2,700 of interest during 2018 on her qualified educational loan. The full amount is deductible.

For each of the following IRA situations, determine the amount the taxpayer can deduct. Discuss any limitations, which might be placed, on the deduction. a.Marissa is single and is an active participant in a qualified employee pension plan. Determine the maximum Roth IRA contribution that she can make if her adjusted gross income for the year is $135,000. b.David and Donna are married and file a joint return. Each is covered by an employee-sponsored pension plan, and their adjusted gross income is $106,000. Determine their maximum IRA contribution and deduction for the current year. c.Pedro and Roxanne are married and have two children, ages 8 and 4. Their adjusted gross income for the year is $196,000. What is maximum amount they can contribute to each child's Coverdell Education Savings Account (CESA) for the year??

Which of the following best describes the tax treatment of losses from uncollectible business debts?

Hector is a 54-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 $36,000. How much can Hector deduct for AGI this year?

Mark and Cindy are married with salaries of $45,000 and $42,000, respectively. Adjusted gross income on their jointly filed tax return is $100,000. Both individuals are active participants in employer provided qualified pension plans. What is the maximum amount each person may deduct for AGI with regard to IRA contributions? ? Mark Cindy A) \ 1,000 \ 1,000 B) \ 5,225 \ 5,225 C) \ 3,200 \ 3,200 D) \- 0- \- 0- E) \ 5,500 \ 5,500

Thomas changes jobs during 2018 and moves from Philadelphia to El Paso. Which of the following expenses relating to the move can Thomas deduct? I.Prior to the move, Thomas flies to El Paso to find an apartment. II.The cost of meals while driving his household goods to El Paso. ​

Carlotta pays $190 to fly from Santa Fe to Denver. She spends three days finalizing a contract with the management of El Rancho Restaurant for the delivery of green chili in the upcoming year. Because she finalized the contract, Carlotta spends two-days attending the National Western Stock Show. Hotel costs are $108 per night and meals are $22 per day. How much can Carlotta deduct as business expenses from her trip?

Beth and Julie are old friends and currently own their own law firms. Each week they go out to lunch. Beth and Julie take turns paying for lunch. During the current year, Beth pays $800 for food and beverages plus $200 for tips. How much can Beth deduct for the lunches?

Carl, age 59, and Cindy, age 49, are married and file a joint return. During the current year, Carl had a salary of $41,000 and Cindy had a salary of $35,000. Both Carl and Cindy are covered by an employer-sponsored pension plan. Their adjusted gross income for the year is $94,000. Determine the maximum IRA contribution and deduction amounts. Maximum Maximum Contribution Deduction A) \ 12,000 \1 2,000 B) \ 11,000 \1 1,000 C) \1 2,000 \ 11,000 D) \ 11,000 \ 9,000 E) \ 13,000 \1 3,000

Lester uses his personal automobile in his business of selling insurances. He bought a new car in 2018 and drove it a total of 30,000 miles of which 3,000 miles were for commuting and other personal uses. Actual gas, oil, repairs, licensing, insurance, and depreciation totaled $16,500 for 2018. Actual parking expenses for business were $200. What is the maximum amount Lester can deduct for 2018?

Deductions for adjusted gross income include I.Contribution to a Roth IRA. II.Contribution to conventional IRA ​

Mollie is single and is an employee of the Royal Corporation. She is an active participant in the company's pension plan. Mollie's adjusted gross income is $118,000 and she has never established an IRA account. How much can Mollie contribute to a Roth IRA?

On May 1, 2018, Linda sells her rental property for $125,000. Her basis in the property at the beginning of the year is $75,000. As part of the sales contract, the buyer agrees to pay the real property taxes of $1,500 for the current year when they come due on December 31, 2018. I.Linda has a gain on the sale of the rental property of $50,000. II.Linda can deduct $500 in real estate taxes. ​

Elizabeth operates an accounting firm as a sole proprietorship. She is single, the accounting business has net income of $120,000 and she has taxable income of $130,000. Which of the following is true regarding her Qualified Business Income (QBI) deduction? I.The QBI deduction is a deduction for adjusted gross income II.The QBI deduction is an itemized deduction III She is not allowed a QBI deduction because she operates a specified service business. ​

Match each statement with the correct term below. -Substantiation requirements

If an employer reimbursement plan is an accountable plan and an expense that is fully reimbursed, the employee does not have to report either the expense or the reimbursement .

For each of the following situations, determine whether the item is deductible, how it would be deducted on the taxpayer's return (if there are alternatives possible, discuss the conditions that would determine the treatment) and any limitations, which might be placed on the deduction. a.Allison is self-employed. She pays the following taxes during the current year: State income tax \ 1,200 Federal income tax 4,000 Self-employment tax 3,200 Property tax on residence 700 Tax on business equipment 200 b.A customer who owed Leon $5,000 declared bankruptcy last year. At that time, the customer's accountant estimated that only 40% of the customer's debts would be paid. In the current year, Leon receives $1,000 from the bankruptcy court as final payment on the $5,000 debt.