Exam 6: Business Expenses

Gary, a sole proprietor, incurs the following expenses in his record store business. Gary can deduct the following as business expenses in the current year I.$3,000 in legal fees to acquire a competing record store. II.$500 to the local police chief to not write parking tickets to his customers whose time ran-out on parking meters in front of his store. ​

Donna is an audit supervisor with the IRS and on January 4, 2017 she uses her car in the following manner. ? Personal residence to her office at the IRS. 8 miles IRS office to X Corp to supervise new audit activities. 10 miles X Corp to Y Corp to supervise ongoing audit activities 6 miles From Y Corp to personal residence 7 miles What amount of Donna's mileage for this day is qualified business mileage?

Which of the following taxpayers can claim a business bad debt deduction for the current year? I.Johnson is a dentist using the cash basis of accounting. He has accounts receivable from patients totaling $7,800 that are more than 90 days past due. II.George owns and operates a sporting goods store and uses the accrual method of accounting. He has several customers who have owed him money for more than 10 months. ​

Sandra, who owns a small accounting firm, pays $1,500 to the local country club for food and entertainment for her annual employee Christmas party. How much of the $1,500 in meals and entertainment cost can Sandra deduct?

Jason travels to Miami to meet with a client. While in Miami, he spends 2 days meeting with his client and 3 days sightseeing. Mary, his wife, goes with him and spends all 5 days sightseeing and shopping. The cost of the trip is as follows: ? Airfare \ 540 for each person. Lodging at hotel \ 150 per day (same rate for single and double rooms). Meals \ 75 per day for each person. Incidental expenses \ 20 per day for Jason. Mary kept no records. If Jason is self-employed, what is the amount of the deduction he may claim for the trip?

Homer and Marge are married and have an adjusted gross income of $186,000. Currently, neither is covered by an employer sponsored pension plan. They have never established an Individual Retirement Account until this year, when they opened a Roth IRA. What is the maximum amount they can each contribute to Roth IRAs?

Sally is a corporate sales representative for Computer City. Sally receives a monthly travel allowance from Computer City to cover her travel costs (transportation, food, lodging, etc.). If Sally is not required to account to Computer City for the use of the travel advance I.Sally 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.Sally will only have gross income to the extent her travel allowance exceeds her actual costs. ​

To be away overnight requires the taxpayer to be away from their tax home for more than 24 hours.

Nora is the CEO of the publicly traded Micro Tech Corporation. The company paid her a salary of $1,030,000 and made mortgage payments of $30,000 on her behalf. How much is deductible as compensation expense?

Which of the following business expenses is/are subject to a 50% deduction limit for 2018? I.Meals while traveling II.Lodging while traveling ​

Kyle is married and a self-employed landscaper. During the current year, Kyle pays $3,000 for health insurance coverage for himself. He pays another $400 for coverage for his employee, Tabatha. How should Kyle deduct the health insurance cost? i.Kyle deducts a total of $3,400 for AGI.II.Kyle cannot deduct any portion of his premium of $3,000 for AGI if his spouse is covered by a health plan through her employer. ​

Ester is a sales representative for a pharmaceutical company. She receives a monthly travel allowance from the company to cover her travel costs (transportation, food, lodging, entertainment, etc.). If Ester is not required to account to the company for the use of the travel advance I.Ester will only have gross income to the extent her travel allowance exceeds her actual costs. II.Ester must include the travel allowance in her gross income. Her actual costs are deductible from AGI, subject to all applicable limits on such deductions. ​

During the current year, Hope Corporation paid a $3,250 premium for a life insurance policy on the life of the chief executive officer, Joel. Determine the deductibility of the $3,250. I.Hope could deduct the premium as compensation if Joel's daughter is the stated beneficiary of the policy. II.The premium is not deductible if Hope Corporation is the beneficiary. ​

Brees Co. requires its employees to adequately account for all reimbursed business expenses. Tracy, an employee of Brees Co. has AGI of $50,000 and submitted for reimbursement the following valid business expenses: ? Transportation costs \ 1,000 Meals 700 Hotel costs \ 1,300 What are the tax consequences if Brees reimburses Tracy $2,400? I.Tracy must report $2,400 of income. II.Tracy can deduct $2,400 of the expenses for AGI and $-0- as miscellaneous itemized deductions. ?

Garcia is a self-employed chiropractor and a cash basis taxpayer. During the most recent tax year, he provides patient services totaling $400,000. Of that total amount, he estimates $20,000 will never be collected. How much can Garcia deduct as a bad debt expense in the current tax year?

Olga is a technical sales consultant for Interactive Systems Corporation (ISC) based in San Diego. While on business in Boise, she entertains several clients at a cost of $600. When she returns to San Diego, Olga gives ISC receipts and other information to account for the entertainment expense. ISC reimburses Olga $600. How much can Olga and ISC deduct? ​ Olga ISC

Rodrigo works as a self-employed salesperson. His job requires that he spend most of his time outside the office calling on customers. In addition, to supplement his income he works 1 night a week and on weekends as a waiter at an exclusive seafood restaurant in the city. During the year, he keeps the following record of his travel: ? Miles Home to office 850 Office to home 425 Office to restaurant 300 Restaurant to home 1,200 Home to restaurant 725 Office to customers to office 7,100 Customers to restaurant 400 Total miles 11,000 If he uses the standard mileage rate, what amount can she deduct as a business automobile expense?

George is a full-time student at Indiana State University majoring in accounting. He works 12 to 20 hours per week at a local CPA firm inputting data for spreadsheets to prepare monthly financial statements for the firm's clients. George's tuition, fees, books, and supplies related to his education are $3,000 for the current year. I.The educational costs are deductible from AGI because they prepare him for a new trade or business. II.The education costs are deductible because it is part of a program that will qualify George to become a CPA. ​

Karen is single and graduated from Marring University in May of 2017. In January of 2018, she begins repaying her student loans and in 2018 pays $2,800 of interest on the loans. Her adjusted gross income is $51,000. I.Karen can deduct $2,500 of interest as a deduction for adjusted gross income. II.Karen can deduct $2,800 of interest as a deduction from adjusted gross income. ​

Which of the following information is not required for substantiation of business gift expenditures?