Exam 3: Business Income and Expenses Part I

Barry is a self-employed attorney who travels to New York on a business trip during the year.Barry's expenses were as follows: How much may Barry deduct as travel expenses for the trip?

Keri is a single taxpayer and has a net operating loss of $30,000 in 2017.Her taxable income for the last 5 years has been about $10,000 each year.She expects 2018 to be a very good year and projects that her income will be over $100,000.If you were Keri's tax advisor,what would you recommend that she do with her 2017 operating loss? Explain.

Nancy owns a small dress store.During the year,Nancy gives business gifts having the indicated cost to the following individuals: What is the amount of Nancy's deduction for business gifts?

Katie operates a ceramics studio from her garage.She incurs the following expenses: Katie's gross receipts from her business were $2,000. a.If the studio is deemed to be a hobby,then calculate the amount of expenses Katie may deduct,and describe how she may report the income and expenses on her tax return. b.If the studio is not a hobby,then calculate the amount of expenses Katie may deduct,and describe how she may report the income and expenses on her tax return.

David purchases a yacht solely for the purpose of entertaining real estate clients.He wishes to position himself as a high-end real estate salesperson specializing in very expensive residences and uses the yacht only for business entertainment.During 2017,his expenses for maintaining and operating the yacht,including depreciation,were $28,000.In addition,he incurred $9,000 of catering expenses for meals he provided to business clients on the yacht.What is David's tax deduction in 2017? ​ Explain.

If an employer chooses a per diem method of substantiation for travel expenses,

Jezebel loaned her friend $7,000 to buy a used car.She had her friend sign a note with repayment terms and set a reasonable interest rate on the note because she wanted her friend to understand that this was purely a loan and not a gift.Her friend is now on disability and has made it clear she has no way of paying back the loan.How should Jezebel treat the bad loan for tax purposes?

Martin has a home office for his business as an agent for rock-and-roll bands.The business shows a loss of $2,000 before home office expenses.How should the home office expenses be treated?

Linda is self-employed and spends $600 for business meals and $900 for business entertainment in the current year.What is Linda allowed to deduct in the current year for these expenses?

Under the specific charge-off method,a deduction for a bad debt is taken when the debt is determined to be worthless.

If a per diem method is not used,which of the following items is not required as substantiation for the deduction of a travel expense?

The net operating loss (NOL)provisions of the Internal Revenue Code ​

During the current year holiday season,Bob,a barber,gave business gifts to 34 customers.The values of the gifts,which were not of a promotional nature,were as follows: ​ 10 at $10 each 8 at $25 each 8 at $50 each 8 at $100 each ​ For the current year,what is the amount of Bob's business gift deduction?

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.

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

Candace uses an office in her home exclusively for her business.The business use of the home is 100 sq ft out of 2,000 sq ft for the entire home.The total expenses to allocate are $3,000.Candace wishes to maximize her deduction in the current year.What is the amount of her home office deduction before any income limitations?

The cost of transportation from New York to London for a trip that is for both business and pleasure may be deducted in full as a travel expense.

Jasper owns a small retail store as a sole proprietor.The business records show that the cost of the store's inventory items has been steadily increasing.The cost of the end of the year inventory is $200,000 and the cost of the beginning of the year inventory was $250,000.Jasper uses the FIFO method of inventory valuation.Which of the following statements is true? ​

Jack is a lawyer who is a member at Ocean Spray Country Club where he spends $7,200 in dues,$4,000 in meals,and $2,000 in green fees to entertain clients.He is also a member of the local Rotary club where he meets potential clients.The dues for the Rotary club are $1,200 a year.How much of the above expenses can Jack deduct as business expenses?

Ruth is a self-employed surgeon and is required to take a week of continuing medical education every year to keep her license.This year she paid $2,000 in course fees for her continuing medical education in Honolulu.She also paid $1,500 for airfare and a hotel room and $400 for meals.What is the total amount she can deduct on her Schedule C related to these expenses?