Exam 3: Business Income and Expenses Part I

Sally and Martha are tax accountant partners operating a tax firm in San Diego.Every year,they attend the Tax Planning Forum in Las Vegas featuring nationally renowned tax experts.The Forum lasts for 2 days.One evening Sally and Martha attend a show and another evening they lose $10 gambling on the nickel slot machines.Their expenses are as follows: ​ Calculate the firm's deduction for attending this event.

Jess has had a couple of good years in his new business and generated large amounts of taxable income.In the current year,however,he has a net operating loss of $8,000.He is uncertain about the future of the business,and has a serious cash flow problem.As his tax accountant,how would you recommend Jess treat his net operating loss?

Michael has a very successful business as a financial consultant.Michael attends the following seminars: How much can Michael deduct as business education expenses?

Patrick has a business net operating loss of $70,000 in 2017.Patrick's business generated significant taxable profits in 2015 and in 2016.Which of the following is true? ​

Acacia Company had inventory of $300,000 on December 31,20X1.Other information is as follows: ​ ​ ​ ​ ​ What is the amount of Acacia's cost of goods sold for 20X1?

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

There is a limitation of $25 per donee on the deduction of gifts to employees for length of service.

Dennis,the owner of Dennis Company,incurs the following expenses while away from home on a 3-week business trip during 2017: In addition to the above expenses,Dennis incurred the following expenses for a weekend sightseeing trip to Washington D.C.: ​ Calculate the amount Dennis may deduct for 2017 as travel expenses for the trip. Calculate the amount Dennis may deduct for 2017 as entertainment. Calculate the amount Dennis may deduct for 2017 as business gifts.

Lew started a business writing a popular syndicated Japanese gardening column in the current year and will report a profit for his first year.His results of operations are as follows: What is the net income Lew should show on his Schedule C? Show the calculation of his taxable income.

Choose the correct statement:

Rick is a business adviser who lives in Escondido,California and works in San Diego.He makes a 70-mile round trip commute to his job every workday,for a total of 14,000 miles a year.In addition,he drives 1,000 miles throughout the year to visit clients from his office in San Diego.If Rick uses the standard mileage method for computing automobile expenses,what is his automobile expense deduction for 2017?

Mary is an insurance salesperson and a member of the Country Club.During the current year,Mary used the club 40 percent for entertaining clients (directly-related use)and 60 percent for pleasure.She incurred the following expenses at the Country Club: Calculate the amount that Mary is allowed to deduct as entertainment expense.

Anna is a self-employed newspaper columnist who does her work exclusively from a home office.Anna had a bad year and her taxable income from her business is only $2,000 before the home office expenses this year.Her office takes up 250 square feet of her 1,000 square foot apartment.The total expenses for her apartment are $8,000 for rent,$1,000 for utilities,$200 of renter's insurance and $800 for pest control and other maintenance.What is Anna's home office deduction? Please show your calculations.

Taxpayers who make a combined business and pleasure trip:

Paul is a self-employed investment adviser who uses his automobile for business.Paul drove his automobile a total of 20,000 miles during 2017;75 percent was business mileage.The actual cost of gasoline,oil,depreciation,repairs,and insurance for the year was $6,200. a.How much is Paul's transportation deduction based on the standard mileage method? b.How much is Paul's transportation deduction based on the actual cost method? c.​Which method should Paul use to calculate his transportation deduction,assuming he used the standard mileage method in the prior tax year? Why? d.Where should he deduct the transportation expense on his current year tax return? ​

Hope Springs,a teacher,loaned Hugh Owens,a friend,$10,000 to invest in real estate.Hugh declared bankruptcy in 2017 and cannot repay the $10,000. a.What is the nature of Hope's loss? b.Assuming Hope has no other capital transactions,is there a limit on the amount she may deduct for 2017? Explain. c.What amount of the loss may Hope deduct in 2017?

What is the purpose of Schedule C?

Gene is a self-employed taxpayer working from his home.His net income is $7,000 before home office expenses.His allocable home office expenses are $8,000 in total.How are the home office expenses treated on his current year tax return?

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

Once the election to use the LIFO inventory method has been made by a taxpayer,the inventory method may be changed only with the consent of the IRS.