Exam 3: Business Income and Expenses Part I

Sherri is a tax accountant.She prepared a large corporate tax return 2 years ago and billed $5,000 to her client.After 2 years of attempting to collect the money,it is clear that she will not be able to collect anything since the business has gone bankrupt.She reports income on her tax return on the accrual basis as she bills it,so the $5,000 was included in her taxable income 2 years ago.Can she claim a bad debt deduction for the $5,000? Explain.

Mikey is a self-employed computer game software designer.He takes a week-long trip to Maui,primarily for business.He takes 2 personal days at the beach.How should he treat the expenses related to this trip?

The cost of a subscription to the New England Journal of Medicine is a deductible expense for a hospital intern.

Girard is a self-employed marketing consultant who spends significant time entertaining potential customers.He keeps all the appropriate records to substantiate his entertainment.He has the following business-related expenses in the current year. ​ What is the tax deductible entertainment expense Girard may claim in the current year.On which tax form should he claim the deduction?

Splashy Fish Store allows qualified customers to purchase items on credit.During the current year,Lisa,the owner of the store,determines that $3,500 of accounts receivable are not collectible.Which of the following statements is true with respect to Splashy Fish Store's deduction for the uncollectible accounts receivable? ​

In which of the following situations may the taxpayer take an education expense on Schedule C?

Choose the correct answer.

Net operating losses may be carried forward indefinitely.

Maria runs a small business out of her home.She has expenses of $2,000 per year and uses the cash basis method of accounting.Her only employee is her cousin who works for her part-time.What form should she use to report her business income?

Chris opens a chiropractic office in Houston on January 1,2017.In 2017,Chris drives a total of 4,200 miles from his office to clients' homes to do chiropractic adjustments.In addition,he drives a total of 3,000 miles for commuting between his home and his office in 2017.He elects to use the standard mileage method.On January 1,2017,Chris purchases an annual subscription to a chiropractic journal for $200 and a 1-year medical reference service for $500.Calculate Chris's deduction for the above items for the 2017 tax year.

Ellen loans Nicole $45,000 to start a hair salon.Unfortunately,the business fails in 2017 and she is unable to pay back Ellen.In 2017,Ellen also had $20,000 of income from her part-time job and $15,000 of capital gain from the sale of stock.How much of the $45,000 bad debt can Ellen claim as a capital loss in 2017? ​

If the taxpayer does not maintain adequate records of car expenses (i.e. ,gas,tires,car insurance,etc. ),the standard mileage rate cannot be used.

Marco makes the following business gifts during the year: Marco also spent $15 on wrapping paper and a card for the above gift to the Whites. Calculate Marco's total allowed deduction for gifts.

Brandi operates a small business and employs three staff members,all of which perform the same tasks with more or less the same level of skill.Two of the staff members are paid wages of $10 per hour;however,the third staff member,Whiski,is Brandi's sister and earns $17 per hour.What amount per hour can Brandi deduct for ​wages paid to Whiski?

The expense of travel as a form of education is not deductible.

To be deductible as the cost of special work clothing or uniforms:

Once a taxpayer uses the standard mileage method to determine the deduction for automobile expenses for the tax year,the standard mileage method must be used in all subsequent years.