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Exam 5: Business Deductions

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Question 41

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Why was the domestic production activities deduction (DPAD)enacted by Congress?

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The American Jobs Creation Act of 2004 p...

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Question 42

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The period in which an accrual basis taxpayer can deduct an expense is determined by applying the economic performance and all events tests.

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Question 43

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Rex,a cash basis calendar year taxpayer,runs a bingo operation which is illegal under state law.During 2013,a bill designated H.R.9 is introduced into the state legislature which,if enacted,would legitimize bingo games.In 2013,Rex had the following expenses: Of these expenditures,Rex may deduct:

Jacques,who is not a U.S.citizen,makes a contribution to the campaign of a candidate for governor.Cassie,a U.S.citizen,also makes a contribution to the same campaign fund.If contributions by noncitizens are illegal under state law,the contribution by Cassie is deductible,while that by Jacques is not.

Blue Corporation incurred the following expenses in connection with the development of a new product: Blue expects to begin selling the product next year.If Blue elects to amortize research and experimental expenditures over 60 months,determine the amount of the deduction for research and experimental expenditures for the current year.

While she was a college student,Angel lived by a bookstore located near campus.She thinks a bookstore located on the other side of campus would be successful.She incurs expenses of $42,800 (legal fees,accounting fees,marketing survey,etc.)in exploring its business potential.Her parents have agreed to loan her the money required to start the business.What amount of these investigation costs can Angel deduct if:

Howard's business is raising and harvesting peaches.On March 10,2013,Howard purchased 10,000 new peach trees at a cost of $60,000.Howard does not elect to expense assets under § 179.If eligible,Howard takes additional first-year depreciation.Determine the cost recovery deduction for 2013.

Investigation of a business unrelated to one's present business never results in a current period deduction of the entire amount if the amount of the investigation expenses exceeds $5,000.

Nikeya sells land (adjusted basis of $120,000) to her adult son,Shamed,for its appraised value of $95,000.Which of the following statements is correct?

Which of the following is not a "trade or business" expense?

Which of the following may be deductible?

Green,Inc.,manufactures and sells widgets.During 2013,an examination of the company records showed the following items: Determine Green's domestic production activities deduction for 2013.

The cost of depreciable property is not a research and experimental expenditure.

In 2012,Robin Corporation incurred the following expenditures in connection with the development of a new product:

If a taxpayer operates an illegal business,no deductions are permitted.

Doug purchased a new factory building on January 15,1988,for $400,000.On March 1,2013,the building was sold.Determine the cost recovery deduction for the year of the sale assuming he did not use the MACRS straight-line method.

Max opened his dental practice (a sole proprietorship)in March 2013.At the end of the year,he has unpaid accounts receivable of $62,000 and no unpaid accounts payable.Should Max use the accrual method or the cash method for his dental practice?

If qualified production activities income (QPAI)cannot be used in the calculation of the domestic production activities deduction in 2013 because of the taxable income limitation,the product of the amount not allowed multiplied by 9% can be carried over for 5 years.

During the past two years,through extensive advertising and improved customer relations,Orange Corporation estimated that it had developed customer goodwill worth $500,000.For the current year,determine the amount of goodwill Orange Corporation may amortize.

During the current year,Owl Corporation (a C corporation) ,a retailer of children's apparel,made the following donations to qualified charitable organizations. How much qualifies for the charitable contribution deduction?