Question 1

Bobby operates a drug trafficking business.Because he has an accounting background,he keeps detailed financial records.What expenses can Bobby deduct on his Federal income tax return?

Accepted Answer

Bobby cannot deduct any of the expenses ...

Question 2

Which of the following statements is correct in connection with the investigation of a business?

Accepted Answer

A)   If the taxpayer is not already engaged in the trade or business, the expenses incurred are deductible if the project is abandoned.
B)   If the business is acquired, the expenses may be deducted immediately by a taxpayer engaged in a similar trade or business.
C)   That business must be related to the taxpayer's present business for any expense ever to be deductible.
D)   Regardless of whether the taxpayer is already engaged in the trade or business, the expenses must be capitalized and amortized.
E)   None of the above.F) C) and E)
G) B) and D)

Question 3

Paula is the sole shareholder of Violet,Inc.For 2012,she receives from Violet a salary of $300,000 and dividends of $100,000.Violet's taxable income for 2012 is $500,000.On audit,the IRS treats $100,000 of Paula's salary as unreasonable.Which of the following statements is correct?

Accepted Answer

A)   Paula's gross income will increase by $100,000 as a result of the IRS adjustment.
B)   Violet's taxable income will not be affected by the IRS adjustment.
C)   Paula's gross income will decrease by $100,000 as a result of the IRS adjustment.
D)   Violet's taxable income will increase by $100,000 as a result of the IRS adjustment.
E)   None of the above is correct.F) A) and D)
G) A) and B)

Question 4

Because it has only one owner,any sole proprietorship is permitted to elect the cash method of accounting.

Accepted Answer

A) True 
 B)False

Question 5

Trade and business expenses should be treated as:

Accepted Answer

A)   A deduction from AGI subject to the 2%-of-AGI floor.
B)   A deduction from AGI not subject to the 2%-of-AGI floor.
C)   Deductible for AGI.
D)   An itemized deduction if not reimbursed.
E)   None of the above.F) A) and C)
G) B) and D)

Question 6

Assuming an activity is deemed to be a hobby,discuss the order and limits in which expenses must be deducted.

Accepted Answer

Amounts deductible under other Code sect...

Question 7

Under what circumstances may a taxpayer deduct the expenses of investigating a possible business acquisition,if (1)the business is not acquired; and (2)the business is acquired?

Accepted Answer

The answer of Under what circumstances may a taxpayer deduct...

Question 8

Generally,a closely-held family corporation is not permitted to take a deduction for a salary paid to a family member in calculating corporate taxable income.

Accepted Answer

A) True 
 B)False

Question 9

Gladys owns a retail hardware store in Tangipahoa.She is considering opening a business in Hammond,a community located 25 miles away.She incurs expenses of $60,000 in 2012 in investigating the feasibility and desirability of doing so.What amount can Gladys deduct in 2012 if the business is:

Accepted Answer

The answer of Gladys owns a retail hardware store in...

Question 10

Vera is the CEO of Brunettes,a publicly held corporation.For the year,she receives a salary of $800,000,a bonus of $400,000,and contributions to her retirement plan of $45,000.The bonus was awarded at the December board meeting based on Vera's threat to accept a better paying job with a competitor.What amount may Brunettes deduct?

Accepted Answer

A)   $842,000.
B)   $1,045,000.
C)   $1,200,000.
D)   $1,245,000.
E)   None of the above.F) C) and D)
G) A) and D)

Question 11

If a residence is used primarily for personal use (rented for fewer than 15 days per year) ,which of the following is correct?

Accepted Answer

A)   No income is included in AGI.
B)   No expenses are deductible.
C)   Expenses must be allocated between rental and personal use.
D)   Only a. and b. are correct.
E)   a., b., and c. are correct.F) All of the above
G) A) and E)

Question 12

On January 2,2012,Fran acquires a business from Chuck.Among the assets purchased are the following intangibles: patent with a 7-year remaining life,a covenant not to compete for 10 years,and goodwill. Of the purchase price,$140,000 was paid for the patent and $60,000 for the covenant.The amount of the excess of the purchase price over the identifiable assets was $100,000.What is the amount of the amortization deduction for 2012?

Accepted Answer

A)   $10,667.
B)   $16,000.
C)   $20,000.
D)   $32,667.
E)   None of the above.F) A) and B)
G) C) and D)

Question 13

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?

Accepted Answer

A)   Nikeya's recognized loss is $25,000 ($95,000 amount realized - $120,000 adjusted basis) .
B)   Shamed's adjusted basis for the land is $120,000 ($95,000 cost + $25,000 disallowed loss for Nikeya) .
C)   If Shamed subsequently sells the land for $112,000, he has no recognized gain or loss.
D)   Only a. and b. are correct.
E)   a., b., and c. are correct.F) B) and D)
G) A) and E)

Question 14

For an expense to be deducted as ordinary,it must be recurring in nature.

Accepted Answer

A) True 
 B)False

Exam 6: Deductions and Losses: in General

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?

Correct Answer
verified

Gladys owns a retail hardware store in Tangipahoa.She is considering opening a business in Hammond,a community located 25 miles away.She incurs expenses of $60,000 in 2012 in investigating the feasibility and desirability of doing so.What amount can Gladys deduct in 2012 if the business is:

Correct Answer
verified

Bobby operates a drug trafficking business.Because he has an accounting background,he keeps detailed financial records.What expenses can Bobby deduct on his Federal income tax return?

Correct Answer
verified
Bobby cannot deduct any of the expenses ...
View Answer

Which of the following statements is correct in connection with the investigation of a business?

Correct Answer
verified

For an expense to be deducted as ordinary,it must be recurring in nature.

Correct Answer
verified

Correct Answer
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Paula is the sole shareholder of Violet,Inc.For 2012,she receives from Violet a salary of $300,000 and dividends of $100,000.Violet's taxable income for 2012 is $500,000.On audit,the IRS treats $100,000 of Paula's salary as unreasonable.Which of the following statements is correct?

Correct Answer
verified

Correct Answer
verified

Because it has only one owner,any sole proprietorship is permitted to elect the cash method of accounting.

Correct Answer
verified

If a residence is used primarily for personal use (rented for fewer than 15 days per year) ,which of the following is correct?

Correct Answer
verified

Assuming an activity is deemed to be a hobby,discuss the order and limits in which expenses must be deducted.

Correct Answer
verified
Amounts deductible under other Code sect...
View Answer

Under what circumstances may a taxpayer deduct the expenses of investigating a possible business acquisition,if (1)the business is not acquired; and (2)the business is acquired?

Correct Answer
verified

Trade and business expenses should be treated as:

Correct Answer
verified

Generally,a closely-held family corporation is not permitted to take a deduction for a salary paid to a family member in calculating corporate taxable income.

Correct Answer
verified

Exam 6: Deductions and Losses: in General

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?

Correct AnswerverifiedShow Answer

Gladys owns a retail hardware store in Tangipahoa.She is considering opening a business in Hammond,a community located 25 miles away.She incurs expenses of $60,000 in 2012 in investigating the feasibility and desirability of doing so.What amount can Gladys deduct in 2012 if the business is:

Correct AnswerverifiedShow Answer

Bobby operates a drug trafficking business.Because he has an accounting background,he keeps detailed financial records.What expenses can Bobby deduct on his Federal income tax return?

Correct AnswerverifiedBobby cannot deduct any of the expenses ...View AnswerShow Answer

Which of the following statements is correct in connection with the investigation of a business?

Correct AnswerverifiedShow Answer

For an expense to be deducted as ordinary,it must be recurring in nature.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Paula is the sole shareholder of Violet,Inc.For 2012,she receives from Violet a salary of $300,000 and dividends of $100,000.Violet's taxable income for 2012 is $500,000.On audit,the IRS treats $100,000 of Paula's salary as unreasonable.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Because it has only one owner,any sole proprietorship is permitted to elect the cash method of accounting.

Correct AnswerverifiedShow Answer

If a residence is used primarily for personal use (rented for fewer than 15 days per year) ,which of the following is correct?

Correct AnswerverifiedShow Answer

Assuming an activity is deemed to be a hobby,discuss the order and limits in which expenses must be deducted.

Correct AnswerverifiedAmounts deductible under other Code sect...View AnswerShow Answer

Under what circumstances may a taxpayer deduct the expenses of investigating a possible business acquisition,if (1)the business is not acquired; and (2)the business is acquired?

Correct AnswerverifiedShow Answer

Trade and business expenses should be treated as:

Correct AnswerverifiedShow Answer

Generally,a closely-held family corporation is not permitted to take a deduction for a salary paid to a family member in calculating corporate taxable income.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Bobby cannot deduct any of the expenses ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Amounts deductible under other Code sect...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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