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Exam 6: Deductions and Losses: in General

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Question 31

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Agnes operates a Christmas Shop in Atlantic City,NJ.She makes a weekend trip to Vero Beach,FL,for the purpose of determining the feasibility of opening another shop.Her travel expenses are $2,000 (includes $500 for meals).In addition,she pays $5,000 to a market research firm in Vero Beach to prepare a feasibility study.Determine the amount of the expenses that Agnes can deduct if: a.​She opens a new shop in Vero Beach. b.She decides not to open a new shop in Vero Beach.

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Question 32

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In applying the $1 million limit on deducting executive compensation,what corporations are subject to the deduction limit? What executives are covered?

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The $1 million limit on deducting the co...

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Question 33

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Are there any circumstances under which lobbying expenditures are deductible?

Andrew,who operates a laundry business,incurred the following expenses during the year. What amount can Andrew deduct for these expenses?

Taylor,a cash basis architect,rents the building in which his office is located for $5,000 per month.He commenced his practice on February 1,2017.In order to guarantee no rent increases during an 18-month period,he signed an 18-month lease and prepaid the $90,000 on February 1,2017.How much can Taylor deduct as rent expense for 2017?

Why are there restrictions on the recognition of gains and losses resulting from transactions between related parties?

A vacation home at the beach which is rented for 200 days and used personally for 16 days is classified in the personal/rental use category.

Which of the following is incorrect?

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.

Kitty runs a brothel (illegal under state law) and has the following items of income and expense.What is the amount that she must include in taxable income from her operation?

Priscella pursued a hobby of making bedspreads in her spare time.Her AGI before considering the hobby is $40,000.During the year she sold the bedspreads for $10,000.She incurred expenses as follows: ​ Assuming that the activity is deemed a hobby,how should she report these items on her tax return?

Rex,a cash basis calendar year taxpayer,runs a bingo operation which is illegal under state law.During 2017,a bill designated H.R.9 is introduced into the state legislature which,if enacted,would legitimize bingo games.In 2017,Rex had the following expenses: Of these expenditures,Rex may deduct:

Al is single,age 60,and has gross income of $140,000.His deductible expenses are as follows: ​ What is Al's AGI?

Which of the following are deductions for AGI?

Describe the circumstances under which a taxpayer can receive rent income from a personal residence,but does not have to report it as gross income.

Can a trade or business expense be deductible if it is necessary but not ordinary?

Tom operates an illegal drug-running operation and incurred the following expenses: Which of the above amounts reduces his taxable income?

Purchased goodwill must be capitalized,but can be amortized over a 60-month period.

Max opened his dental practice (a sole proprietorship) in March 2017.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?

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: a.She opens the bookstore on August 1, 2017. b.She decides not to open the bookstore.