Classify each of the following expenditures paid in 2018 as a deduction "For AGI", "From AGI", or "Not deductible".
Note: Ignore any possible limitations.
a. Roberto gives cash to his father as a birthday gift.
b. Sandra gives cash to her church.
c. Alber
a. Not deductible
b. From AGI
c. From Agi
d. For AGI
e. For AGI
f. For AGI
g. Not deductible
Classify each of the following expenditures paid in 2018 as a deduction for AGI, partially deductible for AGI, a deduction from AGI, partially deductible from AGI, or not deductible. Ignore any percentage or dollar amount limitations.
a. Barak contributes
a. For AGI
b. Not deductible
c. Not deductible
d. From AGI
e. Not deductible
f. Partially deductible from AGI
In the determination of whether a business expense is deductible, the statutory language of the Code refers to reasonableness only with respect to salaries and other compensation.
The courts have held that for ___ the amount must be reasonable.
any business expense to be ordinary and necessary
Monique owns a building that she leases to an individual who operates a grocery store. Rent income is $10,000, and rental expenses are $6,000.
On what Form 1040 schedule or schedules are the income and expenses reported?
Schedule E
Aubry, a cash basis and calendar year taxpayer, decides to reduce his taxable income for 2018 by buying $65,000 worth of supplies for his business on December 27, 2018. The supplies will be used up in 2019.
a. Can Aubry deduct the expenditure for 2018?
b.
a. No, because he was motivated by tax considerations.
b. Yes, because there is a business reason.
Clear, Inc., is a bottled water distributor. Clear's delivery trucks frequently are required to park in no-parking zones to make their deliveries.
If the trucks are occasionally ticketed, can Clear deduct the fines that it pays?
No, because all fines are not allowed as a deduction.
Stuart, an insurance salesperson, is arrested for allegedly robbing a convenience store. He hires an attorney who is successful in getting the charges dropped.
Can Stuart deduct the attorney's fee?
No, because it is personal in nature.
Linda operates an illegal gambling operation. Indicate which of the following expenses that she incurs can reduce taxable income.
Select "Deductible", "Partially Deductible", or "Not deductible", whichever is applicable.
a. Bribes paid to city employees.
a. Not deductible
b. Deductible
c. Deductible
d. Not Deductible
e. Deductible
f. Deductible
g. Deductible
h. Deductible
Gordon anticipates that being positively perceived by the individual who is elected mayor will be beneficial for his business. Therefore, he contributes to the campaigns of both the Democratic and the Republican candidates. The Republican candidate is ele
No
Melissa, the owner of a sole proprietorship, does not provide health insurance for her 20 employees. She plans to spend $1,500 lobbying in opposition to legislation that would require her to provide such insurance.
Regarding Melissa's lobbying expenses, i
a. True
b. False
c. False
Blaze operates a restaurant in Cleveland. He travels to Columbus to investigate acquiring a business. He incurs expenses as follows: $1,500 for travel, $2,000 for legal advice, and $3,500 for a market analysis. Based on the different tax consequences list
a. the same/similar to his current business
b. not a restaurant; and did not acquire it
c. 5,000, amortized over 180 months
Ray loses his job as a result of a corporate downsizing. Consequently, he falls behind on the mortgage payments on his personal residence. His friend Ted would like to make the delinquent mortgage payments for him.
a. Could the payments be structured so t
a. Ted should give the money to Ray so that Ray pays the mortgage company.
b. Ted pays the mortgage company directly.
c. There is no way the payments can be structured so that Ted can deduct the mortgage interest.
Shanna, a calendar year and cash basis taxpayer, rents property from Janice. As part of the rental agreement, Shanna pays $8,400 rent on April 1, 2018 for the 12 months ending March 31, 2019.
If required, round any division to two decimal places. Round yo
a. 8,400 - does not extend beyond the end of 2019.
b. 3,150 [($8,400/24 months) x 9 months].
Falcon, Inc., paid salaries of $500,000 to its employees during its first year of operations. At the end of the year, Falcon had additional unpaid salaries of $45,000.
a. Calculate the salary deduction if Falcon is a cash basis taxpayer. b. Calculate the
a. $500,000
b. 545,000
Nanette is a first-grade teacher. Potential deductions are charitable contributions of $800, personal property taxes on her car of $240, and various supplies purchased for use in her classroom of $225 (none reimbursed by her school).
How will these items
a. Deductions from AGI
b. Deductions from AGI
c. Deduction for AGI
Maud, a calendar year taxpayer, is the owner of a sole proprietorship that uses the cash method. On February 1, 2018, she leases an office building to use in her business for $120,000 for an 18-month period. To obtain this favorable lease rate, she pays t
$120,000
Vella owns and operates an illegal gambling establishment. In connection with this activity, he has the following expenses during the year:
Rent $24,000
Bribes 40,000
Travel expenses 4,000
Utilities 18,000
Wages 230,000
Payroll taxes 13,800
Property insur
$291,400 (everything but bribes and kickbacks)
Printer Company pays a $25,000 annual membership fee to a trade association for paper wholesalers. The trade association estimates that 60% of its dues are allocated to lobbying activities.
If amount is zero, enter, "0".
a. Printer's total deductible expe
a. $10,000 ($25,000 x 40%)
b. $0
Stanford owns and operates two dry cleaning businesses. He travels to Boston to discuss acquiring a restaurant. Later in the month, he travels to New York to discuss acquiring a bakery. Stanford does not acquire the restaurant but does purchase the bakery
$4,522 Regarding the bakery, Stanford may immediately deduct $4,000 [$5,000 - ($51,000 - $50,000)] and amortize the balance of $47,000 ($51,000 - $4,000) over a period of 180 months. $47,000/180 months = $261.11 x 2 months = $522.22. For calendar year 201
Tobias has a brokerage account and buys on the margin, which resulted in an interest expense of $20,000 during the year. Income generated through the brokerage account was as follows:
Municipal interest $50,000
Taxable dividends and interest 350,000
In yo
$17,500 (350,000/400,000 = .875 * 20,000 = 17,500)
Classify each of the following expenditures paid in 2018 as a deduction "For AGI", a deduction "From AGI", or "Not deductible".
Ignore any possible limitations.
a. Samuel has deductions attributable to the rental of his office building.
b. Katie paid for
a. For AGI
b. Not deductible
c. For AGI
d. From AGI
e. Not deductible
f. For AGI
The portion of property tax on a vacation home that is attributable to personal use is an itemized deduction.
True
Deductions are allowed unless a specific provision in the tax law provides otherwise.
False
An advance payment received in June 2018 by an accrual basis and calendar year taxpayer for services to be provided over a 36-month period can be spread over four tax years.
False
Under the "twelve month rule" for the current period deduction of prepaid expenses of cash basis taxpayers, the asset must expire or be consumed by the end of the tax year following the year of payment.
True
Walt wants to give his daughter $1,800 for Christmas. As an alternative, she suggests that he pay the property taxes on her residence. If Ralph pays the property taxes, he can deduct them.
False
Susan is a sales representative for a U.S. weapons manufacturer. She makes a $100,000 "grease" payment to a U.S. government official associated with a weapons purchase by the U.S. Army. She makes a similar payment to a Saudi Arabian government official as
False
The income of a sole proprietorship is reported on Schedule C (Profit or Loss from Business).
True
All income must be reported, and all deductions are allowed unless specifically disallowed in the Code.
False
Michael, who is single, age 20 and claimed by his parents as a dependent, earned $20,000 at the K-M Resort Golf Club during the summer prior to his senior year in college. He wants to make a contribution to a traditional IRA for the tax year 2018, but the
for, does, has no
Dave uses the second floor of a building for his residence and the first floor for his business. The uninsured building is destroyed by fire. Are the tax consequences the same for each part of the building?
If the casualty occurs in a Federally declared d
treated as a deduction from AGI, not deductible, allowed as a business loss, a deduction for AGI
For the following statements, indicate either "True" or "False" regarding what is the "actually paid" requirement for the deduction of an expense by a cash basis taxpayer.
a. The expenses of cash basis taxpayers are deductible only when they are actually
a. False
b. True
c. True
d. True
Jarret owns City of Charleston bonds with an adjusted basis of $190,000. During the year, he receives interest payments of $3,800. Jarret partially financed the purchase of the bonds by borrowing $100,000 at 5% interest. Jarret's interest payments on the
a. $0
b. $0
Daniel, age 38, is single and has the following income and expenses in 2018:
Salary income $153,000
Net rent income 15,500
Dividend income 900
Payment of alimony in accordance w/separation agreement signed in 2018 16,000
Mortgage interest on residence 7,0
a.
Payment of alimony Deductible for AGI
Mortgage interest Deductible from AGI
Property tax on Deductible from AGI
Contribution to IRA Deductible for AGI
Contribution to Church Deductible from AGI
Loss on sale of estate Deductible for AGI
Medical expenses
Henrietta, the owner of a very successful hotel chain in the Southeast, is exploring the possibility of expanding the chain into a city in the Northeast. She incurs $63,500 of expenses associated with this investigation. Based on the regulatory environmen
a. $63,500
b. $2,627 [5,000 - (54,800-50,000)] + {[(54,800 - 200)/180] * 8 months}
For each of the following independent transactions, calculate the recognized gain or loss to the seller and the adjusted basis to the buyer.
If an amount is zero, enter "0."
a. Kiera sells Parchment, Inc. stock (adjusted basis $18,500) to Phillip, her bro
Gain/Loss, Amount, Buyer's Adjusted Basis
a. Recognized loss, $0, $14,400
b. Recognized loss, $36,000, $41,000
c. Recognized loss, $0, $16,100
d. Recognized loss, $10,000, $7,400
e. Recognized gain, $87,000, $245,000
Marsha is single, had gross income of $50,000, and incurred the following expenses:
Charitable contribution $2,000
Taxes and interest on home 7,000
Legal fees incurred in a tax dispute 1,000
Medical expenses 3,000
Penalty on early withdrawal of savings 25
$49,750 (50,000 - 250)
Benita incurred a business expense on December 10, 2018, which she charged on her bank credit card. She paid the credit card statement which included the charge on January 5, 2019. Which of the following is correct?
If Benita is an accrual method taxpayer, she can deduct the expense in 2018
Trade or business expenses of a self-employed taxpayer should be treated as:
Deductible for AGI on Schedule C.
Andrew, who operates a laundry business, incurred the following expenses during the year.
* Parking ticket of $250 for one of his delivery vans that parked illegally.
* Parking ticket of $75 when he parked illegally while attending a rock concert in Tulsa
$0
Tonya is a cash basis taxpayer. In 2018, she paid state income taxes of $8,000. In early 2019, she filed her 2018 state income tax return and received a $900 refund.
If Tonya itemized her deductions in 2018 on her Federal income tax return and her itemized deductions exceeded the standard deduction by more than $900, she must recognize $900 income in 2019 under the tax benefit rule.
Which of the following are deductions for AGI?
Mortgage interest on a building used in a business.