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
1. Deduction from AGI
2. Deduction from AGI
3. Deduction for AGI
Aubry, a cash basis and calendar year taxpayer, decides to reduce his taxable income for 2017 by buying $65,000 worth of supplies for his business on December 27, 2017. The supplies will be used up in 2018.
A. Can Aubry deduct the expenditure for 2017?
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, they are excluded under � 162 and � 212.
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 lobbying expenses and the foll
A. False
B. True
C. False
Maud, a calendar year taxpayer, is the owner of a sole proprietorship that uses the cash method. On February 1, 2017, 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 (can deduct full expense as it will be used within the next calendar year)
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
Rent of $24,000
Travel expenses of $4,000
Utilities of $18,000
Wages of $230,000
Payroll taxes of $13,800
Property Insurance of $1,600
Printers 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 exp
A. $10,000 ($25,000 X .6= $15,000, which is undeductible, therefore $25,000 - $15,000= $10,000 deductible)
B. $0, lobbying expenses are not deductible.
Amos is a self-employed tax attorney. He and Monica, his employee, attend a conference in Dallas sponsored by the American Institute of CPAs. The following expenses are incurred during the trip:
Amos Monica
Conference registration $900 $900
Airfare $1,200
A. Deductible for AGI
B.
Conference registration: $1,800
Airline tickets: $1,900
Taxi fares: $100
Lodging: $1,050
Total: $4,850
C. $4,850
Daniel, age 38, is single and has the following income and expenses in 2017:
Salary income $60,000
Net rent income 6,000
Dividend income 3,500
Payment of alimony 12,000
Mortgage interest on residence 4,900
Property tax on residence 1,200
Contribution to t
A.
Mortgage interest on residence: Deductible from AGI
Property tax on residence: Deductible from AGI
Contribution to traditional IRA (assume the amount is fully deductible): Deductible for AGI
Contribution to United Church: Deductible from AGI
Loss on th
A list of the items that Peggy sold and the losses she incurred during the current tax year is as follows:
Yellow, Inc. stock $1,600
Peggy's personal use SUV $8,000
Peggy's personal residence $10,000
City of Newburyport bonds $900
She also had a theft los
$4,000 ($1,600 stock + $900 bonds + $1,500 theft of business car)
Duck, an accrual basis corporation, sponsored a rock concert on December 29, 2017. Gross receipts were $300,000. The following expenses were incurred and paid as indicated:
Expense Payment Date
Rental of coliseum $25,000 December 21, 2017
Cost of goods so
Gross receipts: $300,000
Less Coliseum rental: $25,000
Food: $30,000
Souvenirs: $60,000
Performers: $100,000
Cleaning costs: $0
Total expenses: $215,000
Net income for 2017: $85,000
Doug incurred and paid the following expenses during the year:
Classify the following expenses as "Deductible" or "Not deductible".
A.$50 for a ticket for running a red light while he was commuting to work.
B. $100 for a ticket for parking in a handicappe
A. Not deductible
B. Not deductible
C. Not deductible
D. Deductible
E. Not deductible
Trevor, a friend of yours from high school, works as a server at the ST Caf�. He asks you to help him prepare his Federal income tax return. When you inquire about why his bank deposits substantially exceed his tip income, he confides to you that he is a
A.
Gross income from gambling: $52,000
Deductible expenses:
Salaries: $8,000
Payouts to winners: $29,000
Bribe to police officer: $0
Subtotal: $37,000
Increase in AGI: $15,000
B. $15,000
Paul 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 liste
A. The same/similar to his current business.
B. That is not the same/similar to his current business
C. $5,000, amortized over 180 months.
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- None deductible for the restaurant
He can deduct $5,000 immediately, less the dollar for dollar amount over $50,000, so for this case $5,000-$1,000= $4,000.
The rest is amortized over 180 months, so $51,000-$4,000 = $47,000/180= $261.11 per month.
Murphy 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 X $20,000 = $17,500)
Nancy, 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 $35,000 of expenses associated with this investigation. Based on the regulatory environment fo
A. $35,000, fully deductible since it is the same to her current industry
B. $3,133 ($5,000-$3,000 = $2,000 immediately deductible)
$51,000/180= $283 per month, and since the restaurant opened in September, 4 months are amortized this year ($283.33 X 4 =
Terry traveled to a neighboring state to investigate the purchase of two hardware stores. His expenses included travel, legal, accounting, and miscellaneous expenses. The total was $52,000. He incurred the expenses in June and July 2017. Under the followi
A. $52,000
B. $52,000
C. $0
D. $3,817 ($3,000 is immediately deductible, $5,000- $2,000 in excess of $50,000)
The rest is amortized over 180 months ($49,000/180 = $272.22 per month.
Since the business begain in October, 3 months have amortized ($272.22 X
Brittany Callihan sold stock (basis of $184,000) to her son, Ridge, for $160,000, the fair market value.
A. What are the tax consequences to Brittany?
B.
1. What are the tax consequences to Ridge if he later sells the stock for $190,000?
2. What are the t
A. Brittany will have a $24,000 loss that is not deductible.
B.
1. A realized gain of $30,000, with $6,000 of it recognized as taxable income ($30,000 - $24,000 disallowed loss).
2. A recognized and realized loss of $8,000
3. There is no recognized gain t
During the current year, Robert pays the following amounts associated with his own residence:
Property taxes $3,000
Mortgage interest 8,000
Repairs 1,200
Utilities 2,700
Replacement of roof 4,000
In addition, Robert paid $1,500 of property taxes on the ho
A.
Property taxes - Robert: Deductible
Property taxes - Anne: Nondeductible
Mortgage interest: Deductible
Repairs: Nondeductible
Utilities: Nondeductible
Replacement of roof: Non deductible
Enter Robert's total deductions without regard for any limitation
Sean is in the business of buying and selling stocks and bonds. He has a bond of Green Corporation for which he paid $200,000. The bond is currently worth only $50,000. Can Sean take a $150,000 loss for a business bad debt or for a worthless security?
Sea
1. Cannot
2. Cannot
3. Security
How are gains from the sale of � 1244 stock treated?
Gains on the sale of � 1244 stock are treated as ___
A capital gain
During the past tax year, Jane identified $50,000 as a nonbusiness bad debt. In that tax year, Jane had $100,000 of taxable income, of which $5,000 consisted of short-term capital gains. During the current tax year, Jane collected $10,000 of the amount sh
1. Short-term
2. $42,000
3. $10,000
4.
Bob owns a collection agency. He purchases uncollected accounts receivable from other businesses at 60% of their face value and then attempts to collect these accounts. During the current year, Bob collected $60,000 on an account with a face value of $80,
1. No bad
2. Income
3. $12,000
Compute the following regarding business and nonbusiness bad debts.
On May 9, 2015, Calvin acquired 250 shares of stock in Aero Corporation, a new startup company, for $68,750. Calvin acquired the stock directly from Aero, and it is classified as � 1244 s
Ordinary loss: $50,000
Short-term capital loss: $0
Long-term capital loss: $11,750
Several years ago John Johnson, who is in the lending business, loaned Sara $30,000 to purchase an automobile to be used for personal purposes. In August of the current year, Sara filed for bankruptcy, and John was notified that he could not expect to rec
1. Is
2. Are
3. Will
4. $26,000
5. Is
6. $26,000
7. Will
Monty loaned his friend Ned $20,000 three years ago. Ned signed a note and made payments on the loan. Last year, when the remaining balance was $11,000, Ned filed for bankruptcy and notified Monty that he would be unable to pay the balance on the loan. Mo
1. Short-term capital loss
2. $11,000 ($11,000- capital gains of $4,000)
Sally is in the business of purchasing accounts receivable. Last year Sally purchased an account receivable with a face value of $80,000 for $60,000. During the current year, Sally settled the account, receiving $65,000. Determine the maximum amount of th
1. $60,000- what she paid for the receivable.
2. $0, as she gained $5,000
Mable and Jack file a joint return. For the current year, they had the following items:
Salaries $120,000
Loss on sale of � 1244 stock acquired two years ago 105,000
Gain on sale of � 1244 stock acquired six months ago 20,000
Nonbusiness bad debt 19,000
D
$ 17,000
$120,000 Salary
-$100,000 ordinary loss (1244 stock)
- ($20,000 gain - $19,000 = $1,000 gain- $5,000 loss, limited to $3,000)
Nell, single and age 38, had the following income and expense items in 2017:
Nonbusiness bad debt $6,000
Business bad debt 2,000
Nonbusiness long-term capital gain 4,000
Nonbusiness short-term capital loss 3,000
Salary 50,000
Interest income 3,000
Nell ha
1. Loss
2. $5,000 ($4,000 gain- nonbusiness short term capital loss of $3,000 - nonbusiness bad debt of $6,000)
3. Deduct
4. $ 3,000
5. $48,000
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
1. Deduction from AGI
2. Deduction from AGI
3. Deduction for AGI
Aubry, a cash basis and calendar year taxpayer, decides to reduce his taxable income for 2017 by buying $65,000 worth of supplies for his business on December 27, 2017. The supplies will be used up in 2018.
A. Can Aubry deduct the expenditure for 2017?
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, they are excluded under � 162 and � 212.
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 lobbying expenses and the foll
A. False
B. True
C. False
Maud, a calendar year taxpayer, is the owner of a sole proprietorship that uses the cash method. On February 1, 2017, 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 (can deduct full expense as it will be used within the next calendar year)
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
Rent of $24,000
Travel expenses of $4,000
Utilities of $18,000
Wages of $230,000
Payroll taxes of $13,800
Property Insurance of $1,600
Printers 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 exp
A. $10,000 ($25,000 X .6= $15,000, which is undeductible, therefore $25,000 - $15,000= $10,000 deductible)
B. $0, lobbying expenses are not deductible.
Amos is a self-employed tax attorney. He and Monica, his employee, attend a conference in Dallas sponsored by the American Institute of CPAs. The following expenses are incurred during the trip:
Amos Monica
Conference registration $900 $900
Airfare $1,200
A. Deductible for AGI
B.
Conference registration: $1,800
Airline tickets: $1,900
Taxi fares: $100
Lodging: $1,050
Total: $4,850
C. $4,850
Daniel, age 38, is single and has the following income and expenses in 2017:
Salary income $60,000
Net rent income 6,000
Dividend income 3,500
Payment of alimony 12,000
Mortgage interest on residence 4,900
Property tax on residence 1,200
Contribution to t
A.
Mortgage interest on residence: Deductible from AGI
Property tax on residence: Deductible from AGI
Contribution to traditional IRA (assume the amount is fully deductible): Deductible for AGI
Contribution to United Church: Deductible from AGI
Loss on th
A list of the items that Peggy sold and the losses she incurred during the current tax year is as follows:
Yellow, Inc. stock $1,600
Peggy's personal use SUV $8,000
Peggy's personal residence $10,000
City of Newburyport bonds $900
She also had a theft los
$4,000 ($1,600 stock + $900 bonds + $1,500 theft of business car)
Duck, an accrual basis corporation, sponsored a rock concert on December 29, 2017. Gross receipts were $300,000. The following expenses were incurred and paid as indicated:
Expense Payment Date
Rental of coliseum $25,000 December 21, 2017
Cost of goods so
Gross receipts: $300,000
Less Coliseum rental: $25,000
Food: $30,000
Souvenirs: $60,000
Performers: $100,000
Cleaning costs: $0
Total expenses: $215,000
Net income for 2017: $85,000
Doug incurred and paid the following expenses during the year:
Classify the following expenses as "Deductible" or "Not deductible".
A.$50 for a ticket for running a red light while he was commuting to work.
B. $100 for a ticket for parking in a handicappe
A. Not deductible
B. Not deductible
C. Not deductible
D. Deductible
E. Not deductible
Trevor, a friend of yours from high school, works as a server at the ST Caf�. He asks you to help him prepare his Federal income tax return. When you inquire about why his bank deposits substantially exceed his tip income, he confides to you that he is a
A.
Gross income from gambling: $52,000
Deductible expenses:
Salaries: $8,000
Payouts to winners: $29,000
Bribe to police officer: $0
Subtotal: $37,000
Increase in AGI: $15,000
B. $15,000
Paul 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 liste
A. The same/similar to his current business.
B. That is not the same/similar to his current business
C. $5,000, amortized over 180 months.
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- None deductible for the restaurant
He can deduct $5,000 immediately, less the dollar for dollar amount over $50,000, so for this case $5,000-$1,000= $4,000.
The rest is amortized over 180 months, so $51,000-$4,000 = $47,000/180= $261.11 per month.
Murphy 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 X $20,000 = $17,500)
Nancy, 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 $35,000 of expenses associated with this investigation. Based on the regulatory environment fo
A. $35,000, fully deductible since it is the same to her current industry
B. $3,133 ($5,000-$3,000 = $2,000 immediately deductible)
$51,000/180= $283 per month, and since the restaurant opened in September, 4 months are amortized this year ($283.33 X 4 =
Terry traveled to a neighboring state to investigate the purchase of two hardware stores. His expenses included travel, legal, accounting, and miscellaneous expenses. The total was $52,000. He incurred the expenses in June and July 2017. Under the followi
A. $52,000
B. $52,000
C. $0
D. $3,817 ($3,000 is immediately deductible, $5,000- $2,000 in excess of $50,000)
The rest is amortized over 180 months ($49,000/180 = $272.22 per month.
Since the business begain in October, 3 months have amortized ($272.22 X
Brittany Callihan sold stock (basis of $184,000) to her son, Ridge, for $160,000, the fair market value.
A. What are the tax consequences to Brittany?
B.
1. What are the tax consequences to Ridge if he later sells the stock for $190,000?
2. What are the t
A. Brittany will have a $24,000 loss that is not deductible.
B.
1. A realized gain of $30,000, with $6,000 of it recognized as taxable income ($30,000 - $24,000 disallowed loss).
2. A recognized and realized loss of $8,000
3. There is no recognized gain t
During the current year, Robert pays the following amounts associated with his own residence:
Property taxes $3,000
Mortgage interest 8,000
Repairs 1,200
Utilities 2,700
Replacement of roof 4,000
In addition, Robert paid $1,500 of property taxes on the ho
A.
Property taxes - Robert: Deductible
Property taxes - Anne: Nondeductible
Mortgage interest: Deductible
Repairs: Nondeductible
Utilities: Nondeductible
Replacement of roof: Non deductible
Enter Robert's total deductions without regard for any limitation
Sean is in the business of buying and selling stocks and bonds. He has a bond of Green Corporation for which he paid $200,000. The bond is currently worth only $50,000. Can Sean take a $150,000 loss for a business bad debt or for a worthless security?
Sea
1. Cannot
2. Cannot
3. Security
How are gains from the sale of � 1244 stock treated?
Gains on the sale of � 1244 stock are treated as ___
A capital gain
During the past tax year, Jane identified $50,000 as a nonbusiness bad debt. In that tax year, Jane had $100,000 of taxable income, of which $5,000 consisted of short-term capital gains. During the current tax year, Jane collected $10,000 of the amount sh
1. Short-term
2. $42,000
3. $10,000
4.
Bob owns a collection agency. He purchases uncollected accounts receivable from other businesses at 60% of their face value and then attempts to collect these accounts. During the current year, Bob collected $60,000 on an account with a face value of $80,
1. No bad
2. Income
3. $12,000
Compute the following regarding business and nonbusiness bad debts.
On May 9, 2015, Calvin acquired 250 shares of stock in Aero Corporation, a new startup company, for $68,750. Calvin acquired the stock directly from Aero, and it is classified as � 1244 s
Ordinary loss: $50,000
Short-term capital loss: $0
Long-term capital loss: $11,750
Several years ago John Johnson, who is in the lending business, loaned Sara $30,000 to purchase an automobile to be used for personal purposes. In August of the current year, Sara filed for bankruptcy, and John was notified that he could not expect to rec
1. Is
2. Are
3. Will
4. $26,000
5. Is
6. $26,000
7. Will
Monty loaned his friend Ned $20,000 three years ago. Ned signed a note and made payments on the loan. Last year, when the remaining balance was $11,000, Ned filed for bankruptcy and notified Monty that he would be unable to pay the balance on the loan. Mo
1. Short-term capital loss
2. $11,000 ($11,000- capital gains of $4,000)
Sally is in the business of purchasing accounts receivable. Last year Sally purchased an account receivable with a face value of $80,000 for $60,000. During the current year, Sally settled the account, receiving $65,000. Determine the maximum amount of th
1. $60,000- what she paid for the receivable.
2. $0, as she gained $5,000
Mable and Jack file a joint return. For the current year, they had the following items:
Salaries $120,000
Loss on sale of � 1244 stock acquired two years ago 105,000
Gain on sale of � 1244 stock acquired six months ago 20,000
Nonbusiness bad debt 19,000
D
$ 17,000
$120,000 Salary
-$100,000 ordinary loss (1244 stock)
- ($20,000 gain - $19,000 = $1,000 gain- $5,000 loss, limited to $3,000)
Nell, single and age 38, had the following income and expense items in 2017:
Nonbusiness bad debt $6,000
Business bad debt 2,000
Nonbusiness long-term capital gain 4,000
Nonbusiness short-term capital loss 3,000
Salary 50,000
Interest income 3,000
Nell ha
1. Loss
2. $5,000 ($4,000 gain- nonbusiness short term capital loss of $3,000 - nonbusiness bad debt of $6,000)
3. Deduct
4. $ 3,000
5. $48,000