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Exam 6: Deductions and Losses

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Question 51

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Discuss tax planning considerations which a taxpayer may use to possibly avoid classification of an activity as a hobby.

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1. Accelerate income so that profitable ...

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Question 52

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Generally, deductions for adjusted gross income on an individual's tax return include all the following types of expenses except those

A) incurred in gambling activities.
B) incurred in a trade or business.
C) incurred in the production of rent income.
D) incurred in the production of royalty income.

E) B) and C)
F) A) and D)

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Question 53

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Self-employed individuals may claim, as a deduction for adjusted gross income, 50 percent of their

During the current year, Paul, a single taxpayer, reported the following items: Compute Paul's taxable income for the year.

Various criteria will disqualify the deduction of a business or investment related expenditure. Which of the following criteria will not disqualify a business or investment expenditure?

Mackensie owns a condominium in the Rocky Mountains. During the year, Mackensie uses the condo a total of 23 days. The condo is also rented to tourists for a total of 77 days and generates rental income of $10,900. Mackensie incurs the following expenses in the condo: Using the court's method of allocating expenses, the amount of depreciation that Mackensie may take with respect to the rental property will be

Hobby expenses are deductible as for AGI deductions.

Taxpayers may deduct lobbying expenses incurred to influence legislation at any governmental level if the legislation is of direct interest to the taxpayer's trade or business.

American Healthcare (AH) , an insurance company, is trying to persuade Congress to enact nationwide anti-smoking legislation. As part of this effort, AH paid $500,000 to hire a lobbying firm to discuss its concerns with members of Congress. AH also contributed $100,000 to candidates for political office who support limiting public smoking. What amount of these expenditures can AH deduct?

A wash sale occurs when a taxpayer realizes a loss on the sale of stock or securities and the taxpayer acquires substantially identical stock or securities within a 61 day period after the date of sale.

Desi Corporation incurs $5,000 in travel, market surveys, and legal expenses to investigate the feasibility of opening a new coffee house in one of the new suburban malls in town. Desi already owns a similar coffee house across town. a. What is the proper tax treatment of these expenses if Desi decides not to open the new coffee house? b. What is the proper tax treatment of these expenses if Desi decides to open the new coffee house? c. Assume that Desi Corp is currently in the cleaning services business and incurs the noted expenses. because it is considering opening a coffee house. Reconsider your responses to parts a and b.

During the current year, Lucy, who has a sole proprietorship, pays legal and accounting fees for the following: Services rendered in resolving a federal tax deficiency Tax return preparation fees: What amount is deductible for AGI?

Discuss why the distinction between deductions for AGI and from AGI is important to individuals.

Victor, a calendar year taxpayer, owns 100 shares of AB Corporation stock, which was purchased three years ago for $5,000. Victor sells all 100 shares on December 27, of the current year, for $4,000 and on January 5, of the following year, purchases 60 shares of AB Corporation stock. Victor's recognized loss will be

Which of the following is not required for an expenditure to be deductible as a business or investment expense?

During 2014 and 2015, Danny pays property taxes of $3,500 each year on a piece of land. During 2014, the land is vacant and unproductive. In 2015, Danny uses the land as a parking lot and generates $16,000 in income. Which of the following is true regarding the property taxes?

Kyle drives a race car in his spare time and on weekends. His records regarding this activity reflect the following information for the year. What is the allowable deduction (before any AGI limitation) for depreciation assuming that this activity is not engaged in for profit and Kyle can itemize his deductions?

Paul, a business consultant, regularly takes clients and potential clients out to dinner. In order to deduct these expenses, Paul must maintain records substantiating all of the following except:

List those criteria necessary for an expenditure to be deductible as business or investment expenses.

Contributions to political candidates are not deductible even if made through the taxpayer's trade or business.