Question 1

A bribe paid to a domestic (U.S. )official is not deductible,but it may be possible to deduct a bribe paid to a foreign official.

Accepted Answer

A) True 
 B)False

Question 2

Salaries are considered an ordinary and necessary expense of a trade or business if they meet what other requirement? What are the tax consequences if this requirement is not met?

Accepted Answer

"Reasonableness" is an additional requir...

Question 3

If a vacation home is a personal/rental residence,no maintenance and utility expenses can be claimed as a deduction.

Accepted Answer

A) True 
 B)False

Question 4

How can an individual's consultation with a lawyer be classified as a deduction for AGI in some cases and a deduction from AGI in other instances?

Accepted Answer

Legal expenses are deductible when they ...

Question 5

Peter sells land held as an investment (adjusted basis of $125,000;fair market value of $95,000)to his Aunt Martha for $95,000.Three years later,Aunt Martha sells the land for $130,000 to a partnership whose business is real estate development.

Accepted Answer

The answer of Peter sells land held as an investment...

Question 6

Investment-related expenses such as those related to investments in stocks and bonds are deductions for AGI.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following cannot be deducted as a § 162 business expense?

Accepted Answer

A)  Expenses of investing in stocks and bonds.
B)  Charitable contributions made by a sole proprietorship.
C)  Fines and penalties.
D)  Only a.and c.cannot.
E)  a. ,b. ,and c.cannot.F) B) and E)
G) A) and E)

Question 8

For constructive ownership purposes,which of the following are related parties under § 267?

Accepted Answer

A)  I - IV.
B)  II - IV.
C)  III and IV.
D)  IV only.
E)  None of the above are related parties.F) None of the above
G) All of the above

Question 9

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 10

A moving expense that is reimbursed by the employer is a deduction for AGI,whereas an unreimbursed moving expense is classified as an itemized deduction.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is deductible as a trade or business expense?

Accepted Answer

A)  A city coroner contributes to the mayor's reelection campaign fund.
B)  Illegal bribes and kickbacks.
C)  Two-thirds of treble damage payments.
D)  Fines and penalties.
E)  None of the above.F) B) and C)
G) A) and B)

Question 12

Amy incurs and pays the following expenses during the year:
  Amy's only income is a $100,000 salary.Calculate Amy's deductions for AGI and from AGI.

Accepted Answer

Amy's AGI ...

Question 13

Why is it important to classify expenses as deductions for AGI or as deductions from AGI?

Accepted Answer

Deductions for AGI can be claimed whethe...

Question 14

Edward operates an illegal drug-running business and has the following items of income and expense.What is Edward's adjusted gross income from this operation?

Accepted Answer

He is allowed to deduct only t...

Question 15

Hobby activity expenses are deductible from AGI to the extent of hobby income.Such expenses not in excess of hobby income are not subject to the 2% of AGI floor.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is a deduction from AGI (itemized deduction) ?

Accepted Answer

A)  Contribution to a traditional IRA.
B)  Roof repairs to a rental home.
C)  Safe deposit box rental fee in which stock certificates are stored.
D)  Alimony payment.
E)  None of the above.F) D) and E)
G) B) and E)

Question 17

Angela,a real estate broker,had the following income and expenses in her business:  How much net income must Angela report from this business?

Accepted Answer

A)  $48,500.
B)  $49,000.
C)  $60,000.
D)  $68,500.
E)  $69,000.F) A) and D)
G) C) and E)

Question 18

Janice is single,had gross income of $38,000,and incurred the following expenses:  Her AGI is:

Accepted Answer

A)  $21,300.
B)  $28,800.
C)  $32,800.
D)  $35,500.
E)  $37,800.F) C) and E)
G) C) and D)

Question 19

What are the relevant factors to be considered in determining whether an activity is profit-seeking or a hobby?

Accepted Answer

The nine relevant factors detailed in Re...

Question 20

Tommy,an automobile mechanic employed by an auto dealership,is considering opening a fast food franchise.If Tommy decides not to acquire the fast food franchise,any investigation expenses are:

Accepted Answer

A)  A deduction for AGI.
B)  A deduction from AGI,subject to the 2 percent floor.
C)  A deduction from AGI,not subject to the 2 percent floor.
D)  Deductible up to $5,000 in the current year with the balance being amortized over a 180-month period.
E)  Not deductible.F) None of the above
G) A) and C)

Exam 6: Deductions and Losses: in General

How can an individual's consultation with a lawyer be classified as a deduction for AGI in some cases and a deduction from AGI in other instances?

Correct AnswerverifiedLegal expenses are deductible when they ...View AnswerShow Answer

What are the relevant factors to be considered in determining whether an activity is profit-seeking or a hobby?

Correct AnswerverifiedThe nine relevant factors detailed in Re...View AnswerShow 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

Why is it important to classify expenses as deductions for AGI or as deductions from AGI?

Correct AnswerverifiedDeductions for AGI can be claimed whethe...View AnswerShow Answer

Salaries are considered an ordinary and necessary expense of a trade or business if they meet what other requirement? What are the tax consequences if this requirement is not met?

Correct Answerverified"Reasonableness" is an additional requir...View AnswerShow Answer

If a vacation home is a personal/rental residence,no maintenance and utility expenses can be claimed as a deduction.

Correct AnswerverifiedShow Answer

Peter sells land held as an investment (adjusted basis of $125,000;fair market value of $95,000)to his Aunt Martha for $95,000.Three years later,Aunt Martha sells the land for $130,000 to a partnership whose business is real estate development.

Correct AnswerverifiedShow Answer

Edward operates an illegal drug-running business and has the following items of income and expense.What is Edward's adjusted gross income from this operation?

Correct AnswerverifiedHe is allowed to deduct only t...View AnswerShow Answer

Angela,a real estate broker,had the following income and expenses in her business: How much net income must Angela report from this business?

Correct AnswerverifiedShow Answer

Hobby activity expenses are deductible from AGI to the extent of hobby income.Such expenses not in excess of hobby income are not subject to the 2% of AGI floor.

Correct AnswerverifiedShow Answer

A moving expense that is reimbursed by the employer is a deduction for AGI,whereas an unreimbursed moving expense is classified as an itemized deduction.

Correct AnswerverifiedShow Answer

A bribe paid to a domestic (U.S. )official is not deductible,but it may be possible to deduct a bribe paid to a foreign official.

Correct AnswerverifiedShow Answer

Which of the following cannot be deducted as a § 162 business expense?

Correct AnswerverifiedShow Answer

Amy incurs and pays the following expenses during the year: Amy's only income is a $100,000 salary.Calculate Amy's deductions for AGI and from AGI.

Correct AnswerverifiedAmy's AGI ...View AnswerShow Answer

Which of the following is deductible as a trade or business expense?

Correct AnswerverifiedShow Answer

Which of the following is a deduction from AGI (itemized deduction) ?

Correct AnswerverifiedShow Answer

Investment-related expenses such as those related to investments in stocks and bonds are deductions for AGI.

Correct AnswerverifiedShow Answer

Tommy,an automobile mechanic employed by an auto dealership,is considering opening a fast food franchise.If Tommy decides not to acquire the fast food franchise,any investigation expenses are:

Correct AnswerverifiedShow Answer

For constructive ownership purposes,which of the following are related parties under § 267?

Correct AnswerverifiedShow Answer

Janice is single,had gross income of $38,000,and incurred the following expenses: Her AGI is:

Correct AnswerverifiedShow Answer

Correct Answer
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Legal expenses are deductible when they ...
View Answer

Correct Answer
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The nine relevant factors detailed in Re...
View Answer

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

Correct Answer
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Deductions for AGI can be claimed whethe...
View Answer

Correct Answer
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"Reasonableness" is an additional requir...
View Answer

Correct Answer
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He is allowed to deduct only t...
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Amy's AGI ...
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