FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 5: Business Deductions

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 1

True/False

Review LaterAdd Note

Review Later

For a taxpayer who is engaged in a trade or business,the cost of investigating a business in the same field is deductible only if the taxpayer acquires the business.

A) True
B) False

Correct Answer

verified

Show Answer

Question 2

Essay

Review LaterAdd Note

Review Later

Max opened his dental practice (a sole proprietorship)in March 2015.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?

Correct Answer

verified

A service provider generally should use ...

View Answer

Show Answer

Question 3

True/False

Review LaterAdd Note

Crow Corporation,a C corporation,donated scientific property (basis of $30,000,fair market value of $50,000)to State University,a qualified charitable organization,to be used in research.Crow had held the property for four months as inventory.Crow Corporation may deduct $50,000 for the charitable contribution (ignoring the taxable income limitation).

Legal fees incurred in connection with a criminal defense are not deductible even if the crime is associated with a trade or business.

In January,Lance sold stock with a cost basis of $26,000 to his brother,James,for $24,000,the fair market value of the stock on the date of sale.Five months later,James sold the same stock through his broker for $27,000.What is the tax effect of these transactions?

Which of the following may be deductible?

Fines and penalties paid for violations of the law (e.g. ,illegal dumping of hazardous waste)are deductible only if they relate to a trade or business.

Tan Company acquires a new machine (ten-year property) on January 15,2015,at a cost of $200,000.Tan also acquires another new machine (seven-year property) on November 5,2015,at a cost of $40,000.No election is made to use the straight-line method.The company does not make the § 179 election and elects to not take additional first-year depreciation if available.Determine the total deductions in calculating taxable income related to the machines for 2015.

An election to use straight-line under ADS is made on an asset-by-asset basis for property other than eligible real estate.

Discuss the criteria used to determine whether a building is residential or nonresidential realty.Also explain the tax consequences resulting from this determination if the property is placed in service in 2015.

Cream,Inc.'s taxable income for the current year before any deduction for an NOL carryforward of $30,000 is $70,000.Cream's qualified production activities income (QPAI) is $60,000.What is the amount of Cream's domestic production activities deduction (DPAD) for the current year?

Alice purchased office furniture on September 20,2014,for $100,000.On October 10,2014,she purchased business computers for $80,000.Alice placed all of the assets in service on January 15,2015.Alice did not elect to expense any of the assets under § 179,did not elect straight-line cost recovery,and did not take additional first-year depreciation (if available) .Determine the cost recovery deduction for the business assets for 2015.

In the current year,Plum Corporation,a computer manufacturer,donated 100 laptop computers to a local university (a qualified educational organization) .The computers were constructed by Plum earlier this year,and the university will use the computers for research and research training.Plum's basis in the computers is $35,000,and their fair market value is $120,000.What is Plum's deduction for the contribution of the computers (ignoring the taxable income limitation) ?

On June 1,2015,Red Corporation purchased an existing business.With respect to the acquired assets of the business,Red allocated $300,000 of the purchase price to a patent.The patent will expire in 20 years.Determine the total amount that Red may amortize for 2015 for the patent.

Regarding research and experimental expenditures,which of the following are not qualified expenditures?

Discuss the tax consequences of listed property being used for the production of income compared to being used in a trade or business.

Discuss the effect on the cost recovery method of a taxpayer election if the uniform capitalization rules apply to a farming business.

On March 1,2015,Lana leases and places in service a passenger automobile.The lease will run for five years and the payments are $500 per month.During 2015,she uses her car 60% for business and 40% for personal activities.Assuming the dollar amount from the IRS table for auto leases is $70,determine Lana's gross income attributable to the lease.

The "luxury auto" cost recovery limits change if mid-quarter cost recovery is used.

The basis of cost recovery property must be reduced by at least the cost recovery allowable.