Question 1

The portion of a shareholder-employee's salary that is classified as unreasonable has no effect on the amount of a shareholder-employee's gross income,but results in an increase in the taxable income of the corporation.

Accepted Answer

A) True 
 B)False

Question 2

Iris,a calendar year cash basis taxpayer,owns and operates several TV rental outlets in Florida,and wants to expand to other states.During 2015,she spends $14,000 to investigate TV rental stores in South Carolina and $9,000 to investigate TV rental stores in Georgia.She acquires the South Carolina operations,but not the outlets in Georgia.As to these expenses,Iris should:

Accepted Answer

A)   Capitalize $14,000 and not deduct $9,000.
B)   Expense $23,000 for 2015.
C)   Expense $9,000 for 2015 and capitalize $14,000.
D)   Capitalize $23,000.
E)   None of the above.F) B) and D)
G) C) and D)

Question 3

The § 179 deduction can exceed $500,000 in 2015 if the taxpayer had a § 179 amount which exceeded the taxable income limitation in the prior year.

Accepted Answer

A) True 
 B)False

Question 4

Heron Corporation,a calendar year C corporation,had an excess charitable contribution for 2014 of $5,000.In 2015,Heron made a further charitable contribution of $20,000.Heron's 2015 deduction is limited to $15,000 (10% of taxable income).The 2015 contribution must be applied first against the $15,000 limitation.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is correct in connection with the investigation of a business?

Accepted Answer

A)   If the taxpayer is not already engaged in the trade or business,the expenses incurred are deductible if the project is abandoned.
B)   If the business is acquired,the expenses may be deducted immediately by a taxpayer engaged in a similar trade or business regardless of whether the business being investigated is acquired.
C)   That business must be related to the taxpayer's present business for any expense ever to be deductible.
D)   Regardless of whether the taxpayer is already engaged in the trade or business,the expenses must be capitalized and amortized.
E)   None of the above.F) B) and C)
G) A) and B)

Question 6

On July 10,2015,Ariff places in service a new sports utility vehicle that cost $70,000 and weighed 6,300 pounds.The SUV is used 100% for business.Determine Ariff's maximum deduction for 2015,assuming Ariff's § 179 business income is $110,000.Ariff does not take additional first-year depreciation (if available) .

Accepted Answer

A)   $2,960
B)   $25,000
C)   $34,000
D)   $70,000
E)   None of the aboveF) A) and C)
G) A) and B)

Question 7

Barry purchased a used business asset (seven-year property) on September 30,2015,at a cost of $200,000.This is the only asset he purchased during the year.Barry did not elect to expense any of the asset under § 179,did not take additional first-year depreciation (if available) ,and did not elect straight-line cost recovery.Barry sold the asset on July 17,2016.Determine the cost recovery deduction for 2016.

Accepted Answer

A)   $19,133
B)   $24,490
C)   $34,438
D)   $55,100
E)   None of the aboveF) A) and E)
G) B) and C)

Question 8

Under MACRS,if the mid-quarter convention is applicable,all property sold is treated as being sold at the mid-point of the quarter in which it is placed in service.

Accepted Answer

A) True 
 B)False

Question 9

Hans purchased a new passenger automobile on August 17,2015,for $30,000.During the year the car was used 40% for business and 60% for personal use.Determine his cost recovery deduction for the car for 2015.

Accepted Answer

A)   $500
B)   $1,000
C)   $1,224
D)   $1,500
E)   None of the aboveF) All of the above
G) B) and D)

Question 10

Hazel purchased a new business asset (five-year asset) on September 30,2015,at a cost of $100,000.On October 4,2015,Hazel placed the asset in service.This was the only asset Hazel placed in service in 2015.Hazel did not elect § 179 or additional first-year depreciation if available.On August 20,2016,Hazel sold the asset.Determine the cost recovery for 2016 for the asset.

Accepted Answer

A)   $14,250
B)   $19,000
C)   $23,750
D)   $38,000
E)   None of the aboveF) A) and B)
G) C) and D)

Question 11

The key date for calculating cost recovery is the date the asset is placed in service.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is a required test for the deduction of a business expense?

Accepted Answer

A)   Ordinary
B)   Necessary
C)   Reasonable
D)   All of the above
E)   None of the aboveF) A) and D)
G) A) and C)

Question 13

In applying the $1 million limit on deducting executive compensation,what corporations are subject to the deduction limit? What executives are covered?

Accepted Answer

The $1 million limit on deducting the co...

Question 14

Generally,a closely-held family corporation is not permitted to take a deduction for a salary paid to a family member in calculating corporate taxable income.

Accepted Answer

A) True 
 B)False

Question 15

Discuss the beneficial tax consequences of an SUV not being classified as a passenger automobile.

Accepted Answer

If an automobile is not classified as a ...

Question 16

Isabella owns two business entities.She may be able to use the cash method for one and the accrual method for the other.

Accepted Answer

A) True 
 B)False

Question 17

In 2014,Gail had a § 179 deduction carryover of $30,000.In 2015,she elected § 179 for an asset acquired at a cost of $115,000.Gail's § 179 business income limitation for 2015 is $140,000.Determine Gail's § 179 deduction for 2015.

Accepted Answer

A)   $25,000
B)   $115,000
C)   $130,000
D)   $140,000
E)   None of the aboveF) D) and E)
G) C) and E)

Question 18

During 2014,the first year of operations,Silver,Inc. ,pays salaries of $175,000.At the end of the year,employees have earned salaries of $20,000,which are not paid by Silver until early in 2015.What is the amount of the deduction for salary expense?

Accepted Answer

A)   If Silver uses the cash method,$175,000 in 2014 and $0 in 2015.
B)   If Silver uses the cash method,$0 in 2014 and $195,000 in 2015.
C)   If Silver uses the accrual method,$175,000 in 2014 and $20,000 in 2015.
D)   If Silver uses the accrual method,$195,000 in 2014 and $0 in 2015.
E)   None of the above is correct.F) B) and E)
G) B) and D)

Question 19

Bonnie purchased a new business asset (five-year property) on March 10,2015,at a cost of $30,000.She also purchased a new business asset (seven-year property) on November 20,2015,at a cost of $13,000.Bonnie did not elect to expense either of the assets under § 179,nor did she elect straight-line cost recovery.Bonnie takes additional first-year depreciation.Determine the cost recovery deduction for 2015 for these assets.

Accepted Answer

A)   $5,858
B)   $7,464
C)   $9,586
D)   $19,429
E)   None of the aboveF) B) and D)
G) A) and D)

Question 20

On May 2,2015,Karen placed in service a new sports utility vehicle that cost $60,000 and has a gross vehicle weight of 6,300 lbs.The vehicle is used 60% for business and 40% for personal use.Determine the cost recovery for 2015.Karen wants to maximize her deductions.

Accepted Answer

A)   $7,200
B)   $25,000
C)   $26,800
D)   $37,000
E)   None of the aboveF) None of the above
G) A) and B)

Exam 5: Business Deductions

Correct Answer
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Isabella owns two business entities.She may be able to use the cash method for one and the accrual method for the other.

Correct Answer
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Correct Answer
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The key date for calculating cost recovery is the date the asset is placed in service.

Correct Answer
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In applying the $1 million limit on deducting executive compensation,what corporations are subject to the deduction limit? What executives are covered?

Correct Answer
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The $1 million limit on deducting the co...
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Correct Answer
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Hans purchased a new passenger automobile on August 17,2015,for $30,000.During the year the car was used 40% for business and 60% for personal use.Determine his cost recovery deduction for the car for 2015.

Correct Answer
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In 2014,Gail had a § 179 deduction carryover of $30,000.In 2015,she elected § 179 for an asset acquired at a cost of $115,000.Gail's § 179 business income limitation for 2015 is $140,000.Determine Gail's § 179 deduction for 2015.

Correct Answer
verified

On May 2,2015,Karen placed in service a new sports utility vehicle that cost $60,000 and has a gross vehicle weight of 6,300 lbs.The vehicle is used 60% for business and 40% for personal use.Determine the cost recovery for 2015.Karen wants to maximize her deductions.

Correct Answer
verified

Under MACRS,if the mid-quarter convention is applicable,all property sold is treated as being sold at the mid-point of the quarter in which it is placed in service.

Correct Answer
verified

Correct Answer
verified

The § 179 deduction can exceed $500,000 in 2015 if the taxpayer had a § 179 amount which exceeded the taxable income limitation in the prior year.

Correct Answer
verified

The portion of a shareholder-employee's salary that is classified as unreasonable has no effect on the amount of a shareholder-employee's gross income,but results in an increase in the taxable income of the corporation.

Correct Answer
verified

Generally,a closely-held family corporation is not permitted to take a deduction for a salary paid to a family member in calculating corporate taxable income.

Correct Answer
verified

Which of the following is a required test for the deduction of a business expense?

Correct Answer
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Correct Answer
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During 2014,the first year of operations,Silver,Inc. ,pays salaries of $175,000.At the end of the year,employees have earned salaries of $20,000,which are not paid by Silver until early in 2015.What is the amount of the deduction for salary expense?

Correct Answer
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Correct Answer
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Discuss the beneficial tax consequences of an SUV not being classified as a passenger automobile.

Correct Answer
verified
If an automobile is not classified as a ...
View Answer

Which of the following statements is correct in connection with the investigation of a business?

Correct Answer
verified

Exam 5: Business Deductions

Correct AnswerverifiedShow Answer

Isabella owns two business entities.She may be able to use the cash method for one and the accrual method for the other.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The key date for calculating cost recovery is the date the asset is placed in service.

Correct AnswerverifiedShow Answer

In applying the $1 million limit on deducting executive compensation,what corporations are subject to the deduction limit? What executives are covered?

Correct AnswerverifiedThe $1 million limit on deducting the co...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Hans purchased a new passenger automobile on August 17,2015,for $30,000.During the year the car was used 40% for business and 60% for personal use.Determine his cost recovery deduction for the car for 2015.

Correct AnswerverifiedShow Answer

In 2014,Gail had a § 179 deduction carryover of $30,000.In 2015,she elected § 179 for an asset acquired at a cost of $115,000.Gail's § 179 business income limitation for 2015 is $140,000.Determine Gail's § 179 deduction for 2015.

Correct AnswerverifiedShow Answer

On May 2,2015,Karen placed in service a new sports utility vehicle that cost $60,000 and has a gross vehicle weight of 6,300 lbs.The vehicle is used 60% for business and 40% for personal use.Determine the cost recovery for 2015.Karen wants to maximize her deductions.

Correct AnswerverifiedShow Answer

Under MACRS,if the mid-quarter convention is applicable,all property sold is treated as being sold at the mid-point of the quarter in which it is placed in service.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The § 179 deduction can exceed $500,000 in 2015 if the taxpayer had a § 179 amount which exceeded the taxable income limitation in the prior year.

Correct AnswerverifiedShow Answer

The portion of a shareholder-employee's salary that is classified as unreasonable has no effect on the amount of a shareholder-employee's gross income,but results in an increase in the taxable income of the corporation.

Correct AnswerverifiedShow Answer

Generally,a closely-held family corporation is not permitted to take a deduction for a salary paid to a family member in calculating corporate taxable income.

Correct AnswerverifiedShow Answer

Which of the following is a required test for the deduction of a business expense?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

During 2014,the first year of operations,Silver,Inc. ,pays salaries of $175,000.At the end of the year,employees have earned salaries of $20,000,which are not paid by Silver until early in 2015.What is the amount of the deduction for salary expense?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Discuss the beneficial tax consequences of an SUV not being classified as a passenger automobile.

Correct AnswerverifiedIf an automobile is not classified as a ...View AnswerShow Answer

Which of the following statements is correct in connection with the investigation of a business?

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The $1 million limit on deducting the co...
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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If an automobile is not classified as a ...
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