Reference no: EM13922929
1. Which of the following is a mixed-use activity that Congress has written detailed rules in an attempt to curbabuse?
a. Hobby.
b. Vacation home.
c. Home-office
d. All of the above.
2. An activity
a. Is considered a hobby if has a business purpose.
b. That is considered a hobby has all of its expenses disallowed
c. Is determined to be a hobby or a profit-motivated activity by examining 9 factors.
d. That is considered a hobby has deductible expenses that are deductions for AGI.
3. A vacation home that is rented out during the year is considered:
a. Strictly a personal residence
b. Strictly a rental property
c. A vacation home that cannot generate a rental loss.
d. Any of the above depending on the length of the rental period.
4. A taxpayer's accounting method is important because it controls the timing of a deduction. Which of the
following amounts is deductible in the current year assuming the taxpayer uses the cash basis for his tree
service business?
a. The taxpayer writes a check and mails it on December 30 of the current year to pay December's rent.
b. The taxpayer pays the December utility bill by charging the amount on a VISA card On December 29
of the current year.
c. The taxpayer trims an accountant's trees in December of the current year exchange for $200 of accounting work performed in December.
d. All of the above are deductible in the current year.
5. A taxpayer's accounting method is important because it controls the timing of a deduction. An accrual basis taxpayer may deduct expenses in the year
a. All of the events have occurred that determine that a liability exists.
b. The amount of the liability can be determined with reasonable accuracy
c. Economic performance has occurred with regard to the liability
d. All of the above.
6. Special rules apply to determine what period an expense can be deducted when an accrual basis taxpayer incurs an expense in a transaction with a related party that is a cash basis taxpayer. Page 2-4 lists some of the more common related parties. Which of the following would be considered a related party?
a. A taxpayer and the taxpayer's uncle
b. A taxpayer and her father
c. A taxpayer and the corporation that the taxpayer owns 30% of the stock.
d. All of the above are related parties.
7. Profit-motivated expenses
a. Can only be classified as trade or business expenses
b. Are deductible for AGI if they are trade or business expenses
c. Are deductible for AGI if they expenses related to the production of income.
d. All of the above.
8. Some expenses can have both a business and personal aspect and therefore those expenses have special taxrules. Examples are:
a. Entertainment
b. Meals
c. Auto
d. All of the above.
9. Some expenses can have both a business and personal aspect and therefore those expenses have special tax rules. Examples are:
a. Travel
b. Gifts
c. Education
d. All of the above.
10. To be deductible, meal and entertainment expense must be an ordinary and necessary expense of the business, not be lavish and must be either directly related to or associated with the active conduct of the
taxpayer's business. If those conditions are satisfied, generally what % of the expenses are deductible?
a. 100%
b. 80%
c. 50%.
d. 20%.
11. Mileage for which of the following uses of the taxpayer's auto is not deductible.
a. Commuting from home to work
b. Travel from taxpayer's home to a temporary workplace
c. Travel from the taxpayer's regular workplace to a temporary workplace
d. Travel from the taxpayer's regular workplace to a second job.
12. If a taxpayer uses their car for a business purpose in 2015, they
a. May deduct 56.5 cents per mile
b. Must keep track of and then deduct actual car expenses
c. Can deduct 57.5 cents per mile plus parking fees
d. Must use the standard mileage rate method.
13. Which of the following expenses related to a taxpayer's trade or business is 100% deductible?
a. Transportation, lodging, meals and incidental expenses while traveling away from home overnight on a business trip
b. Cost of a $100 watch that is given to the taxpayer's best customer
c. Education expenses that qualify the taxpayer for a new trade or business.
d. Salary of $800,000 paid to a non-officer of a publicly traded corporation.
14. Which of the following statements is true about the tax treatment of bad debts?
a. Both business and non-business bad debts can be deducted.
b. A business bad debt is deducted as a short-term capital loss
c. Bad debts can be estimated and deducted before they are written off.
d. Cash basis taxpayers normally can deduct the amount of an account receivable that is written off.
15. Taxpayers can deduct which of the following insurance premiums related to their trade or business?
a. Premiums on a fire insurance policy
b. Premiums for employee's group medical insurance
c. Business interruption insurance
d. All of the above.