Question 1

Paula is the sole shareholder of Violet, Inc.For 2019, she receives from Violet a salary of $300,000 and dividends of $100,000.Violet's taxable income for 2019 is $500,000.On audit, the IRS treats $100,000 of Paula's salary as unreasonable.Which of the following statements is correct?

Accepted Answer

A)  Paula's gross income will increase by $100,000 as a result of the IRS adjustment.
B)  Violet's taxable income will not be affected by the IRS adjustment.
C)  Paula's gross income will decrease by $100,000 as a result of the IRS adjustment.
D)  Violet's taxable income will decrease by $100,000 as a result of the IRS adjustment.
E)  None of these is correct.F) A) and B)
G) None of the above

Question 2

The cost of legal advice associated with the preparation of an individual's Federal income tax return that is paid in
2019 is not deductible because it is a personal expense.

Accepted Answer

A) True 
 B)False

Question 3

Alice incurs qualified moving expenses of $12,000 in 2019.If she is not reimbursed by her employer, the deduction is classified as a deduction for AGI.

Accepted Answer

A) True 
 B)False

Question 4

Marsha is single, had gross income of $50,000, and incurred the following expenses:   Charitable contribution $2,000 Taxes and interest on home 7,000 Legal fees incurred in a tax dispute 1,000 Medical expenses 3,000 Penalty on early withdrawal of savings 250\begin{array} { l r } 	ext { Charitable contribution } & \$ 2,000 \	ext { Taxes and interest on home } & 7,000 \	ext { Legal fees incurred in a tax dispute } & 1,000 \	ext { Medical expenses } & 3,000 \	ext { Penalty on early withdrawal of savings } & 250\end{array} Charitable contribution  Taxes and interest on home  Legal fees incurred in a tax dispute  Medical expenses  Penalty on early withdrawal of savings ​$2,0007,0001,0003,000250​  Her AGI is:

Accepted Answer

A)  $39,750.
B)  $49,750.
C)  $40,000.
D)  $39,750
E)  None of these. F) A) and C)
G) D) and E)

Question 5

If a taxpayer operates an illegal business, no deductions are permitted.

Accepted Answer

A) True 
 B)False

Question 6

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% floor.
C)  A deduction from AGI, not subject to the 2% 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) A) and D)
G) D) and E)

Question 7

Andrew, who operates a laundry business, incurred the following expenses during the year. ∙ Parking ticket of $250 for one of his delivery vans that parked illegally.
∙ Parking ticket of $75 when he parked illegally while attending a rock concert in Tulsa.
∙ DUI ticket of $500 while returning from the rock concert.
∙ Attorney's fee of $600 associated with the DUI ticket.
What amount can Andrew deduct for these expenses?

Accepted Answer

A)  $0.
B)  $250.
C)  $600.
D)  $1,425.E) A) and B)
F) B) and D)

Question 8

Trade or business expenses of a self-employed taxpayer should be treated as:

Accepted Answer

A)  Deductible for AGI on Schedule E.
B)  A deduction from AGI.
C)  Deductible for AGI on Schedule C.
D)  An itemized deduction if not reimbursed.
E)  None of these.F) C) and D)
G) A) and B)

Exam 6: Deductions and Losses: in General

The cost of legal advice associated with the preparation of an individual's Federal income tax return that is paid in 2019 is not deductible because it is a personal expense.

Correct Answer
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Correct Answer
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Trade or business expenses of a self-employed taxpayer should be treated as:

Correct Answer
verified

Paula is the sole shareholder of Violet, Inc.For 2019, she receives from Violet a salary of $300,000 and dividends of $100,000.Violet's taxable income for 2019 is $500,000.On audit, the IRS treats $100,000 of Paula's salary as unreasonable.Which of the following statements is correct?

Correct Answer
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Alice incurs qualified moving expenses of $12,000 in 2019.If she is not reimbursed by her employer, the deduction is classified as a deduction for AGI.

Correct Answer
verified

Correct Answer
verified

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 Answer
verified

If a taxpayer operates an illegal business, no deductions are permitted.

Correct Answer
verified

Exam 6: Deductions and Losses: in General

The cost of legal advice associated with the preparation of an individual's Federal income tax return that is paid in 2019 is not deductible because it is a personal expense.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Trade or business expenses of a self-employed taxpayer should be treated as:

Correct AnswerverifiedShow Answer

Paula is the sole shareholder of Violet, Inc.For 2019, she receives from Violet a salary of $300,000 and dividends of $100,000.Violet's taxable income for 2019 is $500,000.On audit, the IRS treats $100,000 of Paula's salary as unreasonable.Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Alice incurs qualified moving expenses of $12,000 in 2019.If she is not reimbursed by her employer, the deduction is classified as a deduction for AGI.

Correct AnswerverifiedShow Answer

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

If a taxpayer operates an illegal business, no deductions are permitted.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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