FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 6: Deductions and Losses: in General

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 1

Multiple Choice

Review LaterAdd Note

Review Later

Gerald owns an illegal casino.Which of the following expenses incurred in connection with this activity are deductible?

A) Rent.
B) Illegal kickbacks to government officials to stay in business.
C) Fines.
D) Purchase of land for a new building.
E) None of the above.

F) C) and E)
G) A) and C)

Correct Answer

verified

Show Answer

Question 2

True/False

Review LaterAdd Note

Review Later

A hobby activity can result in all of the hobby income being included in AGI and no deductions being allowed.

A) True
B) False

Correct Answer

verified

Show Answer

Question 3

Essay

Review LaterAdd Note

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?

The period in which an accrual basis taxpayer can deduct an expense is determined by applying the economic performance and all events tests.

A vacation home rented for 180 days and used personally for 16 days is classified in the personal/rental use category.

Abner contributes $1,000 to the campaign of the Tea Party candidate for governor.Can Abner deduct this political contribution?

Agnes is the sole shareholder of Violet,Inc.For 2011,she receives from Violet a salary of $200,000 and dividends of $100,000.Violet's taxable income for 2011 is $500,000.On audit,the IRS treats $50,000 of Agnes's salary as unreasonable.Which of the following statements is correct?

Sammie pays his son's real estate taxes.Sammie cannot deduct the real estate taxes,but the son can.

The income of a sole proprietorship are reported on Schedule C (Profit or Loss from Business).

Marvin spends the following amounts on a house he owns:

Peter sells land held as an investment (adjusted basis of $400,000; fair market value of $300,000)to his Aunt Martha for $300,000.Three years later,Aunt Martha sells the land for $425,000 to a partnership whose business is real estate development.

While she was a college student,Juliet worked in a bookstore located near campus.She thinks a bookstore located on the other side of campus would be successful.She incurs expenses of $41,000 (accounting fees,marketing survey,etc.)in exploring its business potential.Her parents have agreed to loan her the money required to start the business.What amount of these investigation costs can Juliet deduct if: a.She opens the business in March 2011. b.She decides not to open the bookstore.

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

In a related party transaction where realized loss is disallowed,when can the disallowed loss be used by the buyer on the subsequent sale of the property?

If a taxpayer cannot satisfy the three-out-of-five year presumption test associated with hobby losses,then expenses from the activity cannot be deducted in excess of the gross income from the activity.

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.

Trade or business expenses are classified as deductions for AGI.Section 212 expenses,barring certain exceptions,are classified as deductions from AGI.What are these exceptions?

Expenses incurred in a trade or business are deductible for AGI.

Trade and business expenses should be treated as:

Legal expenses incurred in connection with rental property are deductions from AGI.