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Exam 5: Business Deductions

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Question 91

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In 2012,Gail had a § 179 deduction carryover of $30,000.In 2013,she elected § 179 for an asset acquired at a cost of $115,000.Gail's § 179 business income limitation for 2013 is $140,000.Determine Gail's § 179 deduction for 2013.

A) $25,000.
B) $115,000.
C) $130,000.
D) $140,000.
E) None of the above.

F) A) and C)
G) B) and C)

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Question 92

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Abner contributes $2,000 to the campaign of the Tea Party candidate for governor,$1,000 to the campaign of the Tea Party candidate for senator,and $500 to the campaign of the Tea Party candidate for mayor.Can Abner deduct these political contributions?

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No.Politic...

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Question 93

Multiple Choice

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On July 10,2013,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 2013,assuming Ariff's § 179 business income is $110,000.Ariff does not take additional first-year depreciation.

Ivory,Inc.,has taxable income of $600,000 and qualified production activities income (QPAI) of $700,000 in 2013.Ivory's domestic production activities deduction is:

The cost recovery basis for property converted from personal use to business use may be the fair market value of the property at the time of the conversion.

Petula's business sells heat pumps which have a one-year warranty.Based on historical data,the warranty costs amount to 11% of sales.During 2013,heat pump sales are $400,000.Actual warranty expenses paid in 2013 are $40,000.

When lessor owned leasehold improvements are abandoned because of the termination of the lease,a loss can be taken for the unrecovered basis.

Can a trade or business expense be deductible if it is necessary but not ordinary?

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

The cash method can be used even if inventory and cost of goods sold are an income producing factor in the business.

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 2013.

Paula is the sole shareholder of Violet,Inc.For 2013,she receives from Violet a salary of $300,000 and dividends of $100,000.Violet's taxable income for 2013 is $500,000.On audit,the IRS treats $100,000 of Paula's salary as unreasonable.Which of the following statements is correct?

Diane purchased a factory building on April 15,1993,for $5,000,000.She sells the factory building on February 2,2013.Determine the cost recovery deduction for the year of the sale.