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Exam 6: Deductions and Losses: in General

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Question 21

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Which of the following is correct?

A) A personal casualty loss is classified as a deduction from AGI.
B) Real estate taxes on a taxpayer's personal residence are classified as deductions from AGI.
C) An expense associated with rental property is classified as a deduction from AGI.
D) Only a. and b. are correct.
E) a., b., and c., are correct.

F) B) and E)
G) None of the above

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Question 22

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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:

A) A deduction for AGI.
B) A deduction from AGI, subject to the 2 percent floor.
C) A deduction from AGI, not subject to the 2 percent 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 E)
G) A) and B)

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Question 23

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Andrew,who operates a laundry business,incurred the following expenses during the year. What amount can Andrew deduct for these expenses?

Melba incurred the following expenses for her dependent daughter during the current year: How much may Melba deduct in computing her itemized deductions?

If part of a shareholder/employee's salary is classified as unreasonable,determine the effect on the:

How can an individual's consultation with a lawyer be classified as a deduction for AGI in some cases and a deduction from AGI in other instances?

Arnold and Beth file a joint return.Use the following data to calculate their deduction for AGI.

The portion of property tax on a vacation home that is attributable to personal use is an itemized deduction.

Larry,a calendar year cash basis taxpayer,has the following transactions: Based on this information,Larry has:

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

What are the relevant factors to be considered in determining whether an activity is profit-seeking or a hobby?

Are all personal expenses disallowed as deductions?

In order to protect against rent increases on the building in which she operates a dance studio,Mella signs an 18-month lease for $36,000.The lease commences on October 1,2012.How much of the $36,000 payment can she deduct in 2012 and 2013?

LD Partnership,a cash basis taxpayer,purchases land and a building for $200,000 with $150,000 of the cost being allocated to the building.The gross receipts of the partnership are less than $100,000.LD must capitalize the $50,000 paid for the land,but can deduct the $150,000 paid for the building in the current tax year.

None of the prepaid rent paid on November 1 by a calendar year cash basis taxpayer for the next 18 months is deductible in the current period.

Depending on the nature of the expenditure,expenses incurred in a trade or business may be deductible for or from AGI.

Which of the following is incorrect?

Cory incurred and paid the following expenses: Calculate the amount that Cory can deduct (before any percentage limitations) .

Janice is single,had gross income of $38,000,and incurred the following expenses: Her AGI is:

The legal cost of having a will prepared is not deductible.