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 61

Essay

Review LaterAdd Note

Review Later

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?

Correct Answer

verified

The normal classification for § 212 expe...

View Answer

Show Answer

Question 62

True/False

Review LaterAdd Note

Review Later

If a vacation home is classified as primarily personal use, part of the maintenance and utility expenses can be allocated and deducted as a rental expense.

A) True
B) False

Correct Answer

verified

Show Answer

Question 63

Essay

Review LaterAdd Note

Are there any exceptions to the rule that personal expenditures cannot be deducted?

Marvin spends the following amounts on a house he owns: $\begin{array}{lr}\text { Repair to roof }\\\text { Carpeting for the living room } & 1,200 \\\text { Painting of the exterior } & 4,000 \\\text { Replacement of front door } & 800\end{array}$ a. How much of these expenses can Marvin deduct if the house is his principal residence? b. How much of these expenses can Marvin deduct if he rents the house to a tenant? c. Classify any deductible expenses as deductions for AGI or as deductions from AGI.

On January 2, 2014, Fran acquires a business from Chuck. Among the assets purchased are the following intangibles: patent with a 7-year remaining life, a covenant not to compete for 10 years, and goodwill. Of the purchase price, $140,000 was paid for the patent and $60,000 for the covenant. The amount of the excess of the purchase price over the identifiable assets was $100,000. What is the amount of the amortization deduction for 2014?

Purchased goodwill must be capitalized, but can be amortized over a 60-month period.

Albie operates an illegal drug­running business and has the following items of income and expense. What is Albie's adjusted gross income from this operation? $\begin{array}{lr}\text { Income }&\$800,000\\\text { Expenses: }\\\text { Rent } & 24,000 \\\text { Utilities } & 9,000 \\\text { Bribes to police } & 55,000 \\\text { Medical expense } & 5,000 \\\text { Legal fees } & 25,000 \\\text { Depreciation } & 30,000 \\\text { Illegal kickbacks } & 30,000 \\\text { Cost of goods sold } & 300,000\end{array}$

Payments by a cash basis taxpayer of capital expenditures:

Melba incurred the following expenses for her dependent daughter during the current year: $\begin{array}{llr} \text { Payment of principal on daughter's automobile loan} &\$3,600\\ \text {Payment of interest on above loan } &2,900\\ \text { Payment of daughter's property taxes } &1,800\\ \text { Payment of principal on daughter's personal residence loan } &2,800\\ \text { Payment of interest on daughter's personal residence loan } &7,000\\\end{array}$ How much may Melba deduct in computing her itemized deductions? A) $\$ 0$ B) $\$8 3 , 8 0 0 .$ C) $\$11,700$ D) $\$18,100$ . E)None of the above

If a vacation home is classified as primarily personal use (i.e., rented for fewer than 15 days), none of the related expenses can be deducted.

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

Bruce owns several sole proprietorships. Must Bruce use the same accounting method for each of these businesses?

For an activity classified as a hobby, the expenses are categorized as follows: 1() Amounts that affect adjusted basis and would be deductible under other Code sections if the activity had been engaged in for profit (e.g., depreciation, amortization, and depletion) . 2() Amounts deductible under other Code sections without regard to the nature of the activity, such as property taxes and home mortgage interest. 3() Amounts deductible under other Code sections if the activity had been engaged in for profit, but only if those amounts do not affect adjusted basis (e.g., maintenance, utilities, and supplies) . If these expenses exceed the gross income from the activity and are thus limited, the sequence in which they are deductible is:

If a vacation home is determined to be a personal/rental use residence, which of the following statements is correct?

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

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

For a vacation home to be classified in the primarily rental use category, what attributes must be present?

Susan is a sales representative for a U.S. weapons manufacturer. She makes a $100,000 "grease" payment to a U.S. government official associated with a weapons purchase by the U.S. Army. She makes a similar payment to a Saudi Arabian government official associated with a similar sale. Neither of these payments is deductible by Susan's employer.

What losses are deductible by an individual taxpayer?

A vacation home at the beach which is rented for 200 days and used personally for 16 days is classified in the personal/rental use category.