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Exam 6: Deductions and Losses: in General

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Question 31

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Sandra sold 500 shares of Wren Corporation to Bob,her brother,for its fair market value.She had paid $26,000 for the stock.Calculate Sandra's and Bob's gain or loss under the following circumstances:

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Question 32

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

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To be classified in the personal/rental ...

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Question 33

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Mattie and Elmer are separated and are in the process of obtaining a divorce.They incur legal fees for their respective attorneys with the expenses being itemized as follows: Although there is no requirement that he do so,Elmer pays Mattie's lawyer as a gesture of the positive feelings he still has for her.

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

Benita incurred a business expense on December 10,2012,which she charged on her bank credit card.She paid the credit card statement which included the charge on January 5,2013.Which of the following is correct?

For purposes of the § 267 loss disallowance provision,a taxpayer's aunt is a related party.

Briefly discuss the disallowance of deductions for capital expenditures.

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

Austin,a single individual with a salary of $100,000,incurred and paid the following expenses during the year: Calculate Austin's deductions for AGI.

Abner contributes $1,000 to the campaign of the Tea Party candidate for governor,$750 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?

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

Which of the following is not a "trade or business" expense?

In January,Lance sold stock with a cost basis of $26,000 to his brother,James,for $24,000,the fair market value of the stock on the date of sale.Five months later,James sold the same stock through his broker for $27,000.What is the tax effect of these transactions?

If a vacation home is rented for less than 15 days during a year,the only expenses that can be deducted are mortgage interest,property taxes,and personal casualty losses.

Which of the following is not a related party for constructive ownership purposes under § 267?

Beige,Inc.,an airline manufacturer,is conducting negotiations for the sale of military aircraft.One negotiation is with a U.S.assistant secretary of defense.She can close the deal on the purchase of 50 attack helicopters if she is paid $750,000 under the table.Another negotiation is with the minister of defense of a third world country.To complete the sale of 20 jet fighters to his government,he demands that he be paid a $1 million grease payment.Beige makes the payments and closes the deals.How much of these payments are deductible by Beige,Inc.?

The Code defines what constitutes a trade or business.

A taxpayer who claims the standard deduction cannot also deduct expenses that are classified as deductions from AGI.

A football team that pays a star player an annual salary of $20 million can deduct the entire $20 million as salary expense.If the same amount is paid to the CEO of IBM,only $1 million is deductible.

In distinguishing whether an activity is a hobby or a trade or business,discuss the presumptive rule.