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Chapter 08 Business Income, Deductions, and Accounting Methods

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Question;Chapter 08;Business Income, Deductions, and Accounting Methods;True / False Questions;1. The;Internal Revenue Code authorizes deductions for trade or business activities if;the expenditure is "ordinary and necessary.;True False;2. Business;activities are distinguished from personal activities in that business;activities are motivated by the pursuit of profits.;True False;3. The phase;ordinary and necessary" has been defined to mean that an expense;must be essential and indispensable to the conduct of a business.;True False;4. Reasonable;in amount means that expenditures can be exorbitant as long as the activity is;motivated by profit.;True False;5. The test;for whether an expenditure is reasonable in amount is whether the expenditure;was for an "arm's length" amount.;True False;6. Illegal;bribes and kickbacks are not deductible as business expenses but fines imposed;by a governmental unit are deductible as long as the fines are incurred in the;ordinary course of business.;True False;7. Although;expenses associated with illegal activities are not deductible, political;contributions can be deducted as long as the donation is not made to a;candidate for public office.;True False;8. When a;taxpayer borrows money and invests the loan proceeds in municipal bonds, the;interest paid by the taxpayer on the debt will not be deductible.;True False;9. Employees;cannot deduct the cost of uniforms if the uniforms are also appropriate for;normal wear.;True False;10. Only half;the cost of a business meal is deductible even if the meal is associated with;the active conduct of business.;True False;11. Taxpayers;must maintain written contemporaneous records of business purpose when;entertaining clients in order to claim a deduction for the expenditures.;True False;12. The;domestic production activities deduction is a deduction for the incremental;cost of manufacturing tangible assets in the United States.;True False;13. Qualified;production activity income for calculating the domestic production activities;deduction is limited to taxable income for a business or modified AGI for an;individual.;True False;14. The;domestic production activities deduction cannot exceed 50 percent of the wages;paid to employees engaged in domestic manufacturing activities during the year.;True False;15. A loss;deduction from a casualty of a business asset is only available if the asset is;completely destroyed.;True False;16. All;taxpayers must account for taxable income using a calendar year.;True False;17. A short;tax year can end on any day of any month other than December.;True False;18. A fiscal;tax year can end on the last day of any month other than December.;True False;19. A business;generally adopts a fiscal or calendar year by using that year end on the first;tax return for the business.;True False;20. Sole;proprietorships must use the same tax year as the proprietor of the business.;True False;21. Even a;cash method taxpayer must consistently use accounting methods that;clearly reflect income" for tax purposes.;True False;22. The;12-month rule allows taxpayers to deduct the entire amount of certain prepaid;business expenses.;True False;23. The;all-events test for income determines the period in which income will be;recognized for tax purposes.;True False;24. The;full-inclusion method requires cash basis taxpayers to include prepayments for;goods or services into realized income.;True False;25. Uniform;capitalization of indirect inventory costs is required for most large;taxpayers.;True False;Multiple Choice Questions;26. Individual;proprietors report their business income and deductions on;A. Form 1065;B. Form;1120S;C. Schedule;C;D. Schedule;A;E. Form 1041;27. According;to the Internal Revenue Code ?162, deductible trade or business expenses must;be one of the following?;A. incurred;for the production of investment income;B. ordinary;and necessary;C. minimized;D. appropriate;and measurable;E. personal;and justifiable;28. Which of;the following is NOT likely to be allowed as a current deduction for a;landscaping and nursery business?;A. cost of;fertilizer;B. accounting;fees;C. cost of a;greenhouse;D. cost of;uniforms for employees;E. a cash;settlement for trade name infringement;29. The IRS;would most likely apply the arm's length transaction test to determine which of;the following?;A. whether;an expenditure is related to a business activity;B. whether;an expenditure will be likely to produce income;C. timeliness;of an expenditure;D. reasonableness;of an expenditure;E. All of;these;30. Which of;the following business expense deductions is most likely to be unreasonable in;amount?;A. Compensation;paid to the taxpayer's spouse in excess of salary payments to other employees.;B. Amounts;paid to a subsidiary corporation for services where the amount is in excess of;the cost of comparable services by competing corporations.;C. Cost of;entertaining a former client when there is no possibility of any future;benefits from a relation with that client.;D. All of;these are likely to be unreasonable in amount.;E. None of;these is likely to be unreasonable in amount.;31. Which of;the following is a true statement?;A. Interest;expense is not deductible if the loan is used to purchase municipal bonds.;B. Insurance;premiums are not deductible if paid for "key man" life insurance.;C. One half;of the cost of business meals is not deductible.;D. All of;these are true.;E. None of;these is true.;32. Which of;the following expenditures is most likely to be deductible for a construction;business?;A. A fine;for a zoning violation.;B. A tax;underpayment penalty.;C. An;under the table" payment to a government representative to obtain a;better price for raw materials.;D. A payment;to a foreign official to expedite an application for a business permit.;E. An arm's;length payment to a related party for emergency repairs of a sewage line.;33. Which of;the following is an explanation for why insurance premiums on a key employee;are not deductible?;A. The;insurance deduction would offset taxable income without the potential for the;proceeds generating taxable income.;B. The;federal government does not want to subsidize insurance companies.;C. It is;impractical to trace insurance premiums to the receipt of proceeds.;D. Congress;presumes that all expenses are not deductible unless specifically allowed in;the Internal Revenue Code.;E. This rule;was grandfathered from a time when the IRC disallowed all insurance premiums;deductions.;34. Paris;operates a talent agency as a sole proprietorship, and this year she incurred;the following expenses in operating her talent agency. What is the total;deductible amount of these expenditures?;$1,000 dinner with a film producer where no business was;discussed;$500 lunch with sister Nicky where no business was discussed;$700 business dinner with a client but Paris forgot to keep;any records (oops!);$900 tickets to the opera with a client following a business;meeting;A. $450;B. $900;C. $1,100;D. $1,200;E. $800;35. Dick pays;insurance premiums for his employees. What type of insurance premium is not;deductible as compensation paid to the employee?;A. Health;insurance with benefits payable to the employee.;B. Whole;life insurance with benefits payable to the employee's dependents.;C. Group;term life insurance with benefits payable to the employee's dependents.;D. key man;life insurance with benefits payable to Dick.;E. All of;these are deductible by Dick.;36. Which of;the following is a true statement?;A. Meals are;never deductible as a business expense.;B. An;employer can only deduct half of any meals provided to employees.;C. The cost;of business meals must be reasonable.;D. A;taxpayer can only deduct a meal for a client if business is discussed during;the meal.;E. None of;these is true.;37. In order;to deduct a portion of the cost of a business meal which of the following;conditions must be met?;A. A client;(not a supplier or vendor) must be present at the meal.;B. The;taxpayer or an employee must be present at the meal.;C. The meal;must occur on the taxpayer's business premises.;D. None of;these is a condition for a deduction.;E. All of;these are conditions for a deduction.;38. Which of;the following is likely to be a fully deductible business expense?;A. Salaries;in excess of the industry average paid to attract talented employees.;B. The cost;of employee uniforms that can be adapted to ordinary personal wear.;C. A;speeding fine paid by a trucker who was delivering a rush order.;D. The cost;of a three-year subscription to a business publication.;E. None of;these is likely to be deductible.;39. After a;business meeting with a prospective client Holly took the client to dinner and;the theatre. Holly paid $290 for the meal and $250 for the theatre tickets;amounts that were reasonable under the circumstances. What amount of these;expenditures can Holly deduct as a business expense?;A. $540;B. $415;C. $270;D. None;unless Holly discussed business with the client during the meal and the;entertainment.;E. None -;the meals and entertainment are not deductible except during travel.;40. This year;Clark leased a car to drive between his office and various work sites. Clark;carefully recorded that he drove the car 23,000 miles this year and paid $7,200;of operating expenses ($2,700 for gas, oil, and repairs, and $4,500 for lease;payments). What amount of these expenses may Clark deduct as business expenses?;A. $7,200;B. Clark;cannot deduct these costs but he must use the mileage method to determine any;deduction.;C. $4,500;D. $2,700;E. Clark is;not entitled to any deduction if he used the car for any personal trips.;41. Shelley is;employed in Texas and recently attended a two-day business conference in New;Jersey. Shelley spent the entire time at the conference and documented her;expenditures (described below). What amount can Shelley deduct as an employee;business expense?;A. $2,850;B. $2,740;C. $1,850 if;Shelley's AGI is $50,000;D. All of;these are deductible if Shelley is reimbursed under an accountable plan.;E. None of;the expenses are deductible - only employers can deduct travel expenses.;42. Which of;the following is a true statement?;A. Meals;lodging, and incidental expenditures are only deductible if the taxpayer is;away from home overnight while traveling.;B. Meals are;deductible for an employee who is forced to work during the lunch hour.;C. When a;taxpayer travels solely for business purposes, only half of the costs of travel;are deductible.;D. If travel;has both business and personal aspects, the cost of transportation is always;deductible but the deductibility of lodging depends upon whether business is;conducted that day.;E. None of;these is true.;43. Which of;the following is a true statement about travel that has both business and;personal aspects?;A. Transportation;costs are always fully deductible.;B. Meals are;not deductible for this type of travel.;C. Only half;of the cost of meals and transportation is deductible.;D. The cost;of lodging, and incidental expenditures is limited to those incurred during the;business portion of the travel.;E. None of;these;44. John is a;self-employed computer consultant who lives and works in Dallas. John paid for;the following activities in conjunction with his business. Which is not;deductible in any amount?;1. Dinner with a potential client where the client's;business was discussed.;2. A trip to Houston to negotiate a contract.;3. A seminar in Houston on new developments in the software;industry.;4. A trip to New York to visit a school chum who is also;interested in computers.;A. 1 only.;B. 2 only.;C. 3 only.;D. 4 only.;E. None of;these.;45. Which of;the following expenses are completely deductible?;A. $1,000;spent on compensating your brother for a personal expense.;B. $50 spent;on meals while traveling on business.;C. $2,000;spent by the employer on reimbursing an employee for entertainment.;D. All of;these expenses are fully deductible.;E. None of;these expenses can be deducted in full.;46. Ed is a;self-employed heart surgeon who has incurred the following reasonable expenses.;How much can Ed deduct?;$1,000 in airfare to repair investment rental property in;Colorado.;$500 in meals while attending a medical convention in New;York.;$300 for tuition for an investment seminar "How to pick;stocks.;$100 for tickets to a football game with hospital;administrators to celebrate successful negotiation of a surgical contract;earlier in the day.;A. $1,300;for AGI.;B. $1,300;for AGI" and $300 "from AGI.;C. $480;for AGI.;D. $80;for AGI" and $1,300 "from AGI.;E. None of;these.;47. Ronald is;a cash method taxpayer who made the following expenditures this year. Which;expenditure is completely deductible in this period as a business expense?;A. $4,000;for rent on his office that covers the next 24 months.;B. $3,000;for a new watch for the mayor to keep "good relations" with city;hall.;C. $2,500;for professional hockey tickets distributed to a customer to generate;goodwill" for his business.;D. $55 to;collect an account receivable from a customer who has failed to pay for;services rendered.;E. None of;these is completely deductible.;48. George;operates a business that generated adjusted gross income of $250,000 and;taxable income of $170,000 this year (before the domestic production activities;deduction). Included in income was $70,000 of qualified production activities;income. George paid $60,000 of wages to employees engaged in domestic;manufacturing. What domestic production activities deduction will George be;eligible to claim this year?;A. $5,400;B. $6,300;C. $7,200;D. $15,300;E. $22,500;49. Which of;the following is a true statement about the domestic production activities;deduction?;A. This;deduction is determined by the amount of goods manufactured in the United;States for export abroad.;B. The;deduction is calculated as a percentage of the cost of goods manufactured in;the United States.;C. This;deduction represents a subsidy to taxpayers who manufacture or construct goods;in the United States.;D. The;domestic production activities deduction is not affected by the cost of labor.;E. All of;these are true.;50. Qualified;production activities income is defined as follows for purposes of the domestic;production activities deduction;A. net;income from selling or leasing property the taxpayer manufactured in the United;States.;B. revenue;from selling or leasing property the taxpayer manufactured in the United;States.;C. revenue;from selling or leasing property the taxpayer manufactured in the United States;but the revenue was less that 50 percent of qualifying wages used in the;production.;D. 6 percent;of revenue from selling or leasing property the taxpayer manufactured in the;United States.;E. None of;these;51. Riley;operates a plumbing business and this year the 3-year old van he used in the;business was destroyed in a traffic accident. The van was originally purchased;for $20,000 and the adjusted basis was $5,800 at the time of the accident.;Although the van was worth $6,000 at the time of accident, insurance only paid;Riley $1,200 for the loss. What is the amount of Riley's casualty loss;deduction?;A. $6,000;B. $14,000;C. $5,800;D. $4,600;E. $5,300;52. Don;operates a taxi business, and this year one of his taxis was damaged in a;traffic accident. The taxi was originally purchased for $32,000 and the;adjusted basis was $2,000 at the time of the accident. The taxi was repaired at;a cost of $2,500 and insurance reimbursed Don $700 of this cost. What is the;amount of Don's casualty loss deduction?;A. $1,300;B. $2,500;C. $1,800;D. $2,000;E. Don is;not eligible for a casualty loss deduction.;53. Which of;the following cannot be selected as a valid tax year end?;A. December;31st;B. January;31st;C. The last;Friday of the last week of June.;D. December;15th;E. A tax;year can end on any of these days.;54. Bill;operates a proprietorship using the cash method of accounting, and this year he;received the following payments;? $100 in cash from a customer for services rendered this;year;? a promise to pay $200 from a customer for services;rendered this year;? tickets to a football game worth $250 as payment for;services performed last year;? a check for $170 for services rendered this year that Bill;forgot to cash;How much income should Bill realize on Schedule C?;A. $100;B. $300;C. $350;D. $270;E. $520;55. Clyde;operates a sole proprietorship using the cash method. This year Clyde made the;following expenditures;$480 to U.S. Bank for 12 months of interest accruing on a;business loan from September 1st of this year through August 31st of next year.;$600 for 12 months of property insurance beginning on July 1;of this year.;What is the maximum amount Clyde can deduct this year?;A. $760;B. $600;C. $480;D. $160;E. $360;56. Beth;operates a plumbing firm. In August of last year she signed a contract to;provide plumbing services for a renovation. Beth began the work that August and;finished the work in December of last year. However, Beth didn't bill the;client until January of this year and she didn't receive the payment until;March when she received payment in full. When should Beth recognize income;under the accrual method of accounting?;A. In August;of last year;B. In;December of last year;C. In;January of this year;D. In March;of this year;E. In April;of this year;57. Jim;operates his business on the accrual method and this year he received $4,000;for services that he intends to provide to his clients next year. Under what;circumstances can Jim defer the recognition of the $4,000 of income until next;year?;A. Jim can;defer the recognition of the income if he absolutely promises not to provide;the services until next year.;B. Jim must;defer the recognition of the income until the income is earned.;C. Jim can;defer the recognition of the income if he has requested that the client not pay;for the services until the services are provided.;D. Jim can;elect to defer the recognition of the income if the income is not recognized;for financial accounting purposes.;E. Jim can;never defer the recognition of the prepayments of income.;58. When does;the all-events test under the accrual method require the recognition of income;from the sale of goods?;A. when the;title of the goods passes to the buyer.;B. when the;business receives payment.;C. when;payment is due from the buyer.;D. the;earliest of these three dates.;E. None of;these.;59. Colbert;operates a catering service on the accrual method. In November of year 1;Colbert received a payment of $9,000 for 18 months of catering services to be;rendered from December 1st of year 1 through May 31st year 3. When must Colbert;recognize the income if his accounting methods are selected to minimize income;recognition?;A. $500 is;recognized in year 1, $6,000 in year 2, and $2,500 in year 3.;B. $500 is;recognized in year 1 and $8,500 in year 2.;C. $9,000 is;recognized in year 3.;D. $2,500 is;recognized in year 1 and $6,500 in year 2.;E. $9,000 is;recognized in year 1.;60. Which of;the following types of transactions may not typically be accounted for using;the cash method?;A. sales of;inventory;B. services;C. purchases;of machinery;D. payments;of debt;E. sales of;securities by an investor;61. Which of;the following types of expenditures is not subject to capitalization under the;UNICAP rules?;A. selling;expenditures;B. cost of;manufacturing labor;C. compensation;of managers who supervise production;D. cost of;raw materials;E. All of;these are subject to capitalization under the UNICAP rules.;62. Kip;started a wholesale store this year selling bulk peanut butter. In January of;this year Kip purchased an initial five tubs of peanut butter for a total cost;of $5,000. In July Kip purchased three tubs for a total cost of $6,000.;Finally, in November Kip bought two tubs for a total cost of $1,000. Kip sold;six tubs by year end. What is Kip's ending inventory under the FIFO cost-flow;method?;A. $12,000;B. $6,000;C. $5,000;D. $2,500;E. $1,000;63. Mike;started a calendar year business on September 1st of this year by paying 12;months rent on his shop at $1,000 per month. What is the maximum amount of rent;that Mike can deduct this year under each type of accounting method?;A. $12,000;under the cash method and $12,000 under the accrual method;B. $4,000;under the cash method and $12,000 under the accrual method;C. $12,000;under the cash method and $4,000 under the accrual method;D. $4,000;under the cash method and $4,000 under the accrual method;E. $4,000;under the cash method and zero under the accrual method;64. Which of;the following is a payment liability?;A. Tort;claims;B. Refunds;C. Insurance;premiums;D. Real;estate taxes;E. All of;these;65. Joe is a;self employed electrician who operates his business on the accrual method. This;year Joe purchased a shop for his business and at year end he received a bill;for $4,500 of property taxes on his shop. Joe didn't pay the taxes until after;year end. Which of the following is a true statement?;A. If he;elects to treat the taxes as a recurring item, Joe can accrue and deduct $4,500;of taxes on the shop this year.;B. The taxes;are a payment liability.;C. The taxes;would not be deductible if Joe's business was on the cash method.;D. Unless;Joe makes an election, the taxes are not deductible this year.;E. All of;these are true.;66. Brad;operates a storage business on the accrual method. On July 1 Brad paid $48,000;for rent on his storage warehouse and $18,000 for insurance on the contents of;the warehouse. The rent and insurance covers the next 12 months. What is Brad's;deduction for the rent and insurance?;A. $48,000;for the rent and $18,000 for the insurance.;B. $24,000;for the rent and $18,000 for the insurance.;C. $24,000;for the rent and $9,000 for the insurance.;D. $48,000;for the rent and $9,000 for the insurance.;E. None of;these is true.;67. Ajax;Computer Company is an accrual method calendar year taxpayer. Ajax has never;advertised in the national media prior to this year. In November of this year;however, Ajax paid $1 million for television advertising time during a;super" sporting event scheduled to take place in early February of;next year. In addition, in November of this year the company paid $500,000 for;advertising time during a professional golf tournament in April of next year.;What amount of these payments, if any, can Ajax deduct this year?;A. $1;million;B. $500,000;C. $1.5;million;D. $1.5;million only if the professional golf tournament is played before April 15.;E. No;deduction can be claimed this year.;68. Big Homes;Corporation is an accrual method calendar year taxpayer that manufactures and;sells modular homes. This year for the first time Big Homes was forced to offer;a rebate on the purchase of new homes. At year end, Big Homes had paid $12,000;in rebates and was liable for an additional $7,500 in rebates to buyers. What;amount of the rebates, if any, can Big Homes deduct this year?;A. $12,000;because rebates are payment liabilities.;B. $19,500;because Big Homes is an accrual method taxpayer.;C. $19,500;if this amount is not material, Big Homes expects to continue the practice of;offering rebates in future years, and Big Homes expects to pay the accrued;rebates before filing their tax return for this year.;D. $12,000;because the $7,500 liability is not fixed and determinable.;E. Big Homes;is not entitled to a deduction because rebates are against public policy.;69. Jones;operates an upscale restaurant and he pays experienced cooks $35,000 per year.;This year he hired his son as an apprentice cook. Jones agreed to pay his son;$40,000 per year. Which of the following is a true statement about this;transaction?;A. Jones;will be allowed to deduct $40,000 only if his son eventually develops into an;expert cook.;B. Jones;will be allowed to accrue $40,000 only if he pays his son in cash.;C. Jones;will be allowed to deduct $35,000 as compensation and another $5,000 can be;deducted as an employee gift.;D. Jones can;only deduct $20,000 because an apprentice cook is only worth half as much as an;experienced cook.;E. None of;these.;70. Manley;operates a law practice on the accrual method and calendar year. At the;beginning of the year Manley's firm had an allowance for doubtful accounts with;a balance of $15,000. At the end of the year, Manley recorded bad debt expense;of $23,000 and the balance of doubtful accounts had increased to $18,000. What;is Manley's deduction for bad debt expense this year?;A. $23,000;B. $3,000;C. $26,000;D. $5,000;E. $20,000;71. Which of;the following is NOT considered a related party for the purpose of limitation;on accruals to related parties?;A. Spouse;when the taxpayer is an individual.;B. A partner;when the taxpayer is a partnership.;C. Brother;when the taxpayer is an individual.;D. A;minority shareholder when the taxpayer is a corporation.;E. All of;these are related parties.;72. Which of;the following is a true statement about accounting for business activities?;A. An;overall accounting method can only be adopted with the permission of the;Commissioner.;B. An;overall accounting method is initially adopted on the first return filed for;the business.;C. The cash;method can only be adopted by individual taxpayers.;D. The;accrual method can only be adopted by corporate taxpayers.;E. None of;these is true.;73. Which of;the following is a true statement about impermissible accounting methods?;A. An;impermissible method is adopted by using the method to report results for two;consecutive years.;B. An;impermissible method may never be used by a taxpayer.;C. Cash;method accounting is an impermissible method for partnerships and Subchapter S;electing corporations.;D. There is;no accounting method that is impermissible.;E. None of;these is true.;74. Todd;operates a business using the cash basis of accounting. At the end of last;year, Todd was granted permission to switch his sales on account to the accrual;method. Last year Todd made $420,000 of sales on account and $64,000 was;uncollected at the end of the year. What is the Todd's ?481 adjustment for this;year?;A. increase;income by $420,000;B. increase;income by $16,000;C. increase;expenses by $64,000;D. increase;expenses by $420,000;E. Todd has;no ?481 adjustment this year.;75. Which of;the following is a true statement about a request for a change in accounting;method?;A. Some;requests are automatically granted.;B. Most;requests require the permission of the Commissioner.;C. Many;requests require payment of a fee and a good business purpose for the change.;D. Form 3115;is required to be filed with a request for change in accounting method.;E. All of;these are true.;Essay Questions;76. Smith;operates a roof repair business. This year Smith's business generated cash;receipts of $32,000 and Smith made the following expenditures associated with;his business;The education expense was for a two-week, nighttime course;in business management. Smith believes the expenditure should qualify as an;ordinary and necessary business expense. What net income should Smith report;from his business? Smith is on the cash method and calendar year.;77. Bryon;operates a consulting business and he usually works alone. However, during the;summer Bryon will sometimes hire undergraduate students to collect data for his;projects. This past summer Bryon hired Fred, the son of a prominent;businessman, for a part-time summer job. The summer job usually pays about;$17,000, but Bryon paid Fred $27,000 to gain favor with Fred's father. What;amount of Fred's summer wages can Bryon deduct for tax purposes? Bryon is on;the cash method and calendar year.;78. Werner is;the president and CEO of Acme, Inc. and this year he took a prospective client;to dinner. During the dinner the President and the client discussed a proposed;contract for over $6 million and personal matters. After dinner the CEO took;the client to a football game and no business was discussed. The CEO paid;$1,220 for an expensive dinner and spent $600 for tickets to the game. What is;the deductible amount of these expenses?;79. Crystal;operates a business that provides typing and delivery services. This year;Crystal spent $2,500 to purchase special shirts that identify her employees and;provide some notoriety for her business. The shirts are especially colorful and;include logos on the front pocket and back. Besides salary payments, Crystal;also compensates her employees by offering to pay whole life insurance premiums;for any that want to provide insurance coverage for their beneficiaries. This;year Crystal paid $5,000 in life insurance premiums. What amount of these;payments can Crystal deduct? Crystal is on the cash method and calendar year.;80. Judy is a;self employed musician who performs for a variety of events. This year Judy was;fined $250 by the city for violating the city's noise ordinance with a;relatively loud performance. As a consequence Judy contributed $1,000 to a;campaign committee formed to recall the city's mayor. Judy normally hires three;part-time employees to help her schedule events and transport equipment. Judy;paid a total of $33,000 to her employees through June of this year. In June;Judy fired her part-time employees and hired her husband to replace them.;However, Judy paid him $55,000 rather than $33,000. Judy is on the cash method;and calendar year, and she wants to know what amount of these expenditures is;deductible as business expenses.;81. Danny owns;an electronics outlet in Dallas. This year he paid $600 to register for a;four-day course in management in Chicago. Danny paid $800 in airfare and $1,000;for five nights lodging. After the course, Danny spent the last day;sightseeing. During the trip, Danny also paid $140 a day for meals, and $80 a;day for a rental car. What amount of these travel-related expenditures may Danny;deduct as business expenses?;82. Sam;operates a small chain of pizza outlets in Fort Collins, Colorado. In November;of this year Sam decided to attend a two-day management training course. Sam;could choose to attend the course in Denver or Los Angeles. Sam decided to;attend the course in Los Angeles and take an eight-day vacation immediately;after the course. Sam reported the following expenditures from the trip;What amount of travel expenditures can Sam deduct?;83. Gabby;operates a pizza delivery service. This year she paid delivery personnel;$18,000 in salary. She carefully documented the use of the auto (11,700 miles;this year) and her $7,350 of vehicle expenses (for gas, oil, repairs, and auto;lease payments). What amount of these expenses may Gabby deduct as business;expenses? Gabby is on the cash method and calendar year.;84. Alvin is a;self-employed sound technician who reports on the cash method and calendar;year. Alvin has a shop in Austin, Texas, but he spends much of his time away;from his shop traveling to and from various concerts around the country. Alvin;leases a truck to move his equipment around the country and this year he spent;$12,000 in lease payments and paid $18,000 for gas, oil, and repairs. Alvin;keeps records of his personal use of the truck and he estimates that 6,000 of;the total 36,000 miles put on the truck this year were for personal trips. What;amount of these expenses may Alvin deduct as business expenses?;85. Sandy;Bottoms Corporation generated taxable income (before the domestic manufacturing;deduction) of $3 million this year. The total income included $2,350,000 of;qualified production activities income. The company paid $460,000 in W-2 wages;to generate the qualified production activity income. What is Sandy Bottom's;domestic manufacturing deduction for the year?;86. Rock;Island Corporation generated taxable income (before the domestic production;activities deduction) of $10 million this year. The total income included;$4,500,000 of qualified production activities income. The company paid $500,000;in W-2 wages to generate the qualified production activity income. What is Rock;Island's domestic production activities deduction for the year?;87. Otto;operates a bakery and is on the cash method and calendar year. This year one of;Otto's ovens caught fire and was partially destroyed. Otto bought it a few;years ago for $20,000 and claimed depreciation of $12,000 up to the fire. Otto;was charged $4,400 for repairs to the oven but the insurance company paid Otto;$1,500 for the damage. What is Otto's casualty loss deduction?;88. David;purchased a deli shop on February 1st of last year and began to operate it as a;sole proprietorship. David reports his personal taxes using the cash method;over a calendar year, and he wants to use the cash method and fiscal year f

 

Paper#38057 | Written in 18-Jul-2015

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