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Question;31.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.;32.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);None of these is likely to be unreasonable in amount.;e);Compensation paid to the taxpayer's spouse in excess of salary payments to;other employees, amounts paid to a subsidiary;corporation;for services where the amount is in excess of the cost of comparable services;by competing corporations, and cost of;entertaining;a former client when there is no possibility of any future benefits from a;relation with that client are all likely to be;considered;unreasonable in amount.;33.The;domestic manufacturing deduction is a deduction for the incremental cost of;manufacturing tangible assets in the United;States.;?;True;?;False;34.Reasonable;in amount means that expenditures can be exorbitant as long as the activity is;motivated by profit.;True;False;35.All;taxpayers must account for taxable income using a calendar year.;?;True;?;False;36.The full-inclusion;method requires cash basis taxpayers to include prepayments for goods or;services into realized income.;True;False;37.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;38.Illegal;bribes and kickbacks are not deductible as business expenses, but this;prohibition does not include fines incurred in the;ordinary;course of business.;?;True;?;False;39.Qualified;production activity income for calculating the domestic manufacturing deduction;is limited to taxable income for a;business;or modified AGI for an individual.;True;False;40.A;business generally adopts a fiscal or calendar year by using that year end on;the first tax return for the business.;True;False;41.The;domestic manufacturing deduction cannot exceed 50 percent of the wages paid to;employees engaged in domestic;manufacturing;activities during the year.;True;False;42.Only;half the cost of a business meal is deductible even if the meal is associated;with the active conduct of business.;True;False;43.A;fiscal tax year can end on the last day of any month other than December.;True;False;44.Uniform;capitalization of indirect inventory costs is required for most large;taxpayers.;True;False;45.The;test for whether an expenditure is reasonable in amount is whether the;expenditure was for an "arm's length" amount.;True;False;46.The;Internal Revenue Code authorizes deductions for trade or business activities if;the expenditure is "ordinary and necessary".;?;True;?;False;47.Sole;proprietorships must use the same tax year as the proprietor of the business.;True;False;48.The;all-events test for income determines the period in which income will be;recognized for tax purposes.;True;False;49.The;12-month rule allows taxpayers to deduct the entire amount of certain prepaid;business expenses.;True;False;50.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;51.Business activities are distinguished;from personal activities in that business activities are motivated by the;pursuit of profits.;True;False;52.Employees cannot deduct the cost of;uniforms if the uniforms are also appropriate for normal wear.;True;False;53.The Internal Revenue Code authorizes;deductions for trade or business activities if the expenditure is;ordinary and necessary".;True;False;54.The;domestic manufacturing deduction cannot exceed 50 percent of the wages paid to;employees engaged in domestic;manufacturing;activities during the year.;?;True;? False

 

Paper#44984 | Written in 18-Jul-2015

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