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Exam 6: Deductions and Losses: in General

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Question 61

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Briefly discuss the disallowance of deductions for capital expenditures.

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Any expenditures that add to t...

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Question 62

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Walter sells land with an adjusted basis of $175,000 and a fair market value of $160,000 to his mother, Shirley, for $160,000. Walter reinvests the proceeds in the stock market. Shirley holds the land for one year and a day and sells it in the marketplace for $169,000. a.Determine the tax consequences to Walter. b.Determine the tax consequences to Shirley.

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Question 63

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

Legal fees incurred in connection with a criminal defense are not deductible even if the crime is associated with a trade or business.

Assuming an activity is deemed to be a hobby, discuss the order and limits in which expenses must be deducted.

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?

Two-thirds of treble damage payments under the antitrust law are not deductible.

Which of the following statements is correct in connection with the investigation of a business?

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

Only under limited circumstances can a loss on the sale of a personal use asset be deducted.

Kitty runs a brothel (illegal under state law) and has the following items of income and expense. What is the amount that she must include in taxable income from her operation?

Priscella pursued a hobby of making bedspreads in her spare time. Her AGI before considering the hobby is $40,000. During the year she sold the bedspreads for $10,000. She incurred expenses as follows: ​ Assuming that the activity is deemed a hobby, how should she report these items on her tax return?

An expense need not be recurring in order to be "ordinary."

Can a trade or business expense be deductible if it is necessary but not ordinary?

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

During the year, Martin rented his vacation home for three months and spent one month there. Gross rental income from the property was $5,000. Martin incurred the following expenses: mortgage interest, $3,000; real estate taxes, $1,500; utilities, $800; maintenance, $500; and depreciation, $4,000. Compute Martin's allowable deductions for the vacation home under the court's approach and the IRS's approach.

Are there any circumstances under which lobbying expenditures are deductible?

Alfred's Enterprises, an unincorporated entity, pays employee salaries of $100,000 during the year. At the end of the year, $12,000 of additional salaries have been earned but not paid until the beginning of the next year. a.Determine the amount of the deduction for salaries if Alfred is a cash method taxpayer. b.Determine the amount of the deduction for salaries if Alfred is an accrual method taxpayer.

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

Tom operates an illegal drug-running operation and incurred the following expenses: Which of the above amounts reduces his taxable income?