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Exam 6: Deductions and Losses: in General

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Question 61

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In order to protect against rent increases on the building in which she operates a dance studio,Mella signs an 18-month lease for $36,000.The lease commences on October 1,2012.How much of the $36,000 payment can she deduct in 2012 and 2013?

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Question 62

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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.

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Question 63

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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.

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.

The stock of Eagle,Inc.is owned as follows: Tom sells land and a building to Eagle,Inc.for $212,000.His adjusted basis for these assets is $225,000.Calculate Tom's realized and recognized loss associated with the sale.

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.

Calculate the net income includible in taxable income for the following hobby:

Alfred's Enterprises,an unincorporated entity,pays employee salaries of $92,000 during the year.At the end of the year,$9,000 of additional salaries have been earned but not paid until the beginning of the next year.

Why are there restrictions on the recognition of gains and losses resulting from transactions between related parties?

Al single,age 60,and has gross income of $140,000.His deductible expenses are as follows: What is Al's AGI?

If a vacation home is a personal/rental residence,no maintenance and utility expenses can be claimed as a deduction.

All domestic bribes (i.e.,to a U.S.official)are disallowed as deductions.

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

If a taxpayer cannot satisfy the three-out-of-five year presumption test associated with hobby losses,then expenses from the activity cannot be deducted in excess of the gross income from the activity.

Which of the following cannot be deducted as a § 162 business expense?

The period in which an accrual basis taxpayer can deduct an expense is determined by applying the economic performance and all events tests.

The Code defines what constitutes a trade or business.

Sandra owns an insurance agency.The following selected data are taken from the agency balance sheet and income statement prepared using the accrual method. Calculate Sandra's net profit using the cash method for 2012.

On January 2,2012,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 2012?

Iris,a calendar year cash basis taxpayer,owns and operates several TV rental outlets in Florida,and wants to expand to other states.During 2012,she spends $14,000 to investigate TV rental stores in South Carolina and $9,000 to investigate TV rental stores in Georgia.She acquires the South Carolina operations,but not the outlets in Georgia.As to these expenses,Iris should: