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Jimmy took a business trip from Dallas to Brazil. He was there for a total of seven days, of which two were weekend days.
Over the weekend, he spent his time sightseeing and relaxing. His expenses were as follows:
                                 
Airfare $ …………………………………………………………………… 1,400
Lodging (7 days × $300) ……………………………………………. 2,100
Meals (7 days × $80) …………………………………………………. 560
Taxi fares ($620 to and from business meetings) ……….. 750
 
How much is Jimmy allowed to deduct?
 
    $3,349.
    $3,436
    $4,530.
    $4,810
 
1400 + 2100 + (560 / 2) + 750
   
Frank purchased a vehicle for business and personal use. In 2017, he used the vehicle 80% for business
(12,000 business miles incurred equally throughout the year) and calculated his vehicle expenses using the
standard mileage rate.
Frank also paid $1,900 in interest and $400 in county property tax on the car.
What is the total business deduction related to business use of the car?
 
Multiple Choice
 
    $ 6,520.
    $7,042.
    $8,260
    $8,720.
 
(12000 x .535) + (1900 + 400 x) x .8
   
Atlas, a financial consultant, had the following income and expenses in his business:
                                 
Fee Income                                                                                                                     $216,200
 
Expenses:                             
Rent Expense                                                                                                                 16,700
Penalties assessed by the SEC                                                                   2,500
Office expenses                                                                                              6,400
Supplies                                                                                                                               6,200
Interest paid on note used to acquire office equipment                    2,600
Speeding tickets going to see clients                                                                        700
 
How much net income must Atlas report from this business?
 
    $181,100
    $184,300
    $185,000
    $187,500
 
216200 - 16700 - 6400 - 6200 - 2600
   
Lawrence purchased an apartment building on February 10, 2017, for $336,000, $30,600 of which was for the land.
What is the cost recovery deduction for 2017? (Use Table 6A-6)
 
    $0.
    $6,862.
    $9,718
    $10,854.
 
336000 - 30600 x .03182 (3.182%) = 9717.828 (9,718)
   
Annie is self-employed and has $49,300 in income from her business.
She also has investments that generated dividends of $2,800 and interest of $2,300.
What is Annie’s self-employment tax for the year?
 
    $6,966
    $7,326.
    $7,543.
    $7,626.
 
49300 x .153 (15.3%) x .9235 (92.35%) = 6965.86815 ($6,966)
   
Which of the following statements regarding meals and entertainment expenses is not true?
 
A secondary reason for providing a meal or entertainment should be to conduct business.
Meals and entertainment expenses must be provided to a current or potential business customer or client.
Meals and entertainment expenses must be an ordinary and necessary business expense.
Meals and entertainment expenses must not be lavish or extravagant.
   
Which of the following statements regarding meals and entertainment expenses is true?
 
If taxpayers participate in reciprocal meal expenses, they are 50% deductible.
A taxpayer may deduct 50% of the costs of meals incurred for a business purpose; however, 100% is allowed for a full deduction for
social or recreational expenses that primarily benefit employees.
A taxpayer may deduct 50% of the costs of meals incurred for a personal purpose.
Meals provided to employees (that are treated as compensation) are deductible according to the 50% rule.
   
A meal expense is related to active conduct of business if it meets all of the following conditions except
 
The expenses are related to the taxpayer and people involved in the business activity.
The principal reason for providing the meal is to conduct personal affairs.
There is more than a general expectation of deriving income or a business benefit from the meal.
A bona fide business activity takes place during the meal.
  Which of the following statements regarding deductibility of auto expenses is true?
 
Using the actual cost method, the taxpayer can deduct gas and oil, repairs, insurance, license, and other expenses of driving the car,
but cannot deduct depreciation.
When using the standard mileage rate method, the taxpayer cannot add the business portion of tolls, parking, interest, and property taxes, as
They are incorporated into the standard mileage.
The taxpayer can deduct the cost of commuting to and from the workplace if it is over 50 miles per day.
Using the actual cost method, the taxpayer can deduct depreciation, gas and oil, repairs, insurance, license, and other expenses of driving
the car, whereas using the standard mileage rate method, the taxpayer can include the business portion of tolls, parking, interest, and property taxes.
   
Which of the following is an acceptable method for calculating a deduction for auto expenses for business purposes?
 
The only acceptable method is the standard mileage rate method.
The only acceptable method is the actual cost method.
The taxpayer can choose the reciprocal method or the actual cost method.
A taxpayer can choose one of two methods for computing a deduction for using an auto for business purposes: the standard mileage rate method or
the actual cost method.
   
Which of the following is considered deductible business-related travel?
Travel from the taxpayer's second job to home
Travel from the taxpayer's home to a temporary workplace
Travel from the taxpayer's home to virtually anywhere is considered business-related travel.
Travel from the taxpayer's home to a regular workplace
   
Which of the following statements regarding business travel expenses is true?
 
Expenses incurred for the spouse of the taxpayer are deductible if the taxpayer demonstrates the need to socialize with other couples during the business travel.
The taxpayer can deduct any transportation costs if the purpose of the trip is primarily business.
Travel expenses to attend investment-related conferences are deductible if the taxpayer is an equestrian coach with a significant portfolio.
Travel expense is limited to 50% of the cost of transportation, lodging, meals, and incidentals.
  Which of the following statements regarding deductible travel expenses is true?
 
To be a deductible travel expense, the taxpayer must be away from his or her tax home overnight.
Noi travels from Denver to Birmingham for a conference; she spends eight days in her profession (civic activism) and two days sightseeing.
She has to allocate her plane ticket of $489 between deductible and nondeductible travel expenses. Noi travels from Denver to Birmingham
for a conference; she spends two
days in her profession (civic activism) and eight days sightseeing. She is allowed to deduct the full price of her plane ticket of $489.
The primary reason for the trip is business if the taxpayer spends less than 50% of the time on business activities.
   
Travel expense by a family member to a workshop in Atlanta is properly deductible under which of the following circumstances?
 
There is a social purpose for the person's presence in Atlanta.
b.There is a bona fide business purpose for the person's presence in Atlanta, and the family member is an employee of the taxpayer.
There is never a situation when travel expense by a family member is properly deductible.
The spouse or family member is a colleague of the taxpayer.
 
Atlanta, and the family member is an employee of the taxpayer.
   
Which of the following statements regarding substantiation requirements is true?
 
Failure to keep substantiation has no repercussions.
Documentation requirements are very vague.
Substantiation requirements apply to entertainment, auto, travel, and gift expenses.
Substantiation requirements apply to meals, auto, travel, and gift expenses, and documentation required includes recording the amount of
the expense, the time and place of the event, the business purpose of the event, and the business relationship to the person entertained or
receiving the gift.
   
Which of the following statements regarding deductible education expenses is true?
 
Education expenses are deductible when the education is required by law, or the education maintains or improves the skills
required in the taxpayer's trade or business.
Education expenses are deductible if the education is required for the taxpayer to meet the minimum educational requirements of his or her trade or business.
Education expenses are nondeductible for self-employed taxpayers.
   
Which of the following statements regarding business gifts is true?
 
To apply the $25 limitation, only direct gifts to a person must be counted.
Business gifts are subject to the 50% limitation that applies to meals and entertainment expenses.
A taxpayer can deduct up to $25 per year per donee for gifts to business customers.
To apply the $25 limitation, only indirect gifts to a person must be counted.
A taxpayer can deduct up to $25 per year per donee for gifts to business customers.
   
Which of the following statements regarding nonbusiness bad debts is true?
 
Nonbusiness bad debts can be deducted when voluntarily forgiven.
A deduction is allowed for the full worthlessness of nonbusiness bad debts.
Nonbusiness bad debts can be deducted when the forgiveness of debt is intended as a gift.
The specific charge-off method is not allowed for nonbusiness bad debts.
A deduction is allowed for the full worthlessness of nonbusiness bad debts.
   
Which of the following statements regarding Qualified Business Income (QBI) deductions is true?
 
For purposes of calculating the deduction for QBI, salaries paid to S corporation owners or guaranteed payments to partners are not calculated in net income.
The purpose of the QBI deduction is so that owners of conduit entities pay tax like self-employed taxpayers.
The QBI deduction is the greater of 20% of QBI or 20% of taxable income (not including capital gains, but before the QBI deduction).
Only taxpayers who itemize may claim the QBI deduction.
   
Which of the following statements regarding nonbusiness bad debts is true?
 
Nonbusiness bad debts are accounted for using the specific charge-off method.
Nonbusiness bad debts can be deducted at any point in time.
A deduction is allowed for the partial worthlessness of a nonbusiness bad debt.
Nonbusiness bad debts are considered long-term capital losses.