FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 6: Deductions and Losses: in General

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

True/False

Review LaterAdd Note

Review Later

A taxpayer who claims the standard deduction can also deduct expenses that are classified as deductions from AGI.

A) True
B) False

Correct Answer

verified

Show Answer

Question 22

Essay

Review LaterAdd Note

Review Later

Woody owns a barber shop.The following selected data are taken from the barber shop balance sheet and income statement prepared for 2010 using the cash method. The following supplemental data also is provided. Calculate Woody's net profit using the accrual method for 2011. Woody's cash method net profit is calculated as follows:

Correct Answer

verified

To convert to accrua...

View Answer

Show Answer

Question 23

True/False

Review LaterAdd Note

Landscaping expenditures on new rental property are deductible in the year they are paid or incurred.

Petal,Inc.is an accrual basis taxpayer.Petal uses the aging approach to calculate the reserve for bad debts.During 2011,the following occur associated with bad debts. The amount of the deduction for bad debt expense for Petal for 2011 is:

Under the "one-year rule" for the current period deduction of prepaid expenses of cash basis taxpayers,the asset must expire or be consumed by the end of the tax year following the year of payment.

The salaries of the top eight executives of Lemon,Inc.are as follows:

Benita incurred a business expense on December 10,2011,which she charged on her bank credit card.She paid the credit card statement which included the charge on January 5,2012.Which of the following is correct?

For individuals who are employees,which of the following is correct?

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

None of the prepaid rent paid on October 1 by a calendar year cash basis taxpayer for the next 18 months is deductible in the current period.

Payments by a cash basis taxpayer of capital expenditures:

Susan is a sales representative for a U.S.weapons manufacturer.She makes a $100,000 "grease" payment to a U.S.government official associated with a weapons purchase by the U.S.Army.She makes a similar payment to a Saudi Arabian government official associated with a similar sale.Neither of these payments is deductible by Susan's employer.

In order to protect against rent increases on the building in which she operates a dance studio,Mella signs an 18-month lease for $18,000.The lease commences on November 1,2011.How much of the $18,000 payment can she deduct in 2011 and 2012? a.If Mella is an accrual basis taxpayer? b.If Mella is a cash basis taxpayer?

Are all personal expenses disallowed as deductions?

Investigation of a business unrelated to one's present business never results in a current period deduction of the entire amount if the amount of the investigation expenses exceeds $5,000.

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. Tom's realized loss is $13,000. However,his recognized loss is $0 because the loss is disallowed as a § 267 related party transaction.

The ordinary and necessary expenses for operating an illegal gambling operation (excluding such items as fines,bribes,and other illegal payments)are deductible.

Expenses incurred for the production or collection of income generally are deductions from adjusted gross income.

Wally is in the 25% tax bracket.He may receive a different tax benefit for a $1,000 expenditure that is classified as a deduction from AGI than he will receive for a $1,000 expenditure that is classified as a deduction for AGI.

Under certain circumstances,a cash method taxpayer must treat prepayments the same as an accrual method taxpayer.