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Exam 6: Deductions and Losses: in General

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Question 31

Multiple Choice

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

A) $0.
B) $8,200.
C) $10,300.
D) $16,700.
E) None of the above.

F) D) and E)
G) All of the above

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Question 32

Multiple Choice

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Janice is single,had gross income of $38,000,and incurred the following expenses: Her AGI is:

A) $21,300.
B) $28,800.
C) $32,800.
D) $35,500.
E) $37,800.

F) C) and D)
G) A) and B)

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Question 33

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The amount of the addition to the reserve for bad debts for an accrual method taxpayer is allowed as a deduction for tax purposes.

On January 2,2011,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 2011?

In applying the $1 million limit on deducting executive compensation,what corporations are subject to the deduction limit? What executives are covered?

Bridgett's son,Hubert,is $6,000 in arrears on his residential mortgage payments.Of the $6,000,$4,200 represents interest and $1,800 represents principal.

The cost of legal advice associated with the preparation of an individual's Federal income tax return is not deductible because it is a personal expense.

Nikeya sells land (adjusted basis of $120,000) to her adult son,Shamed,for its appraised value of $95,000.Which of the following statements is correct?

Bobby operates a drug trafficking business.Because he has an accounting background,he keeps detailed financial records.What expenses can Bobby deduct on his Federal income tax return?

Vera is the CEO of Brunettes,a publicly held corporation.For the year,she receives a salary of $900,000,a bonus of $500,000,and contributions to her retirement plan of $42,000.The bonus was awarded at the December board meeting based on Vera's threat to accept a better paying job with a competitor.What amount may Brunettes deduct?

Graham,a CPA,has submitted a proposal to do the annual audit for a municipality.Owen,the city treasurer,tells Graham that for a $1,000 fee,he will use his influence to have the audit awarded to Graham.What factors are relevant in determining if Graham can deduct the $1,000 payment assuming he pays the fee to Owen?

If a vacation home is classified as primarily personal use (i.e.,rented for fewer than 15 days),none of the related expenses can be deducted.

Which of the following is correct?

Which of the following must be capitalized by a business?

Mattie and Elmer are separated and are in the process of obtaining a divorce.They incur legal fees for their respective attorneys with the expenses being itemized as follows: Although there is no requirement that he do so,Elmer pays Mattie's lawyer as a gesture of the positive feelings he still has for her.

The portion of property tax on a vacation home that is attributable to personal use is an itemized deduction.

During the year,Larry rented his vacation home for 180 days and lived in it for 16 days.During the remaining days,the vacation home was available for rental use.Is the vacation home subject to the limitation on the deductions of a personal/rental vacation home?

Marge sells land to her adult son,Jason,for its $20,000 appraised value.Her adjusted basis for the land is $25,000.Marge's recognized loss is $0 and Jason's adjusted basis for the land is $25,000 ($20,000 cost + $5,000 disallowed loss of Marge).

Robyn rents her beach house for 60 days and uses it for personal use for 30 days during the year.The rental income is $6,000 and the expenses are as follows: Using the IRS approach,total expenses that Robyn can deduct on her tax return associated with the beach house are:

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