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Exam 6: Deductions and Losses: in General

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Question 61

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

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To be classified in the primarily rental...

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Question 62

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

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Question 63

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In distinguishing whether an activity is a hobby or a trade or business,discuss the presumptive rule.

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

Section 212 expenses that are related to rent and royalty income are deductions for AGI.

Ordinary and necessary business expenses,other than cost of goods sold,of an illegal drug trafficking business do not reduce taxable income.

If a vacation home is classified as primarily rental use,a deduction for all of the rental expenses is allowed.

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

Which of the following is not a related party for constructive ownership purposes under § 267?

Beige,Inc.,an airline manufacturer,is conducting negotiations for the sale of military aircraft.One negotiation is with a U.S.assistant secretary of defense.She can close the deal on the purchase of 50 attack helicopters if she is paid $750,000 under the table.Another negotiation is with the minister of defense of a third world country.To complete the sale of 20 jet fighters to his government,he demands that he be paid a $1 million grease payment.Beige makes the payments and closes the deals.How much of these payments are deductible by Beige,Inc.?

During the year,Jim rented his vacation home for 200 days and lived in it for 19 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?

Walt wants to give his daughter $1,800 for Christmas.As an alternative,she suggests that he pay the property taxes on her residence.If Ralph pays the property taxes,he can deduct them.

If a taxpayer can satisfy the three-out-of-five year presumption test associated with hobby losses,then expenses from the activity can be deducted in excess of the gross income from the activity.

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

During the year,Rita rented her vacation home for twelve days for $2,400 and she used it personally for three months.The following expenses were incurred on the home: ​ Calculate her rental gain or loss and itemized deductions.

For purposes of the § 267 loss disallowance provision,a taxpayer's aunt is a related party.

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

Which of the following is not a "trade or business" expense?

Aaron,a shareholder-employee of Pigeon,Inc.,receives a $300,000 salary.The IRS classifies $100,000 of this amount as unreasonable compensation.The effect of this reclassification is to decrease Aaron's gross income by $100,000 and increase Pigeon's gross income by $100,000.

Depending on the nature of the expenditure,expenses incurred in a trade or business may be deductible for or from AGI.