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To file a Schedule C-EZ, the taxpayer must:
Have business expenses of $5,000 or less.
Schedule SE and C
($470,000 - 415,000 + 160,000)
Janine is a sole proprietor owning asmall specialty store. The businessrecords show that the cost of the store’s individual inventory items has beensteadily increasing. The cost of the endof the year inventory is $125,000 and the cost of the beginning of the yearinventory was $150,000. Janine uses theLIFO method of inventory valuation. Which of the following statements is true?
Janine would have a higher net income if she used the FIFO method of inventory valuation instead of the LIFO method.
Acacia Company had inventory of $100,000on December 31, 2012. Other informationis as follows:
Inventory 1/1/2012 300,000
What is the amount of Acacia’s cost of goods sold for 2012?
($300,000 + 1,500,000 - 100,000)
Jasper owns a small retail store as asole proprietor. The business recordsshow that the cost of the store’s inventory items has been steadilyincreasing. The cost of the end of theyear inventory is $200,000 and the cost of the beginning of the year inventorywas $250,000. Jasper uses the FIFOmethod of inventory valuation. Which ofthe following statements is true?
Jasper has apparently decreased the volume of items in his ending inventory as compared to the number of items in his beginning inventory.
(20 x $11) + (10 x $9)
(5 miles + 21 miles)
Do not include the normal costs of commuting
A taxpayer who has a fleet of 10 business automobiles
Barry is a self-employed attorney whotravels to New York on a business trip during 2012. Barry's expenses were asfollows:
How much may Barry deduct as travel expenses for the trip?
[$560 + $40 + $350 + (50% x $100)]
The meals and incidental expenses method requires actual cost records to substantiate lodging expenses.
$600 + (50% x $200) + $500
Cost of entertaining clients
Taxpayers who make a combined businessand pleasure trip:
Must allocate the travel cost between the business and pleasure parts of the trip if the travel is outside the United States
Which of the following expenses,incurred while on travel, does notqualify as a travel expense?
Gift purchased for a prospective customer ($20)
Mikey is a self-employed computer gamesoftware designer. He takes a week-long trip to Maui, primarily for business.He takes 2 personal days at the beach. How should he treat the expenses relatedto this trip?
The cost of all of the airfare and the expenses related to the business days should be deducted, while the expenses related to the personal days are not deductible.
All of the above must be substantiated
$175 + ($600/4 days) + (50% x $45)
50 percent, Schedule C deduction
50% x ($4,000 + $2,000) + $1,200
50% x ($600 + $400)
In order to be deductible, dues and subscriptions must be related to the taxpayer’s work.
Henry, an administrative assistant, is taking an advanced Word computer program class through an adult school program.
Choose the correct answer.
Expenses for travel as a form of education are not deductible.
Which of the following is deductible asdues, subscriptions or publications?
Subscription to the "Journal of Taxation" for a tax attorney
An accountant buys a business suit.
To be deductible as the cost of specialwork clothing or uniforms:
The clothing must not be suitable for everyday use and must be required as a condition of the job.
$25 limit + $6 + (400 x $1) + $370
Nancy owns a small dress store. During2012, Nancy gives business gifts having the indicated cost to the followingindividuals:
Mrs. Johns (a customer) $37 plus $3 shipping
Mr. Johns (nonclient husband of Mrs. Johns) $10
Ms. Brown (a customer) $22
What is the amount of Nancy's deduction for business gifts?
$25 limit + $3 + $22
During the 2012 holiday season, Bob, abarber, gave business gifts to 34 customers. The values of the gifts, whichwere not of a promotional nature, were as follows:
8 at $10 each
8 at $25 each
8 at $50 each
10 at $100 each
For 2012, what is the amount of Bob's business giftdeduction?
(8 x $10) + (26 x $25 limit)
$45,000, with $30,000 carried forward to 2013
Lisa is not allowed a deduction for the uncollectible accounts if she has not previously included the income arising from the accounts in taxable income.
A dentist, using the accrual basis of accounting, who records income when it is received and extends credit to a patient for services provided
$3,000 short-term capital loss
Because of the business loss, home office expenses can not be deducted in the current year but can be carried forward to the next year
[1/6 x ($12,000 + $4,800 + $1,200)]
Only $7,000 of the office expenses can be deducted; the remaining $1,000 can be carried forward to future tax years.
Bobby is an accountant who uses aportion of his home as his office. Hishome is 2,500 square feet and his office space occupies 1,000 square feet. Rent expense is $20,000 a year; utilitiesexpense is $1,200 a year; and maintenance expense is $2,000 a year. What is the total amount of these expensesthat can be allocated to his business?
[($20,000 + $1,200 + $2,000) / 2,500 sq ft x 1,000 sq ft]
Only $5,000 home office expenses may be deducted, resulting in net business income of zero. The extra $5,000 of home office expenses may be carried forward and deducted in a future year against home office income.
Richard operates a hair styling boutiqueout of his home. 300 of the 1,200 square feet of floor space are allocated tothe boutique. Other info is as follows:
Gross income from the boutique $10,000
Supplies for the boutique 2,000
Depreciation on total residence 12,000
Utilities for total residence 6,000
what is the income or loss?
[$10,000 - $2,000 - 25% x ($12,000 + $6,000)]
Patrick may offset income he made in 2010 and 2011 with 2012’s net operating loss by carrying the net operating loss back to each of those tax years. The remaining net operating loss can be used to offset future gains.
Are primarily designed to provide relief for trade or business losses.
The activity shows a profit for 3 of the 5 previous years.
Whether the activity is owned and run by the taxpayer alone.
The expertise of the taxpayer.
The time and effort expended by the taxpayer.
Financial status of the taxpayer.
Income and loss history from the activity.
All of the above.
Fred’s deductions are limited to the income from selling furniture because he is engaged in a hobby.
e. None of the above
Bill is the owner of a house with twoidentical apartments. He resides in one and rents the other. The tenant made timely monthly rental payments of $500 per monthfor the months of January through December, 2012. The following expenses wereincurred on the entire building:
Maintenance and repairs 800
Insurance on building 600
--depreciation allocable to the rented apartment is $1,500. What is net rental income?
[$6,000 (12 x $500) - $1,500 - 50% x($3,600 + $800 + $600) = $2,000]
Mort is the owner of an apartmentbuilding containing ten identical apartments. Mort resides in one apartment andrents out the remaining units. For 2012, the following information isavailable:
Gross rents $21,600
Utilities for total building 2,500
Maintenance and repairs (rental apts only) 1,200
Advertising for vacant apartments 300
Depreciation of blding (all units) 5,000
--What should be reported as net rental income?
[$21,600 - $1,200 - $300 - 90% x ($2,500+ $5,000)]
Donald owns a two-family home. He rentsout the first floor and resides on the second floor. The following expensesattributable to the total building were incurred by Donald for the year endedDec 31, 2012:
Real estate taxes 1,800
Mortgage interest 1,200
Repairs (first floor) 300
Painting (second floor) 400
--dep. attributable to entire building is 2,000. What is total deduction amount for Don's 1040?
[$300 + 50% x ($1,800 + $1,200 + $1,000+ $2,000)]
The expenses associated with the rentalof a residence used for both personal and rental purposes are subject to threepossible tax treatments. Which of the following is not included as one of thethree?
If the residence is rented for 15 days or more and is used for personal purposes for not more than 14 days or 10 percent of the days rented, whichever is greater, the residence is treated as a personal residence for tax purposes.
Because Patrick rented the home for more than 14 days, he must report the income. He is also allowed to deduct a percentage of expenses such as utilities and depreciation to the extent of the income.
Arnold purchased interests in twolimited partnerships 6 years ago. During 2012, Arnold had income of $22,000from one of the partnerships. He had a loss from the other partnership of$32,000, salary income of $35,000, and dividend income of $2,000. What is theamount of net passive losses that Arnold may deduct for 2012?
$10,000 net loss
$45,000 + $12,000 + $1,000 + $11,000 -$11,000 (partnership loss limited to rental income
50% x ($150,000 - $140,000)
Choose the correct statement. Passivelosses
Often result from the rental of real estate
$8,000 + $2,500 + $4,000
Which of the following is true about theself-employed health insurance deduction?
Long-term care insurance is allowed as a deduction, subject to a dollar limitation.
Distributions from HSAs are tax and penalty free when used for qualified medical expenses.
Which of the following statements isfalse about health savings acounts (HSAs)?
Contributions to HSAs are deductible as itemized medical deductions.
Which of the following is not a testwhich must be met to qualify for the moving expense deduction?:
The taxpayer must stay with the same employer.
Which of the following is not deductibleas a moving expense?
The cost of a pre-move house-hunting trip
Monica has a Roth IRA to which shecontributed $15,000. The IRA has a current value of $37,500. She is 54 years oldand takes a distribution of $25,000. How much of the distribution will betaxable to Monica?
$25,000 - $15,000
$5,000 to either a traditional IRA or a nondeductible IRA, but no contribution is allowed to a Roth IRA
April 15, 2013
Jody is a physician (not covered by aretirement plan) with a salary of $40,000 from the hospital where she isemployed. She supports her husband, Andre, who sells art work and has no earnedincome. Both are in their twenties. What is the maximum total amount that Jodyand Andre may contribute to their IRAs and deduct for the 2012 tax year?
Married taxpayers, neither of whom is covered by a qualified retirement plan, with total adjusted gross income, all earned, of $85,000
He is subject to penalties on the IRA withdrawal because the medical bill was not greater than 7.5 percent of his AGI.
Withdrawing up to $20,000 of first-time home-buying expenses
20% x $20,000
The contribution limits for SEPs (Simplified Employee Pension) are the lesser of 20 percent of net self-employment income or $50,000 for a self-employed taxpayer
Defined benefit plan
Ursula is not required to include either the $2,000 contribution or the earnings thereon in her 2012 gross income.
15% x $100,000
There are no current-year tax consequences for a direct transfer.
Assuming there are no unusual events, the taxpayer has a maximum of 60 days in which to transfer funds to a new plan.
Jon had adjusted gross income of $25,000in 2012. During the year, he incurred and paid the following medical expenses:
Drugs and medicines prescribed by doctors $ 300
Health insurance premiums 750
Jonr eceived $900 in 2012 as reimbursement for a portion of the drs fee. If Jon were to itemize his deductions, what would his allowable medical expense deduction after AGI limitation is taken into account.
($300 + $750 + $2,250 + $75 -$900) - (7.5% x $25,000)
During 2012, Mary paid the followingexpenses:
Prescription drugs $470
Aspirin and over the counter cold capsules 130
Hospital and doctors 700
Health insurance 250
What is the total amount expenses (before limitations) that would enter into the calculation of itemized deductions on Mary's 2012 income tax return?
$470 + $700 + $250
In 2012, David had adjusted gross incomeof $30,000. During the year he paid the following
Prescription medicines $ 200
Medical care insurance 400
Crutches for a broken leg 100
What amount can David deduct as medicalexpenses (after the adjusted gross income limitation) in calculating hisitemized deductions for 2012?
($200 + $2,100 + $400 + $100) - (7.5% x$30,000)
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