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Exam 6: Deductions and Losses: in General

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Question 51

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All employment related expenses are classified as deductions for AGI.

A) True
B) False

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Question 52

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Briefly explain why interest on money borrowed to buy tax-exempt municipal bonds is disallowed as a deduction.

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Because the interest income on municipal...

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Question 53

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Legal expenses incurred in connection with rental property are deductions from AGI.

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?

The expenses incurred to investigate the expansion of an existing business are deductible even if the expansion is not accomplished.

Which of the following is not deductible?

What losses are deductible by an individual taxpayer?

Marvin spends the following amounts on a house he owns:

Ralph wants to give his daughter $1,000 for Christmas.As an alternative,she suggests that he pay the property taxes on her residence.If Ralph pays the property taxes,he cannot deduct them.

Because Scott is three months delinquent on the mortgage payments for his personal residence,Jeanette (his sister) is going to cover the arrearage.Based on past experience,she does not expect to be repaid by Scott.Which of the following statements is correct?

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

Albie operates an illegal drug-running business and has the following items of income and expense.What is Albie's adjusted gross income from this operation?

Tom operates an illegal drug-running operation and incurred the following expenses: Which of the above amounts reduces his taxable income?

While she was a college student,Juliet worked in a bookstore located near campus.She thinks a bookstore located on the other side of campus would be successful.She incurs expenses of $41,000 (accounting fees,marketing survey,etc.)in exploring its business potential.Her parents have agreed to loan her the money required to start the business.What amount of these investigation costs can Juliet deduct if:

Briefly discuss the two tests that an accrual basis taxpayer must apply before an expense can be deducted.

Alice incurs qualified moving expenses of $12,000.If she is reimbursed by her employer,the deduction is classified as a deduction for AGI.If not reimbursed,the deduction is classified as an itemized deduction.

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).

If an activity involves horses,a profit in at least two of seven consecutive years meets the presumptive rule of § 183.

Which of the following can be claimed as a deduction for AGI?

Which of the following expenses associated with the illegal sale of whiskey (i.e.,bootlegging) can be deducted?