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Exam 6: Deductions: General Concepts and Trade or Business Deductions

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Question 41

True/False

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Personal expenses are only deductible if the tax laws specifically state that they are.

A) True
B) False

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Question 42

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During the current year, a calendar year corporation incurred $52,000 of research and experimental expenditures. fte corporation elects to capitalize and amortize the costs over 60 months. If the corporation first realizes benefits from the research and experimental expenditures on November 1 of the current year, its R&E deduction will equal:

A) $4,633
B) $3,544
C) $2,217
D) $1,733

E) All of the above
F) B) and C)

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Question 43

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Deductions for AGI are:

S&G Mining Corporation purchased a mine that is estimated to hold 500,000 tons of ore for $1,000,000. During the first year, 50,000 tons were extracted and 40,000 tons were sold. In the second year, 60,000 tons were extracted and 50,000 tons were sold. Estimates of the amount of ore held by the mine at the end of the first year were revised to 670,000 tons. Compute cost depletion for the first two years.

fte amount of a bad debt deduction is always limited to the adjusted basis of the debt in the hands of the taxpayer.

Research and experimentation expenditures connected with a trade or business can be capitalized and amortized for tax purposes over a period of not less than:

To be deductible for tax purposes, trade or business expenses must be:

Expenses that are costs paid or incurred while traveling around town on business are known as:

Jim Bender incurs the following moving expenses: Jim does not get a reimbursement from his employer. What is Jim's moving expense deduction on his federal income tax return?

Harry Simms travels from Los Angeles to Cleveland on a business trip. ftree days of the trip are spent conducting business activities and one day is spent on personal sightseeing activities. Harry incurs $700 in airfare costs in going to and returning from Cleveland and $150 a day in expenses for qualified meals and lodging while in Cleveland. Harry receives an $800 reimbursement from his employer for these travel costs. What amount is deductible on Harry's tax return for travel expenses related to the above activities?

If a taxpayer drives 10,000 business miles during 2012, and uses the standard mileage method, the taxpayer's deduction is:

Apartment buildings are an example of residential real property.

Tangible assets are "depreciated;" intangible assets are "amortized."

Goodwill is subject to amortization for tax purposes.

In order to qualify for a moving expense deduction, it is necessary for a taxpayer to have a prior job location.

PDQ, Inc., a calendar-year company, paid $15,000 as a prepayment of two years of its liability insurance on November 1 of the current year. How much insurance expense can PDQ deduct on its current year income tax return?

Business depreciable property placed in service prior to what year is not eligible for ACRS depreciation?

A calendar-year corporation incurs $53,000 of start-up costs. If the corporation began business on August 1 of the current year, what is the maximum amount of the start-up costs that it can deduct against business income in the current year? (round your answer to the nearest dollar)

Which of the following investment related expenses are deductible for AGI?

In 2012, Mason Container Co., a calendar year taxpayer, purchased 5-year depreciable property for $650,000. Mason wants to take the largest possible tax deduction in 2012 related to this property. Compute the largest tax deduction possible in 2012 related to this business equipment. (Consider the Section 179 deduction and bonus depreciation.)