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Exam 6: Deductions and Losses: in General

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Question 81

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If a vacation home is determined to be a personal/rental use residence, which of the following statements is correct?

A) All rental income is included in gross income.
B) All rental related expenses that are deductible are classified as deductions for AGI.
C) Expenses must be allocated between rental and personal use.
D) Only a.and b.are correct.
E) a., b., and c.are correct.

F) B) and D)
G) A) and E)

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Question 82

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Austin, a single individual with a salary of $100,000, incurred and paid the following expenses during the year: Calculate Austin's deductions for AGI.

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Question 83

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

Susan is a sales representative for a U.S.weapons manufacturer.She makes a $100,000 "grease" payment to a U.S.government official associated with a weapons purchase by the U.S.Army.She makes a similar payment to a Saudi Arabian government official associated with a similar sale.Neither of these payments is deductible by Susan's employer.

Bob and April own a house at the beach.The house was rented to unrelated parties for 8 weeks during the year.April and the children used the house 12 days for their vacation during the year.After properly dividing the expenses between rental and personal use, it was determined that a loss was incurred as follows: What is the correct treatment of the rental income and expenses on Bob and April's joint income tax return for the current year assuming the IRS approach is used if applicable?

If a taxpayer operated an illegal business (not drug trafficking), what expenses can be deducted and what expenses are disallowed?

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.?

Which of the following are deductions for AGI?

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.

A cash basis taxpayer who charges an expense on a bank credit card is allowed to claim a deduction currently, whereas a cash basis taxpayer who charges an expense on a department store credit card is not allowed to claim a deduction until payment is made.

Discuss the application of the "one-year rule" on prepayments by a cash basis taxpayer.

Andrew, who operates a laundry business, incurred the following expenses during the year. What amount can Andrew deduct for these expenses?

Which of the following cannot be deducted as a § 162 business expense?