The sixth course in the series covers deductions that taxpayers can use to reduce tax liability. It reviews the rules on deducting travel and entertainment, business and job-related, moving, and investment expenses, and examines the methods used in claiming depreciation, such as MACRS and ACRS. Also covered is the deduction for amortization, which is similar to depreciation. The course also reviews the rules for recognized losses that can be deducted from a trade or business, such as casualty, theft, and bad debt. In addition, it reviews the the deduction for domestic production activities.
Final Exam > Results Page
final exam score:
final exam status:
100%
Question 1
Correct
All of the following are requirements for filing Schedule C-EZ except:
Business expenses not exceeding $5,000
(You Answered) (Correct Answer) Gross receipts under $100
No home office deduction
No employees
Question 2
Correct
Which of the following is not correct with regard to vacation homes?
Where annual rental is fewer than 15 days, rental income is not reported, and no deductions are allowed (other than mortgage interest and taxes).
Where annual rental is 15 days or longer and personal use exceeds the lengthier of 14 days or 10% of the rental period, deductions and expenses are limited to rental income.
Where annual rental is 15 days or longer and personal use does not exceed 14 days or 10% of the rental period, property is treated as rental property subject to the passive loss limitations.
(You Answered) (Correct Answer) Mortgage interest and property taxes are not deductible if expenses exceed rental income.
Question 3
Correct
What characteristic is not required for an accountable plan?
(You Answered) (Correct Answer) The purpose of the expense must be defined at the time of payment.
The employee must provide adequate substantiation of all expenses on a timely basis.
The plan must require remittance of any advances or payments in excess of substantiated expenses.
Substantiation and remittance of excess amounts must be made on a timely basis.
Question 4
Correct
Accountable plans require that:
Advances be made within 30 days of expense\r
Substantiation be provided to the employer within 60 days of expense
Excess amounts be returned within 120 days of expense
(You Answered) (Correct Answer) All of the above
Question 5
Correct
Which of the following is not deductible as an “actual car expense” by a taxpayer who uses that method to figure the deductible cost of operating his car for business purposes?
Depreciation
Gas and oil
Lease fees
(You Answered) (Correct Answer) Parking fines
Question 6
Correct
Which of the following is not a deductible transportation expense?
Cost of round-trip transportation between an individual’s office and his client’s place of business
Cost of round-trip transportation between an individual’s home and a temporary training site in the same city
(You Answered) (Correct Answer) Cost of round-trip transportation between an individual’s home and office while conducting business on his car phone
Cost of round-trip transportation between an individual’s office in the home and his client’s place of business
Question 7
Correct
In March 2013, Mitchell Dean bought a pre-owned car used 100% for business. The car cost $36,000 and weighs less than 6,000 pounds (assume that Mitchell made no other equipment purchases in 2013). In 2013, Mitchell may deduct:
(You Answered) (Correct Answer) $3,160
$5,100
$25,000
$36,000
Question 8 Correct
Five elements must be proven with respect to entertainment expenses. Two of the elements are the amount and the business purpose of the expense. Which of the following is not one of the other three elements?
The place of the entertainment
(You Answered) (Correct Answer) The nature of the entertainment
The time/date of the entertainment
The business relationship of the person(s) being entertained
Question 9
Correct
With regard to meal and entertainment expenses, all of the following statements are correct except:
Country club dues are not allowed as a deduction.
An entertainment expense must meet one of the two tests: directly related test or associated test.
(You Answered) (Correct Answer) The allowable deduction for the cost of a Super Bowl ticket is limited to twice the face value of the ticket.
The deductible limit on business entertainment expenses is 50%.
Question 10
Correct
Julio Flores takes his wife on a business trip out of town; they fly to their destination. She does not work for Julio’s employer. The primary reason for the trip is business. The cost of her airfare is:
(You Answered) (Correct Answer) Not deductible
Deductible up to 50%
Fully deductible if she accompanies him to luncheons
Fully deductible regardless of what she does on the trip
Question 11
Correct
On deducting the cost of business gifts, which of the following limitations applies?
(You Answered) (Correct Answer) $25 per individual each year
$400 per individual each year
50% of the cost of the gift
Ordinary and necessary business expense
Question 12
Correct
In general, how is the percentage of business use of a home figured for purposes of the home office deduction?
Ratio of home office to number of rooms in the home
(You Answered) (Correct Answer) Square footage basis
Hours worked in the home office
Flat 10% in all cases
Question 13
Correct
Harriet is a high school French teacher. In the summer she travels to France to practice her language skills. In regard to the cost of the trip, which of the following statements is correct?
She can deduct her travel costs as an educational expense.
She can deduct only the cost of airfare.
She can deduct airfare and lodging, but not meals.
(You Answered) (Correct Answer) She cannot deduct any costs of the trip.
Question 14
Correct
Which of the following is not deductible as an itemized educational expense?
Marion Lane, an elementary school teacher, took additional courses to qualify her to teach mathematics in high school.
Theresa Roland owns an accounting practice and took several courses in taxation and accounting.
Janice Paine, a salesperson, was required by her employer to take a public speaking course at her own expense as a condition to retain her position.
(You Answered) (Correct Answer) William Bard was employed as a patent chemist on the condition that he obtain a law degree at his own expense. He enrolled in evening law school. When he graduated from law school, he was promoted to patent attorney, with a substantial increase in salary.
Question 15
Correct
Which of the following nonbusiness investment expenses is not deductible?
(You Answered) (Correct Answer) The cost of travel to attend an investment seminar
The cost of a safety-deposit box rental
A subscription to an investment advisory letter
Fees to an IRA custodian paid from a non-IRA account
Question 16
Correct
A factory building placed in service on May 1, 2013, is depreciated using the straight-line method over:
19 years
27.5 years
(You Answered) (Correct Answer) 39 years
40 years
Question 17
Correct
The maximum dollar limit on the Code Sec. 179 deduction in 2013 is:
$25,000
$139,000
$250,000
(You Answered) (Correct Answer) $500,000
Question 18
Correct
Which of the following is not listed property?
Cars
(You Answered) (Correct Answer) Celluar phones
Computers
Video recording equipment
Question 19
Correct
Form 4562 is required to be filed in 2013 by an individual in business in all of the following situations except:
There is any vehicle depreciation reported.
There is any new amortization reported.
A Section 179 deduction is elected.
(You Answered) (Correct Answer) No property is placed in service in 2013 by a business with no vehicle usage or new amortization to report.
Question 20
Correct
Edward Smith explores a business in January and February 2013. In May 2013, the business begins. It has start-up expenses of $80,000, costs for acquiring Code Sec. 197 assets of $125,000, and cost for acquiring a lease of $10,000. Which of the following expenses can be amortized?
Business start-up costs
Acquisition of Code Sec. 197 assets
Cost of acquiring a lease
(You Answered) (Correct Answer) All of the above
Question 21
Correct
Deductible nonbusiness casualty losses result from each of the following except:
Damage from sonic booms
Earthquake damage
Hurricane damage
(You Answered) (Correct Answer) Termite damage undetected over several years
Question 22
Correct
For disaster loss that occurred in 2013, which of the following is not an option for the taxpayer?
Deduct the loss on a 2012 return.
Deduct the loss on a 2013 return.
(You Answered) (Correct Answer) Deduct the loss on a 2014 return.
Apply for a quick refund.
Question 23
Correct
The carryback period for an ordinary net operating loss arising in 2013 is:
One year
(You Answered) (Correct Answer) Two years
Three years
Five years
Question 24
Correct
All of the following statements regarding bad debts are correct except:
In order to be deductible, a nonbusiness bad debt must be entirely worthless.
To claim a bad debt deduction, the taxpayer must include a statement with the tax return containing information such as when the debt became due, collection efforts, the nature of the debt, and how the taxpayer concluded the debt was worthless.
(You Answered) (Correct Answer) Nonbusiness bad debts are treated as long-term capital losses.
Nonbusiness bad debts are deductible in the year they become worthless.
Question 25
Correct
The statute of limitations for claiming a deduction for business bad debt arising in 2013 is:
One year
Two years
Three years
(You Answered) (Correct Answer) Seven years
