Business Income And Tax Quiz

29 Questions | Total Attempts: 81

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Tax Quizzes & Trivia

Business Income, Deductions, and Accounting Methods


Questions and Answers
  • 1. 
    Business expenses are generally deductible without limitation if it is ordinary and necessary – commonly incurred by other businesses (not necessarily repetitive in nature (e.g., legal fees for defense in lawsuit) and appropriate for a particular business. 
    • A. 

      True

    • B. 

      False

  • 2. 
    One way to substantiate reasonableness is by presenting documentation of similar expenses by any other businesses.
    • A. 

      True

    • B. 

      False

  • 3. 
    Fines that violate public policy can be counted as a business expense.
    • A. 

      True

    • B. 

      False

  • 4. 
    Capital expenditures are not deductible .
    • A. 

      True

    • B. 

      False

  • 5. 
    Business expense cannot be related to what type of production of income?
    • A. 

      Tax-exempt

    • B. 

      For profit

    • C. 

      Non-profit

    • D. 

      None of the above

  • 6. 
    Activity must be related to a _______________, not  to investments,  hobbies, or personal-use property to be considered a business expense.
  • 7. 
    If part business, part personal, use a reasonable allocation (e.g., mileage for automobiles) for these mixed-motive expenditures.
    • A. 

      True

    • B. 

      False

  • 8. 
    What percentage of meal expenses qualify as a business deduction?
    • A. 

      25%

    • B. 

      75%

    • C. 

      50%

    • D. 

      40%

  • 9. 
    The taxpayer (or an employee) must be present when the meal is furnished to qualify as a business deduction
    • A. 

      True

    • B. 

      False

  • 10. 
    Entertainment expenses are limited to what percentage?
  • 11. 
    Janine paid a $300 registeration fee for a three-day course in landscape design.  The course was held in New York (Janine paid $700 for airfare to attend) and she spent four days in New York.  She spent the last day sightseeing.  During the trip, Janine paid $150 a night for three nights' lodging, $50 a day for meals, and $70 a day for a rental car.  What amount of these travel-related expenditures may Janine deduct as business expenses?
    • A. 

      $735

    • B. 

      $1,435

    • C. 

      $1,285

    • D. 

      $1,510

  • 12. 
    Janine paid a $300 registeration fee for a three-day course in landscape design.  The course was held in New York (Janine paid $700 for airfare to attend) and she spent ten days in New York (three days at the seminar and seven days with Eileen). During the trip, Janine paid $150 a night for three nights' lodging, $50 a day for meals, and $70 a day for a rental car.  What amount of these travel-related expenditures may Janine deduct as business expenses?
    • A. 

      $735

    • B. 

      $1,435

    • C. 

      $1,285

    • D. 

      $1,510

  • 13. 
    Travel costs are only deductible if the taxpayer is away from home overnight while traveling.
    • A. 

      True

    • B. 

      False

  • 14. 
    If primary purpose is business how much of thel transportation costs are fully deductible?
    • A. 

      100%

    • B. 

      25%

    • C. 

      0%

    • D. 

      50%

  • 15. 
    If primary purpose is personal how much of thel transportation costs are fully deductible?
    • A. 

      100%

    • B. 

      25%

    • C. 

      0%

    • D. 

      50%

  • 16. 
    •Generally, all casualty losses and theft losses are deductible if incurred in a trade or business or in connection with an investment with the exception of losses caused by a taxpayer’s willful act or willful negligence.
    • A. 

      True

    • B. 

      False

  • 17. 
    The result of a Gain or Loss from casualty for business use is what type of gain or loss?
    • A. 

      Capitalized

    • B. 

      Realized

    • C. 

      Recognized

    • D. 

      Expensed

  • 18. 
    Gain or loss from casualty is a from AGI deduction
    • A. 

      True

    • B. 

      False

  • 19. 
    If reimbursement is less than the property’s adjusted basis, then no gain can be realized.
    • A. 

      True

    • B. 

      False

  • 20. 
    Suppose Wilma acquired a business-use asset and Wilma had deducted $4,000 of depreciation expense against the asset.  Hence, the asset's tax basis was $5,000 ($9,000 - $4,000), what would be the amount of his business casualty loss?
    • A. 

      $5,000

    • B. 

      $5,250

    • C. 

      $1,000

    • D. 

      $4,750

  • 21. 
    Related parties include
    • A. 

      Family members including parents, siblings & spouses.

    • B. 

      Shareholders and C Corporations when the shareholder owns more than 25% of the common stock.

    • C. 

      Shareholders and C Corporations when the shareholder owns more than 50% of the common stock.

    • D. 

      Owners of partnerships and S Corporations regardless of the ownership percentage.

    • E. 

      Owners of partnerships and C Corporations regardless of the ownership percentage.

  • 22. 
        Fair Market Value     Adjusted Before After Insurance Event Basis Casualty Casualty Reimbursement 1. Stolen Equip $13,000 $5,000 $0 $2,000 2. Fire – Equip $60,000 $80,000 $25,000 $35,000 3. Accident - Car $17,000 $16,000 $6,000 $12,000 4. Accident – Car $8,000 $12,000 $3,000 $4,500
    • A. 

      Stolen equipment loss of $11,000

    • B. 

      Stolen equipment loss of $3,000

    • C. 

      Stolen equipment loss of $6,000

    • D. 

      Stolen equipment gain of $3,000

  • 23. 
        Fair Market Value     Adjusted Before After Insurance Event Basis Casualty Casualty Reimbursement 1. Stolen Equip $13,000 $5,000 $0 $2,000 2. Fire – Equip $60,000 $80,000 $25,000 $35,000 3. Accident - Car $17,000 $16,000 $6,000 $12,000 4. Accident – Car $8,000 $12,000 $3,000 $4,500
    • A. 

      Fire equipment loss of $25,000

    • B. 

      Fire equipment loss of $35,000

    • C. 

      Fire equipment loss of $20,000

    • D. 

      Fire equipment gain of $20,000

  • 24. 
        Fair Market Value     Adjusted Before After Insurance Event Basis Casualty Casualty Reimbursement 1. Stolen Equip $13,000 $5,000 $0 $2,000 2. Fire – Equip $60,000 $80,000 $25,000 $35,000 3. Accident - Car $17,000 $16,000 $6,000 $12,000 4. Accident – Car $8,000 $12,000 $3,000 $4,500
    • A. 

      Accident - Car loss of $3,500

    • B. 

      Accident - Car loss of $1,000

    • C. 

      Accident - Car No gain or loss

    • D. 

      Accident - Car gain of $6,000

  • 25. 
        Fair Market Value     Adjusted Before After Insurance Event Basis Casualty Casualty Reimbursement 1. Stolen Equip $13,000 $5,000 $0 $2,000 2. Fire – Equip $60,000 $80,000 $25,000 $35,000 3. Accident - Car $17,000 $16,000 $6,000 $12,000 4. Accident – Car $8,000 $12,000 $3,000 $4,500
    • A. 

      Accident - Car loss of $3,500

    • B. 

      Accident - Car loss of $1,000

    • C. 

      Accident - Car No gain or loss

    • D. 

      Accident - Car gain of $6,000

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