Business Income And Tax Quiz

The statement suggests that if an expense is both business and personal, a reasonable allocation should be made for the mixed-motive expenditures. This means that if an expense, such as mileage for automobiles, is used for both business and personal purposes, a fair and logical division should be made to determine the portion that is attributable to each purpose. Therefore, the answer "True" indicates that it is indeed necessary to allocate mixed-motive expenditures in a reasonable manner.

Business expenses are generally deductible without limitation if they are ordinary and necessary. This means that the expenses are commonly incurred by other businesses and are appropriate for a particular business. This includes expenses that are not necessarily repetitive in nature, such as legal fees for defense in a lawsuit. Therefore, the statement is true.

Adjusted basis 100
Insurance premium 90
FMV 90
There is no gain or loss

To qualify for a business deduction, the taxpayer or an employee must be physically present when the meal is provided. This means that simply providing meals for business purposes without the taxpayer or an employee being present would not be eligible for a deduction. The presence requirement helps ensure that the meal is directly related to the taxpayer's business activities and not for personal use.

Casualty losses and theft losses are generally deductible if they are incurred in a trade or business or in connection with an investment, except for losses caused by a taxpayer's willful act or willful negligence. This means that if the losses were not intentionally caused by the taxpayer, they can be deducted from their taxable income. Therefore, the statement "True" is correct.

There must be (1) an intent to make a profit (the IRS is generally satisfied if 3 of 5 years are profitable) §183(d) and (2) an entrepreneurial effort.

Entertainment expenses are limited to 50% of the total expenses. This means that only half of the total expenses can be allocated towards entertainment purposes.

Meal expenses qualify as a business deduction at a rate of 50%. This means that when calculating taxes, a business can deduct 50% of their meal expenses from their taxable income. This deduction is typically applicable for meals that are directly related to the business, such as meals with clients or meals while traveling for business purposes. The remaining 50% of the expenses are not deductible and must be paid out of pocket by the business.

Travel costs can be deducted from taxes only if the taxpayer is away from their home overnight while traveling. This means that if the taxpayer stays overnight at a location that is not their home, they can claim the travel expenses as deductions. However, if the taxpayer does not stay overnight, they cannot deduct the travel costs. Therefore, the statement "Travel costs are only deductible if the taxpayer is away from home overnight while traveling" is true.

Public policy must not be violated by the expense. Fines, kickbacks, bribes, etc. are not deductible.

Capital expenditures are not deductible because they are considered investments in long-term assets that provide benefits over multiple years. These expenditures are not considered regular business expenses and cannot be deducted in the year they are incurred. Instead, they are capitalized and their costs are depreciated or amortized over their useful lives. This allows businesses to recover the costs of these assets gradually over time. Therefore, the statement that capital expenditures are not deductible is true.

A business expense cannot be related to tax-exempt production of income. This is because tax-exempt income refers to income that is not subject to taxation, and therefore, there is no need for the business to incur expenses related to it. Business expenses are typically incurred in order to generate taxable income, whether it is for-profit or non-profit.

Because the activity was not directly related to or associated with a substantial business discussion.

If the primary purpose of the transportation costs is for business, then all of the transportation costs are fully deductible. This means that the business can claim the entire amount of the transportation expenses as a deduction on their taxes.

Gain is recognized to the extent that insurance reimbursements exceed adjusted basis.

If the primary purpose of transportation is personal, none of the transportation costs are fully deductible. This means that individuals cannot claim any deductions for their personal transportation expenses.

Janine can deduct $270 [(190 + 350) x 50%], representing half the cost of the meal and entertainment.

For AGI deduction

insurance 4,500 - AB (8,000) = (3,500)

Airfare $700, Lodging $450, Meals $75 ((3 x 50) x 50%), Rental car $210

The answer "Stolen equipment loss of $11,000" is correct because the fair market value of the stolen equipment before the theft was $13,000 and the adjusted basis of the equipment was $2,000. Therefore, the loss incurred due to the theft is the difference between the fair market value and the adjusted basis, which is $11,000.

AB 195,000
FMV-Insurance (40,000)
Subtotal 155,000
Insurance proceeds (90,000)

Adjusted Basis 65,000

Must be a comparable business

Insurance reimbursement 35,000 - 55,000 = (20,000)

$12,000 reimbursement is less than the Adjested basis ($17,000) but more than the decrease in FMV ($10,000)

Airfare $0, Lodging $450, Meals $75 ((3 x 50) x 50%), Rental car $210

Insurance proceeds 250
Minus adjusted tax basis - 5,000
Casualty loss deduction 4,750

Related parties are individuals or entities that have a close relationship with the reporting entity and have the potential to influence its financial transactions. In this case, the correct answer includes family members, such as parents, siblings, and spouses, as they have a close personal relationship with the reporting entity. Shareholders and C Corporations are also considered related parties when the shareholder owns more than 50% of the common stock, as they have significant control over the reporting entity. Additionally, owners of partnerships and S Corporations are considered related parties regardless of the ownership percentage, as they have a direct financial interest in the reporting entity.