Business Income And Tax Quiz
Business Income, Deductions, and Accounting Methods
- 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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