Business Income And Tax Quiz

29 Questions | By Mindotheplusman | Last updated: Mar 21, 2022 | Total Attempts: 162

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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