Exam (elaborations)

Test Bank for McGraw Hill’s Taxation of Business Entities 2022 Edition

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Physiology

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University Of Toronto (U Of T )

Test Bank for McGraw Hill’s Taxation of Business Entities 2022 Edition TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false. 1) The Internal Revenue Code authorizes deductions for trade or business activities if the expenditure is "ordinary and necessary." ⊚ tr...

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Uploaded on February 23, 2022
Number of pages 60
Written in 2021/2022
Type Exam (elaborations)
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test bank for mcgraw hill’s taxation of business entities 2022 edition
test bank for mcgraw hill’s taxation of business entities 2022 editiontest bank for mcgraw hill’s taxation of business entities 2

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Test Bank for McGraw Hill’s Taxation of
Business Entities 2022 Edition, 13th Edition,
Brian Spilker, Benjamin Ayers, John Barrick,
Troy Lewis, John Robinson, Connie Weaver,
Ronald Worsham

Version 1 1

,TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
1) The Internal Revenue Code authorizes deductions for trade or business activities if the
expenditure is "ordinary and necessary."

⊚ true
⊚ false

2) Business activities are distinguished from personal activities in that business activities are
motivated by the pursuit of profits.

⊚ true
⊚ false

3) The phrase "ordinary and necessary" has been defined to mean that an expense must be
essential and indispensable to the conduct of a business.
⊚ true
⊚ false

4) Reasonable in amount means that expenditures can be exorbitant if the activity is
motivated by profit.

⊚ true
⊚ false

5) The test for whether an expenditure is reasonable in amount is whether the expenditure
was for an "arm's length" amount.

⊚ true
⊚ false

6) Illegal bribes and kickbacks are not deductible business expenses, but fines imposed by a
governmental unit are deductible as long as the fines are incurred in the ordinary course of
business.

Version 1 2

, ⊚ true
⊚ false

7) Although expenses associated with illegal activities are not deductible, political
contributions can be deducted if the donation is not made to a candidate for public office.

⊚ true
⊚ false

8) When a taxpayer borrows money and invests the loan proceeds in municipal bonds, the
interest paid by the taxpayer on the debt will not be deductible.

⊚ true
⊚ false

9) A business can deduct the cost of uniforms supplied to employees if the uniforms are not
suitable for normal wear.

⊚ true
⊚ false

10) Only half the cost of a business meal is deductible even if the meal is extravagant.

⊚ true
⊚ false

11) Taxpayers must maintain written contemporaneous records of business purpose when
traveling to claim a deduction for the expenditures.

⊚ true
⊚ false

12) Ralph borrowed $4 million and used the proceeds in his Internet business. The interest on
this debt is not subject to an interest limitation if Ralph's business has average annual gross
receipts of $26 million or less for the prior three taxable years.

Version 1 3

, ⊚ true
⊚ false

13) Adjusted taxable income for calculating the business interest limitation is defined as
taxable income of the taxpayer computed without regard to any item of income, gain, deduction,
or loss that is not properly allocable to a trade or business.

⊚ true
⊚ false

14) The deduction for business interest expense is limited to the sum of (1) business interest
income and (2) 30 percent of the adjusted taxable income of the taxpayer for the taxable year.

⊚ true
⊚ false

15) The deduction for business interest expense is limited to the sum of (1) business interest
income and (2) the adjusted taxable income of the taxpayer for the taxable year.

⊚ true
⊚ false

16) A loss deduction from a casualty of a business asset is only available if the asset is
completely destroyed.

⊚ true
⊚ false

17) All taxpayers must account for taxable income using a calendar year.

⊚ true
⊚ false

18) A short tax year can end on any day of any month other than December.

Version 1 4

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