Exam (elaborations)
Taxation of Business Entities 11Th Ed By Brian Spilker - Test Bank
Test Bank For Taxation of Business Entities 11Th Ed By Brian Spilker Complete Test Bank
[Show more]
Content preview
,Taxation of Business Entities, 11e (Spilker)Chapter 1 Business Income, Deductions, and Accounting Methods
1) The Internal Revenue Code authorizes deductions for trade or business activities if the
expenditure is "ordinary and necessary."
Answer: TRUE
Difficulty: 1 Easy
Topic: Business Deductions
Learning Objective: 01-01 Identify common business deductions.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
2) Business activities are distinguished from personal activities in that business activities are
motivated by the pursuit of profits.
Answer: TRUE
Difficulty: 1 Easy
Topic: Business Deductions
Learning Objective: 01-01 Identify common business deductions.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
3) The phase "ordinary and necessary" has been defined to mean that an expense must be
essential and indispensable to the conduct of a business.
Answer: FALSE
Explanation: A necessary expense is an expense that is helpful or conducive to the business
activity.
Difficulty: 2 Medium
Topic: Business Deductions
Learning Objective: 01-01 Identify common business deductions.
Bloom's: Analyze
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
1
Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
,4) Reasonable in amount means that expenditures can be exorbitant as long as the activity is
motivated by profit.
Answer: FALSE
Difficulty: 2 Medium
Topic: Business Deductions
Learning Objective: 01-01 Identify common business deductions.
Bloom's: Analyze
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
5) The test for whether an expenditure is reasonable in amount is whether the expenditure was
for an "arm's length" amount.
Answer: TRUE
Difficulty: 2 Medium
Topic: Business Deductions
Learning Objective: 01-01 Identify common business deductions.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
6) Illegal bribes and kickbacks are not deductible as business expenses but fines imposed by a
governmental unit are deductible as long as the fines are incurred in the ordinary course of
business.
Answer: FALSE
Explanation: No deductions are allowed for expenditures that are against public policy.
Difficulty: 2 Medium
Topic: Limitations on Business Deductions
Learning Objective: 01-02 Determine the limits on deducting business expenses.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
7) Although expenses associated with illegal activities are not deductible, political contributions
can be deducted as long as the donation is not made to a candidate for public office.
Answer: FALSE
Difficulty: 1 Easy
Topic: Limitations on Business Deductions
Learning Objective: 01-02 Determine the limits on deducting business expenses.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
2
Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
, 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.
Answer: TRUE
Difficulty: 2 Medium
Topic: Limitations on Business Deductions
Learning Objective: 01-02 Determine the limits on deducting business expenses.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
9) A business can deduct the cost of uniforms supplied to employees.
Answer: FALSE
Difficulty: 2 Medium
Topic: Limitations on Business Deductions
Learning Objective: 01-02 Determine the limits on deducting business expenses.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
10) Only half the cost of a business meal is deductible even if the meal is extravagant.
Answer: FALSE
Difficulty: 2 Medium
Topic: Limitations on Business Deductions
Learning Objective: 01-02 Determine the limits on deducting business expenses.
Bloom's: Understand
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
11) Taxpayers must maintain written contemporaneous records of business purpose when
traveling in order to claim a deduction for the expenditures.
Answer: TRUE
Difficulty: 1 Easy
Topic: Limitations on Business Deductions
Learning Objective: 01-02 Determine the limits on deducting business expenses.
Bloom's: Remember
AACSB: Reflective Thinking
AICPA: BB Critical Thinking
3
Copyright 2020 © McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller ExamsExpert. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £22.99. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
77254 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now