Exam (elaborations)
TAX 4001 EXAM 2
Exam of 28 pages for the course TAX 4001 at TAX 4001 (TAX 4001 EXAM 2)
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TAX 4001 EXAM 2______ is allowed for the contribution of services, unless there was - ANS-No
deduction;
unreimbursed expenses relating to the service or
transportation and reasonable expenses for lodging and cost of meals while away from
home incurred while performing donated services
2 tests must be met for moving expenses to be deductible - ANS-distance test
time test
20% ceiling applies to - ANS-contributions of appreciated capital gain property to private
non-operating foundations that are not 50% organizations
30% assets include - ANS-capital gain property for which contribution amount is FMV
certain contributions to private non-operating foundations
30% Limit - ANS-charitable contribution deduction for 30% assets cannot exceed 30%
of taxpayer's AGI
50% Limit - ANS-In no case can charitable contribution deduction for a year exceed
50% of taxpayer's AGI
50% Organizations are - ANS-public charities and private foundations (both operating
and non-operating) that qualify for the 50% ceiling
A 30% ceiling applies to contributions - ANS-of cash and ordinary income property to
private non-operating foundations that are not 50% organizations;
contributions of appreciated capital gain property to 50% organizations
A cash basis taxpayer must have _____ or ______ paid the Expense - ANS-Actually
Constructively
A Current Deduction is Not Allowed for Capital Expenditures except through -
ANS-Amortization, Depletion, or Depreciation
A Hobby is an Activity - ANS-Not Engaged in for Profit
,A key distinction between trade/business expense and not a trade/business expense is
whether or not the activity is a: - ANS-Hobby
Accountable Plan - ANS-requires adequate accounting to employer for expense
reimbursed
any excess reimbursements must be returned to employer
employee reports no income and takes no deduction
Activities that have both Personal and Profit-Seeking motives are classified as -
ANS-Hobbies
Additional First Year Depreciation (Bonus Depreciation) allows taxpayer to -
ANS-deduct additional 50% (2017) cost recovery in the year qualified property placed in
service
Additional First Year Depreciation is calculated as 50% of the adjusted basis ______
any Section 179 Expense, and _____ regular MACRS depreciation for that year -
ANS-after;
before
Adjusted Basis is reduced each year by - ANS-The amount of cost recovery that is
ALLOWED, and at least by the amount that is ALLOWABLE
Adjusted Basis of an Asset is - ANS-The book value for tax purposes
initial cost + capital additions - cost recovery to date (either allowed or allowable)
AGI as a function - ANS-Income - Exclusions - Deductions for AGI
All Events Test - ANS-All of the event have occurred to create taxpayer's liability
Amount of the liability can be determined with reasonable accuracy
ALLOWABLE cost recovery amount is - ANS-The recovery that COULD HAVE been
taken under applicable cost recovery method
ALLOWED cost recovery amount is - ANS-the recovery actually taken
Amount Deductible for Transportation Expenses - ANS-Actual expenses:
must keep adequate records of all expenses, depreciation is limited
automatic mileage method
53.5 cents per mile for business miles for 2017
, plus parking, tolls, etc
adequate documentation of mileage required
An asset's basis must be lowered each year by at least the _______ amount, even if no
________, which is the ________ amount - ANS-allowable;
actual deduction is taken;
allowed amount
An Expenditure that creates an Asset having a Useful Life that Extends Substantially
beyond the End of the Current Tax Year must be - ANS-Capitalized (use Depreciation to
record its expenses for Tax Purposes)
Any elected Section 179 expense is taken ______ any Additional First-Year
Depreciation is computed - ANS-Before
Are deductions allowed for partial worthlessness of a nonbusiness bad debt? - ANS-No
Bad Debts for Individuals are generally _________, unless the Bad Debt is
___________ - ANS-Nonbusiness;
Related to the business of the individual
Bad Debts: if an AR arising from credit sale of goods/services becomes worthless: -
ANS-bad debt reduction permitted only if income arising from creation of AR was
previously included in income (accrual method)
no deduction allowed for cash basis, since they wouldn't have recorded the tax yet since
they haven't been paid and the debt is now bad
Because Property Taxes and Home Mortgage Interest are Deductible even without the
hobby generally, - ANS-the net affect to taxable income as a result of a hobby is
reported not considering Property Taxes and Home Mortgage Interest
Before computing any Standard MACRS depreciation, make sure you have expensed
both - ANS-Any Section 179 Immediate Expensing Elected, and any Additional
First-year Depreciation
Being Miscellaneous Itemized Deductions, Hobby Expenses are subject to the _____,
with there being an exception for _____ - ANS-2% of AGI floor - meaning that you
subtract 2% of AGI from total Hobby Expenses (not those for which there is an
exception, however) and deduct this remainder ;
Expenses deductible without regard to profit motive - these are deductible in full
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