Test Bank for McGraw Hill's Taxation of Business Entities 2025: Evergreen Release by Brian Spilker, Connie Weaver, Ronald Worsham, John Barrick, John Robinson, Benjamin Ayers and Edmund Outslay. Chapter 1 to 7 are included in this document however full chapters can be purchased through bundle produ...
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1. Award: 10.00 points 2. Award: 10.00 points The Internal R evenue Code authorizes deductions for trade or business activities if the expenditure is
"ordinary and necessary ."
True
False
References
True / False Difficulty: 1 Easy Learning Objective: 09-01 Identify common
business deductions.
Business activities are distinguished from personal activities in that business activities are motivated by
the pursuit of profits.
True
False
References
True / False Difficulty: 1 Easy Learning Objective: 09-01 Identify common
business deductions.
Chapter 01 2025 - Business Income, Deductions, and Accounting Methods �����������������������������������������������������������������������������������������������������������������������������������
� 3. Award: 10.00 points 4. Award: 10.00 points 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
A necessary expense is an expense that is helpful or conducive to the business activity .
References
True / False Difficulty: 2 Medium Learning Objective: 09-01 Identify common
business deductions.
Reasonable in amount means that expenditures can be ex orbitant if the activity is motivated by profit.
True
False
References
True / False Difficulty: 2 Medium Learning Objective: 09-01 Identify common
business deductions.
5. Award: 10.00 points 6. Award: 10.00 points The test for whether an expenditure is reasonable in amount is whether the expenditure was for an
"arm 's length " amount.
True
False
References
True / False Difficulty: 2 Medium Learning Objective: 09-01 Identify common
business deductions.
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.
True
False
No deductions are allowed for expenditures that are against public policy .
References
True / False Difficulty: 2 Medium Learning Objective: 09-02 Determine the
limits on deducting business expenses.
7. Award: 10.00 points 8. Award: 10.00 points 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
References
True / False Difficulty: 1 Easy Learning Objective: 09-02 Determine the
limits on deducting business expenses.
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
References
True / False Difficulty: 2 Medium Learning Objective: 09-02 Determine the
limits on deducting business expenses.
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