Test Bank for McGraw Hill's Essentials of Federal Taxation 2025 Edition Evergreen Release by Brian Spilker | Chapter 9 to 17
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Test Bank for McGraw Hill's Essentials of Federal Taxation 2025 Edition Evergreen Release by Brian Spilker | Chapter 9 to 17 are included in this document however Complete Chapters are given in Package Deal of this document.
PART III: BUSINESS-RELATED TRANSACTIONS
9 Business Income, Deductions...
The Internal Revenue 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.
2. Award: 10.00 points
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.
,3. 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.
4. Award: 10.00 points
Reasonable in amount means that expenditures can be exorbitant 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
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.
6. Award: 10.00 points
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
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.
8. Award: 10.00 points
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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