Question 1: Which of the following is a true statement with respect to real estate assessments by a municipal government against business property for construction of public parking facilities benefiting the business?
The cost of such assessments is added to the adjusted basis of the taxpayer's property (Reg. 1.164-4)
The cost of such assessments is deductible by the business as a tax expense in the year incurred
These costs get the same tax treatment as real estate taxes paid on business property
These costs could be deducted as charitable contribution because they are benefiting the public
Question 2: Which of the following is a true statement with respect to the business use of automobiles and other property placed in service during the year?
The business use of both transportation and entertainment property must exceed 25% to claim the Sec. 179 expensing deduction.
The maximum purchase price of an automobile is $15,300.
Depreciation on automobiles and entertainment property is limited per year for each item.
The business use of automobiles must exceed 50% to deduct depreciation at an accelerated rate.
Question 3: Which of the following is INCORRECT in regards to the ADR (alternative depreciation system)?
The ADR midpoint is considered to be 12 years, if the property has no specified ADR midpoint
ADR uses a recovery percentage based on a modified straight-line method that allows the use of any recovery period, provided it exceeds the regular recovery period under MACRS
The alternative depreciation system uses the straight-line method over a specific recovery period which generally depends on the ADR midpoint for the property
The ADR midpoint is 40 years for residential rental and nonresidential real property
Question 4: On 1/1/2016 Max incurred $1,800 of start-up expenses to start his "Happy Vending Machines" business. Max reports his business income and expenses on Schedule C. Max wants to accelerate his first year business expenses to the extent allowed by the law.
Which of the following statements is NOT correct?
Max has to capitalize and amortize $1,800 of startup expenses over 180 months
Max deducts $1,800 in current year
Max does not need to make election to deduct $1,800 start up expenses
US Tax law permits tax minimization techniques
Question 5: Phil Bobo is actively engaged in the oil business and owns numerous oil leases in the Southwest. During the current year, he made several trips to inspect oil wells on the leases and to consult about future oil wells to be drilled on these sites. As a result of these overnight trips, he paid the following:
Plane fares $4,000
Hotels 1,000
Meals 800
Entertaining lessees 500
Of the $6,300 in expenses incurred, he can claim as deductible expenses
$6,300
$6,040
$5,650
$5,000
Question 6: Matt operates a sole proprietorship and files his return on a calendar-year basis. He took out a fire insurance policy for his business effective July 1, Year 1, and paid a premium of $3,600 for 4 years. Matt reports his income and expenses on a cash basis. What is Matt's deductible insurance expense for Year 1?
$3,600
$900
$450
$0
Question 7: Which of the following may be deducted as a business bad debt by Mr. G, an accrual-basis taxpayer?
Worthless loan to his partner, which was used to buy a house.
Worthless trade receivable.
Worthless corporate security.
Worthless loan to his sister, who used the proceeds in her business.
Question 8: Mark purchased a new car in January of XX11 for $10,500. The MACRS depreciation for 100% business usage is $2,100 in the first year. He paid $4,200 for gas, oil, and maintenance during the year. Mark drove 12,000 miles for business (he is self-employed) and 6,000 miles for personal purposes, and expects this ratio to remain constant in the future. Ignoring the Sec. 179 expense deduction and additional first-year depreciation, what is the largest amount Mark can deduct in the XX11 tax year?
Standard rate per mile:
XX10 50 cents
XX11 51 cents
$6,300
$3,150
$6,000
$6,120
Question 9: On January 1, XX11, Carrie leased property for her business for 5 years for $6,200 per year. Carrie paid the full $31,000 during the first year of the lease. What is Carrie's rental deduction for the year XX11?
$31,000
$6,200
$15,500
$24,800
Question 10: Cora purchased a hotel building on May 17, XX10, for $3,000,000. Determine the cost recovery deduction for XX11 Assume current tax law applies to XX10 and XX11
$48,150.
$59,520.
$69,000.