1. In July 2014, Cassie purchases equipment for $55,000 to be used in her business. Assuming Cassie has a small net loss from her business prior to the deduction, what is the maximum amount of cost recovery Cassie can deduct?
$7,860.
$27,500.
$31,430.
$55,000.
2. Mario owns a home in Park City, Utah, that he rented for $1,600 for three weeks during the summer. He lived there for a total of 120 days and the rest of the year, the house was vacant. The expenses for the home included $6,000 in mortgage interest, $900 in property taxes, $1,300 in maintenance and utilities, and $3,500 in depreciation. How much net rental income or loss from the Park City home would Mario report for the current year? Use the IRS method for allocating expenses.
$0
$1,600 net income
$6,000 net loss
$9,100 net loss
3. Which one of the following is a capital asset?
Household furnishings.
Business inventory.
A non-musical copyright created by the taxpayer.
Rental property.
4. In 2008, Naila purchased land for $77,000 for use in her landscape business. She sold it in 2014 for $83,000. If Naila has no other sales of business or trade property, how will this gain be taxed?
$6,000 short-term capital gain.
$6,000 long-term capital gain.
$6,000 ordinary income.
$6,000 Sections 1231 gain.
5. In order for an employee to deduct home office expenses, which of the following must occur?
The business use of the home must be specifically for trade or business purposes.
There must be no other fixed business location.
The taxpayer's most important activities must occur in the home.
The home office must be for the convenience of his or her employer.