Question 1: Pete, a self-employed CPA, went to Los Angeles for 3 weeks. He spent 1 week analyzing his clients' investments in the Westwood area, 1 week at a continuing education conference that relates to his CPA practice, and 1 week playing tennis. Pete's round-trip airfare was $600, the hotel bill was $1,200, meals (all under $75) were $450, tuition was $500, and tennis fees were $90. Pete kept track of all expenses in a diary, but he had documentary substantiation for only the airfare and hotel bill. How much can Pete deduct?
$2,200
$1,850
$2,050
$1,550
Question 2: On New Year's Eve, Hal sent three bottles of champagne to the three owners of the Day & Night Cleaners to thank them for their business during the year. Each bottle of champagne cost $75. Each of the owners took the champagne home. Earlier in the year, Hal had given a video game to the son of one of the owners. The value of the game was $50. To show his appreciation to another customer for his business, Hal took the customer to a football game. The value of the tickets was $100. What is the total amount Hal can deduct as business gifts?
$375
$100
$125
$75
Question 3: Which one of the following individuals is not subject to self-employment tax?
Mike received $10,000 for serving as a director of a corporation.
Laura, a paralegal, received $28,000 from her law firm's partnership as salary.
Gene, a real estate dealer, had net rental income of $85,000.
Nicole, an inactive partner, received $9,000 as her distributive share of the partnership income.
Question 4: In January XXX1, Mr. D, who is self-employed, purchased a new automobile which he uses 100% for business. During XXX1, he drove the car 14,000 miles. Mr. D also owns another automobile which he uses occasionally for business but primarily for personal purposes. During XXX1, he drove the second car 2,000 business miles. The second car is not fully depreciated. What is the amount of Mr. D's XXX1 automobile expense deduction using the standard mileage rate?
Standard rate per mile:
XXX2______ 55.5 cents
XXX1 _____ 51 cents
XXX0______ 50 cents
$7,140
$8,160
$8,000
None listed
Question 5: Sam Sheffield operates a cafe and files his returns on a calendar-year basis. He bought a fire insurance policy on the cafe building effective October 1, Year 1, and paid a premium of $3,600 for 2 years of coverage. How much of the premium can Sam deduct on his Year 2 return?
$0
$3,150
$2,400
$1,800
Question 6: George Michael, a sole proprietor, may deduct various taxes imposed by federal, state, local, and foreign governments, if he incurs them in the ordinary course of his business. All of the following are deductible on Schedule C, Form 1040, except
Personal property taxes on personal property used in his business.
State and local income taxes on net income.
Gasoline taxes included in the cost of fuel used in his business.
Real estate taxes on real property used in his business.
Question 7: Gary purchased "The BestInTown Car Repair" shop on 1/1/XXX1. $15,000 of total purchase price of $200,000 was allocated to goodwill. Gary reports this business on Schedule C of his 1040. Which statement is correct in relation to the goodwill associated with acquisition of Gary's business?
Assume that current tax law applies to Year XXX1.
Gary can expense $15,000 in current year as a start-up cost
Gary has to capitalize $15,000 and deduct $1,000 amortization expense on his XXX1 Schedule C
The goodwill acquired is Sec. 197 intangible asset and, therefore, can not be amortized to expenses
Gary has to capitalize $15,000 and deduct $1,500 amortization expense on his XXX1 Schedule C
Question 8: Mr. C, a self-employed insurance salesman, maintains a country club membership. He establishes by appropriate documentation the following for the current year: 20% of the use of the club is directly related to his insurance sales.
An additional 35% of the use of the club is associated with his insurance sales.
Club dues are $100 per month for the current year. Other expenses incurred at the club for meals, golf, and other events were $1,800, of which $1,200 is bona fide business entertainment.
What is the total amount in club dues and other entertainment expenditures that Mr. C can deduct on his Schedule C, Form 1040, for the current year?
$960
$1,584
$600
$1,488
Question 9: Any § 179 expense amount that is carried forward is subject to what limitation(s) in the carry forward year?
Only business income limitation in the carry forward year.
Only Sec. 179 deduction limitation applicable to the carry forward year
Both business income and Sec. 179 amount limitations applicable to the carry forward year.
NONE
Question 10: All of the following expenses incurred in the course of operating a business are deductible business expenses except
Cost of sending communications to members of a city council regarding legislation.
Public service advertising that keeps the name of the business before the public.
Advertising in a concert program the local church is sponsoring.
Advertising in a convention program of a political party. The proceeds from the publication of the program are for the local use of the political party.