Question 1: Mr. D purchased an automobile for use in his business for $10,000 in XX06. For the years XX06 through XX10, he used the maximum standard mileage rate to figure his car expense deduction. What would Mr. D's car expense deduction be in XX11, using the standard mileage rate, if the auto was driven 20,000 miles for business use, and the business mileage from prior years is 100,000 miles?
Assume that Standard mileage rate in XX11 is 50 cents
$11,000
$10,000
$0
$12,000
Question 2: Which type of income is not subject to self-employment tax?
Wages, salaries, and tips received as an employee.
Non-employee compensation.
Net profits from sole proprietorship.
Distributive share of partnership income.
Question 3: A $80,000 automobile used 100% for business in the first year (2015) and fails the 50% business usage test in the second year. What amount will be recaptured as a cost recovery if business usage drops below 50% in the second year?
$3,160
NONE
Other amount specified by the IRC Sec. 280F
$1,580
Question 4: Home Office, Inc., leased a copying machine to a new customer on December 27, 2010. The machine was to rent for $500 per month for a period of 36 months beginning January 1, 2011. The customer was required to pay the first and last month's rent at the time the lease was signed. The customer also was required to pay an $800 damage deposit. Home Office must recognize as income for the lease:
$1,000 in 2011, if Home Office is a cash basis taxpayer.
$1,800 in 2010, if Home Office is a cash basis taxpayer.
$0 in 2010, if Home Office is an accrual basis taxpayer.
$1,000 in 2010, if Home Office is an accrual basis taxpayer.
Question 5: Mr. O, a real estate broker, went to Paris to attend a convention on "Art as an Investment." Mr. O spent $2,000 on travel expenses on his trip. $600 was attributable to air fare. How much of the cost of the trip can Mr. O deduct on his Schedule C for the current year?
$2,000
NONE
50% of $2,000 as entertainment expense
$600
Question 6: Sluggo, a slot machine manufacturer, paid and incurred the following expenses during the year:
Raw materials $50,000
Materials and supplies 10,000
Freight-in on raw materials 3,500
Freight on shipments of finished slot machines 5,000
Direct labor 35,000
Indirect labor 15,000
Allocable overhead expenses for production 20,000
The beginning inventory of finished goods was $35,000, and the ending inventory was $20,000.
What is the amount of Sluggo's cost of goods sold for the year?
$133,500
$148,500
$150,000
$168,500
Question 7: Mr. R is a self-employed over-the-road trucker who uses the cash method of accounting. Which one of the following expenses paid during the current year would be deductible on Mr. R's Schedule C?
Penalty for late delivery of cargo paid to Corporation V.
Overweight fine paid to State B.
Fine for speeding in business truck paid to City A.
Contribution to Bull Moose political party in an attempt to receive a trucking contract.
Question 8: Which of the following is a true statement with respect to group life insurance premiums paid by the employer covering the lives of employees?
Life insurance premiums paid by the employer on the lives of employees are NEVER deductible
Life insurance premiums paid by the employer on the lives of employees are deductible as compensation to the employees provided the employees designate their own beneficiaries
Life insurance premiums paid by the employer on the lives of employees are deductible when the employer is the beneficiary
Under Sec. 264(a) life insurance premiums paid by the employer on the lives of employees are ALWAYS deductible
Question 9: Calvin gave two tickets to a theater performance to a business customer. The tickets cost $25 each. Calvin did not go with his customer to the performance. Which of the following statements is true?
Calvin can choose to treat the tickets as either a gift or an entertainment expense.
If Calvin treats the tickets as entertainment, then the deduction is 100% of the cost of the tickets.
This entertainment does NOT have to be directly related to, or associated with, the active conduct of the taxpayer's trade or business in order to be deductible as business expense
If Calvin treats the entertainment tickets as a gift, under Sec. 274(b), the limit for deduction is $50 per person per year.
Question 10: Which of the following elements is NOT part of the directly related test for entertainment?
You had more than a general expectation of getting income or some other specific business benefit.
The entertainment took place directly before or after a business discussion.
You did engage in business with the person during the entertainment period.
The main purpose of the entertainment was the active conduct of business.