Question 1

Oscar bought an $800,000 apartment building on July 28,2017.On August 15,2017,he purchased $300,000 of 5-year class assets.Oscar elects to take the maximum expense on every asset.What is the maximum cost recovery deduction Oscar can take in 2017?

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Question 2

On April 23,2017,Bailey purchased an automobile for $25,000.The car is used 80% for business and 20% for personal use.What is the cost recovery deduction for 2017 and 2018 assuming the 50% bonus was taken? (Round answers to the nearest dollar)

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Question 3

Nancy purchased a computer on July 15,2017,for $5,000.The computer was used 70% of the time in her business and the rest of the time her children used the computer to surf the Web.In 2017,the computer was used 40% for business and 60% for personal use.What are the cost recovery deductions for 2017 and 2018? (No §179 or bonus).Is there any recapture of depreciation in 2017?

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Question 4

List and define the criteria for an expenditure to be deductible on Schedule C.

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Question 5

Terry,a CPA,flew from Dallas to New York to attend a conference.The conference lasted four days.Then she took three days of vacation to go sightseeing.Terry's expenses for the trip are as follows:
 $\begin{array}{lr}
\text { Airfare }&\$525\\text { Lodging }(7 \text { days } \times \$ 155)&1,085\\text { Meals }(7 \text { days } \times \$ 120)&840\\text { Taxi from airport to hotel and back }&70
\end{array}$
 Calculate Terry's travel expense deduction.

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Question 6

Sandy is the owner of ABC Loan Company.On June 2,2016,ABC loaned Randy $80,000.In 2017,Randy filed for bankruptcy.At that time,the bankruptcy court indicated that Randy's creditors could expect to receive 30 cents on the dollar.In August 2018 final settlement was made,and ABC received $20,000.ABC's policy is to deduct losses as soon as permitted.How much loss can ABC deduct and in which year?

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Question 7

Xavier bought furniture and fixtures (7-year property)on September 15,2017 for $515,000.He elects to expense as much as possible under Section 179 but does not elect the 50% bonus.Xavier's earned income for the year is $510,000.What is the maximum deduction Xavier can take in 2017 for the equipment? (Round answers to the nearest dollar)

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Question 8

Kiri acquires equipment (7-year property)on August 14,2017,for $80,000.She does not elect to expense the asset under Section 179 or the 50% bonus.She sells the asset on January 15,2021.
a.What is Kiri's cost recovery deduction related to the equipment in 2017 and 2021?
b.What is Kiri's cost recovery deduction related to the equipment in 2017 and 2021 if the 50% bonus is elected?

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The answer of Kiri acquires equipment (7-year property)on August 14,2017,for...

Question 9

Lateefah purchased a new office building on April 1,2017,for $3,000,000.On August 20,2021,the building was sold.What is the cost recovery deduction for the year of purchase and the year of sale?

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Question 10

Alice is a high school teacher who enjoys knitting.She knits scarves and sweaters and sells them in a local boutique.Alice spends 10 to 15 hours a week knitting the scarves and sweaters.Alice had sales of $6,000 and expenses of $10,000 related to knitting and selling the goods.Alice's $10,000 of expenses consisted of $800 of interest expense and $1,600 in property taxes for her building and tools,$3,000 in supplies,and $4,600 in depreciation charges.How would Alice's income and expenses be reported on her tax return if her knitting activity is characterized as a hobby?

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Question 11

Describe each of the depreciation conventions and when each is applicable.

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Question 12

Tonia acquires the following 5-year class property in 2017:
 $\begin{array}{lcr}\text { Asset } & \text { Date of Acquisition } & \text { Cost } \
\text { X } & \text { January 15 } & \$ 70,000\
\text { Y } & \text { May 28 } & 45,000 \
Z & \text { November 23 } & 90,000\&\text { Total }&\$205,000
\end{array}$ Tonia does not elect §179 or bonus depreciation.Tonia has $300,000 of taxable income from her business.Determine her total cost recovery deduction for the year.

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Question 13

Alan owns a ranch in Kansas.During the year,a tornado damaged one of his barns and destroyed some equipment.The following information provides the details of the losses Alan suffered from the tornado.
 $\begin{array}{lccccc} 
& \text { Adjusted Basis } & \text { FMV Before } & \text { FMV After } & \text {Insurance Proceeds } \
\text { Barn } & \$ 75,000 & \$ 90,000 & \$  40,000 & \$ 30,000 \
\text { Bailer } & \$ 25,000 & \$ 15,000 & \$  0 & \$ 15,000 \
\text { Truck } & \$ 15,000 & \$ 18,000 & \$  0 & \$ 10,000
\end{array}$ How much loss from the tornado can he deduct on his tax return for the current year?

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The answer of Alan owns a ranch in Kansas.During the...

Question 14

Bob took a business trip from Chicago to London.He was away 12 days of which he spent six days on business (including two travel days)and six days vacationing.His expenses are as follows:
 $\begin{array}{lr}
\text { Airfare } & \$ 1,400 \
\text { Lodging }(12 \text { days } \times \$ 125) & 1,500 \
\text { Meals }(12 \text { days } \times \$ 100) & 1,200
\end{array}$ Calculate Bob's travel expense deduction.

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The answer of Bob took a business trip from Chicago...

Question 15

Beau earned $35,000 of net earnings from a tax preparation business that he runs during tax season.He also earned a salary of $100,000 from his full-time job.How much self-employment tax must he pay for 2017? (Round calculations to the nearest dollar)

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Question 16

Ted purchased a vehicle for business and personal use.In 2017,Ted used the vehicle 70% for business (10,000 business miles)and used the standard mileage rate to calculate his vehicle expenses.Ted also paid $1,200 in interest and $380 in county property tax on the car.What is the total business deduction related to business use of the car in 2017?

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The answer of Ted purchased a vehicle for business and...

Quiz 6: Self-Employed Business Income Line 12 of Form 1040 and Schedule C