Book 4 page 1-60

Question 1

this doctrine stipulates that a transaction will not be effective for income tax purposes unless it is intended to achieve a genuine business purpose other than tax avoidance

Answer 1

business purpose doctrine

Question 2

prohibits an individual to form an entity just to potentially receive favorable tax treatment ; requires actual business purpose to be present

Answer 2

business purpose doctrine

Question 3

this doctrine allows the IRS to look through the legal formalities of a transaction to determine its actual economic substance

Answer 3

substance-over-form doctrine

Question 4

give an example of when the substance-over-form doctrine becomes relevant

Answer 4

a corporate executive who is in need of income decides to have the corp lend her money from the business, the IRS could declare that this loan should be reclassified as salary

Question 5

this doctrine states that the person who earns the income cannot assign the income to someone else just for tax purposes ; also known as the fruit and the tree doctrine

Answer 5

assignment-of-income doctrine

Question 6

this doctrine converts otherwise nontaxable income into taxable income

Answer 6

tax benefit rule/doctrine

Question 7

give an example of the tax benefit doctrine

Answer 7

a taxpayer is reimbursed in a subsequent year for medical expenses paid and deducted in a previous year

Question 8

states that if there is no substantial limitation or restriction on a taxpayer’s right to bring the funds under personal control, the income will be taxed as if already received

Answer 8

constructive receipt doctrine

Question 9

if a taxpayer sells stock after a dividend has been declared but before the record date, who will pay tax on the dividend?

Answer 9

the purchaser

Question 10

taxable income that has not yet been received in cash

Answer 10

phantom income

Question 11

true or false?
A client is in the 28% bracket. Because of this the client instructed the tenant of his rental property to make payments to his (the CFP client) daughter. The daughter is in the 15% bracket so the client wants the rental income to be taxed at lower rates. This is a valid strategy to use

Answer 11

false, this will be classified as assignment of income. Because the client owns the rental property he is the one that is required to recognize income

Question 12

true or false?

income from partnerships is taxed at the partners’ own individual rates

Answer 12

true

Question 13

what return must a partnership file?

Answer 13

Form 1065

Question 14

which form indicates each partner’s share of the partnership income?

Answer 14

K-1

Question 15

true or false?

income from a general partnership on the K-1 is usually self employment income

Answer 15

true

Question 16

true or false?

income from a limited partnership is passive activity income for the limited partner

Answer 16

true

Question 17

who pays the tax on a S corps income?

Answer 17

the shareholders

Question 18

what form does a S corp file?

Answer 18

1120S

Question 19

true or false?

each shareholder of a S corp will receive a K-1

Answer 19

true

Question 20

true or false?

the income from the S corp is considered passive activity income

Answer 20

true

Question 21

income generated by assets of an estate that is distributed from the estate to the beneficiaries

Answer 21

income in respect of a decedent (IRD)

Question 22

true or false?

IRD income is usually not taxable

Answer 22

false, it is taxable

Question 23

when the taxpayer obtains possession of the income but is not legally entitled to the receipt of the income because the taxpayer is required to turn over the income to its rightful owner

Answer 23

Conduit for others

Question 24

true or false?

gift loans may only occur between individuals

Answer 24

true

Question 25

On January 1, Richie loaned his daughter, Beth, $90k to purchase a new home. There were no other loans outstanding between the two. Beth’s only income was $30k salary and $4k interest income. Richie had investment income of $200k. Richie did not charge Beth interest. The relevant federal rate was 9%. How much imputed interest must Richie recognize and how much imputed interest expense must Beth recognize?

Answer 25

$4,000

the $100k exemption applies and thus Richie’s imputed interest income and Beth’s imputed interest expense is limited to Beth’s net investment income.

Question 26

employee achievement awards of less than $_____ per year and based on length of service are excluded from an employee’s gross income

Answer 26

$400

Question 27

true or false?

cash and the FMV of prizes and awards are included in gross income

Answer 27

true

Question 28

true or false?
if an annuitant dies before life expectancy and has not completely recovered the basis, the un-recovered basis is deductible on the annuitant’s final income tax return as a miscellaneous itemized deduction not subject to the 2% of AGI floor

Answer 28

true

Question 29

true or false?

annuity payments beyond projected life expectancy are fully taxable if the annuity was issued after 1986

Answer 29

true

Question 30

Wendy a 55 year old taxpayer has begun receiving an annuity over her life expectancy of 25.5 years. She receives $1,500 per month. Her contributions to the annuity were after tax and amounted to $91,800. Payments began April 1 of this year. How much of the payments can she exclude this year?

Answer 30

$2,700

($1,500 x 9) = $13,500
exclusion ratio = $91,800 / $459,000 = 20%

$13,500 x 20% = $2,700

Question 31

employees can exclude premiums paid by their employers on the first $_____ of group term life coverage

Answer 31

$50k

Question 32

Tom is 51 years old and works for Employer A. Tom’s life insurance coverage with employer A is $80,000. Tom pays a premium of $50 per year for the coverage, how much should Tom include in his gross income?

Answer 32

$32.80

excess coverage = $30,000
excess coverage / $1,000 = 30
30 x .23 cents = $6.90 (.23 cents comes from a table)
$6.90 x 12 = $82.80
$82.80 - $50 = $32.80

Question 33

includes AGI from all sources plus 50% of SSI benefits, foreign income previously excluded, and any tax exempt interest income

Answer 33

provisional income

Question 34

FICA is made up of ____ and ____

Answer 34

OASDI and HI

social security and medicare

Question 35

what is the tax rate for OASDI? Is it for employers or employees?

Answer 35

it is 6.2% and it is for both

Question 36

at what point does OASDI stop getting applied to your wages?

Answer 36

$127,200 for 2017

Question 37

true or false?

the medicare tax has no ceiling for taxable earnings

Answer 37

true

Question 38

what is the HI (medicare tax) rate? Is it for employers or employees?

Answer 38

1.45% and its for both

Question 39

what is the medicare tax rate for self employed individuals?

Answer 39

2.9%

Question 40

self employment tax rates are ____%

Answer 40

15.3%

Question 41

when calculating self employment tax, the taxpayer reduces net earnings by _____%

Answer 41

7.65%

Question 42

the additional medicare tax of ____% also applies to self employed individuals who have a combined income greater than $_____ if single and $_______ if MFJ

Answer 42

.9% ; $200k ; $250k

Question 43

true or false?
amounts paid by an employer upon an employee’s death to the employee’s beneficiaries are fully includable in the beneficiaries income

Answer 43

true

Question 44

true or false?

a death benefit from an employer is taxable income to the beneficiaries

Answer 44

true

Question 45

true or false?

social security benefits are taxable to the parent if the child is receiving the benefits

Answer 45

false

Question 46

true or false?
if you choose an annuity payout option after winning the lottery you are not required to recognize income right away assuming there is no qualified prize option

Answer 46

false

Question 47

allows you to declare annuity payments as income in the year they are received from winning a prize rather than immediately

Answer 47

qualified prize option

Question 48

act that allows payments from a personal injury lawsuit to be paid out periodically most often in an annuity form for the remainder of the injured party’s life

Answer 48

Periodic Payment Settlement Act

Question 49

damages arising out of the personal injury lawsuit considered to only make the injured party whole

Answer 49

compensatory damages

Question 50

true or false?

compensatory damages are taxable to the injured party

Answer 50

false, they are tax free

Question 51

true or false?

damages received in age, sex, or racial cases are generally taxable

Answer 51

true

Question 52

damages arising out of a personal injury intended to punish the offender for their acts

Answer 52

punitive damages

Question 53

are punitive damages taxable?

Answer 53

yes, generally

Question 54

when does scholarship money in excess of the qualified education expenses have to be realized on a tax return?

Answer 54

not until all expenses are paid, could be more than one year after receipt of scholarship

Question 55

true or false?

you can exclude scholarship money that is used for room and board from your tax return

Answer 55

false

Question 56

true or false?

you can exclude scholarship money that is used for books from your tax return

Answer 56

true

Question 57

true or false?
if you choose to receive installment payments as a death benefit option to a life insurance policy, you must pay tax on the interest that you receive each year

Answer 57

true

Question 58

when do dividends received from a life insurance policy become taxable?

Answer 58

when the aggregate of the dividends exceeds your basis in the contract

Question 59

can businesses deduct life insurance premiums for their employees or officers if the business is listed as a beneficiary under the policy?

Answer 59

no

Question 60

true or false?

if you are terminally ill you can use a viatical agreement and receive some of your death benefit tax free while living

Answer 60

true

Question 61

true or false?
if you are chronically ill you can use a viatical agreement and receive your death benefit tax free regardless of what you use the proceeds for

Answer 61

false, proceeds must be used for LTC and any that are not are subject to taxation

Question 62

Jack surrendered to the insurer a whole life insurance policy with a cash value of $80k (there was no policy loans or distributions prior to the surrender). Jack made $70k in aggregate premium payments. The original cost of the insurance was $11k. How much will Jack include as ordinary income on his tax return?

Answer 62

$10k

(80 - 70)

the cost of insurance does not affect this

Question 63

Jack sold his whole life insurance policy to Martin. Martin is unrelated to Jack and will not suffer an economic lost upon Jack’s death. Jack sold the policy for $95k and the policy had a $80k cash surrender value at the time. Jack had paid $70k in aggregate premium payments. The cost of insurance was $11k. what is the total gain and what is the long term capital gain that Jack must realize?

Answer 63

total gain = $95k - $70k - $11k = $36k

long term cap gain = $36k - ($80k - $70k) = $26k

Question 64

true or false?
if selling a term life insurance policy all the gain is considered capital gain instead of some of it being ordinary income

Answer 64

true

Question 65

a contract where if the premiums paid during the first seven years of the contract exceed the total of the net level premiums that would have been paid if the policy provided for paid up benefits after the seventh year

Answer 65

modified endowment contract

Question 66

do modified endowment contracts use LIFO or FIFO on their withdrawals and loans?

Answer 66

LIFO

Question 67

is there any penalty and if so how much, on withdrawals or loans under MEC if under age 59.5?

Answer 67

10% penalty on any taxable portion

Question 68

true or false?

the death benefit under a MEC is taxable

Answer 68

false

Question 69

true or false?

health insurance premiums paid by the employer are deductible for the employer but taxable to the employee

Answer 69

false, they are deductible and excludable

Question 70

true or false?

disability premiums paid by the employer are deductible for the employer and tax excludable for the employee

Answer 70

true

Question 71

true or false?
if the employer pays the disability premiums for the employee and then the employee collects disability benefits, the benefits will not be taxable

Answer 71

false, the benefits are taxable to the employee

Question 72

true or false?

contributions made by an employer to a medical savings account or health savings account are not taxable to the employee

Answer 72

true

Question 73

how much of child and dependent care services paid by the employer can an employee exclude from income?

Answer 73

$5,000

Question 74

true or false?
the value of a health facility or gymnasium provided by the employer on the premises solely for the use of employees and the employee’s dependents is excluded from the employee’s gross income

Answer 74

true

Question 75

true or false?

employer paid health club dues (public gyms or health facility) for an employee are taxable

Answer 75

true

Question 76

how much of qualified educational assistance provided by an employer can an employee exclude from income?

Answer 76

$5,250

Question 77

does the qualified educational assistance provided by an employer cover undergrad, grad, or both?

Answer 77

both

Question 78

when can an employee exclude from income an employee discount?

Answer 78

when the property is not real property or investment property
the property or services are offered in the same line of business in which the employee works

Question 79

the benefits are so small that account for them is impractical

Answer 79

de minimis fringes

Question 80

when an employer offers goods or services to an employee at a discount and they can be excluded from income

Answer 80

qualified employee discounts

Question 81

when an employer provides property or services to an employee that an employee could have deducted had they paid for the expense themselves

Answer 81

working condition fringes

Question 82

true or false?

personal use of an employer-provided car is usually a taxable fringe benefit

Answer 82

true

Question 83

qualified employee discounts for services can be excluded but the exclusion is limited to ____% of the customer’s cost

Answer 83

20%

Question 84

adoption assistance can be excluded up to $_____ for 2017 per child with an AGI phaseout of $____ to $____

Answer 84

$13,570 ; $203,540 - $243,540

Question 85

noncorporate investors can exclude ____% of the gain they realize on qualified small business stock. Any remaining gain is taxed at the ____% cap gains rate

Answer 85

50% ; 28%

Question 86

section 1202 stock must be held for ____ years to qualify for the exclusion

Answer 86

5

Question 87

if 1202 stock was required after 9/27/2010 then ____% of the gain is excluded from a noncorporate taxpayer’s income

Answer 87

100

Question 88

true or false?

generally if a lender forgives a borrower’s debt. the borrower does not report the forgiven debt as income

Answer 88

false, they do report the forgiven debt as income

Question 89

how much of foreign income can a taxpayer exclude from US gross income for 2017? Are there any requirements to meet this exclusion, if so what are they?

Answer 89

$102,100

yes, must be a bona fide resident of the foreign country or be present in a foreign country for at least 330 days during and 12 consecutive months

Question 90

how much can you contribute to a Coverdell Education Savings Account per beneficiary?

Answer 90

$2,000

Question 91

true or false?
distributions from Coverdell Education Savings Account are excluded from income if used for room and board and the student attends less than half time

Answer 91

false, must be half time

Question 92

when must the funds in a Coverdell Education Savings Account be distributed by?

Answer 92

age 30

Question 93

what if the funds in a Coverdell Education Savings Account aren’t distributed by the required date?

Answer 93

they must be distributed and the accumulated earnings are taxable and they are subject to a 10% penalty

Question 94

are unreimbursed business expenses deductible as above the line deductions or below the line (itemized) deductions?

Answer 94

itemized

Question 95

can self employed individuals deduct self employment tax paid for OASDI and Medicare?

Answer 95

yes

Question 96

Paul has net Schedule C income of $40k. what is his self employment tax and deductible portion of self employment tax?

Answer 96

self employment tax = ($40k x (100%-7.65%) x 15.3% =$5,651.82
deductible portion = ($40k x (100%-7.65%) x (6.2% + 1.45%) = $2,825.91

Question 97

true or false?

alimony paid to an ex spouse is an itemized deduction for the person who is paying the alimony

Answer 97

false, it is an above the line deduction for the person who is paying the alimony

Question 98

the distance between the new job and the old residence must be at least _____ miles greater than the old job and the old residence

Answer 98

50 miles

Question 99

to qualify for the moving expense deduction you must work ______ weeks out of the next _______ weeks

Answer 99

39 ; 52

Question 100

to qualify for the moving expense deduction and are self employed you must work _______ weeks out of the next ________ weeks

Answer 100

78 ; 104

Question 101

are qualified unreimbursed moving expenditures treated as above the line deductions or itemized deductions?

Answer 101

above the line

Question 102

true or false?

any forfeited interest on withdrawals from a CD is deductible for AGI

Answer 102

true

Question 103

true or false?
if a person dies with a capital loss carry forward on their last tax return the beneficiaries can continue to use the loss carry forward in following years

Answer 103

false, they capital loss carry forward goes away

Question 104

distributions under an Archer Medical Savings Account
and a HSA that are not used for medical expenses are subject to tax and a _____% penalty unless made after age ____ or upon ____ or ________

Answer 104

20% ; 65 ; death ; disability

Question 105

is student loan interest an above the line or an itemized deduction?

Answer 105

above the line

Question 106

true or false?
the taxpayer claiming a student loan interest deduction can claim the deduction even if someone else claims them as a dependent

Answer 106

false, they cannot be claimed a dependent

Question 107

what is the maximum student loan interest deduction allowed?

Answer 107

$2,500

Question 108

charitable gifts are limited to _____% of AGI and are itemized deductions

Answer 108

50%

Question 109

medical expenses that exceed ____% of AGI are deductible

Answer 109

10%

Question 110

casualty losses must exceed _____% of AGI to be deductible

Answer 110

10%

Question 111

miscellaneous itemized deductions such as unreimbursed job expenses must exceed _____% of AGI to be deductible

Answer 111

2%

Question 112

true or false?

a corporation can only use capital losses as an offset against capital gains

Answer 112

true

Question 113

a corporations capital losses may be carried forward for ____ years or carried back to each of the preceding ____ tax years

Answer 113

5 years ; 3 tax years

Question 114

true or false?

alimony received is included in gross income

Answer 114

true

Question 115

if there is more than a $____ decrease in alimony payments between any of the first _______ years, there may be alimony recapture

Answer 115

$15,000 ; 3

Question 116

in order for a property transfer as a result of a divorce to have no tax consequences, the transfer must be made within _____ year(s) after the marriage ceases

Answer 116

1 year

Question 117

true or false?

child support is taxable to the receiver

Answer 117

false

Question 118

true or false?

child support is tax deductible to the payor

Answer 118

false

Question 119

who does the Kiddie tax apply to?

Answer 119

any child who has not attained age 19 by end of tax year or a full time student who has not attained age 24 by end of tax year

Question 120

Ann is age 14 and earned $5,600 from babysitting in 2017. She also had interest of $2,200 from her savings account. What is Ann’s net unearned income and how much of her income will be taxed at her parent’s marginal rate and her own rate?

Answer 120

net unearned income = $100
taxed at parent’s rate = $100
taxed at her own rate = $1,750

$1,750 = gross income of $7,800 - earned income plus $350 of $5,950 - income taxed at parent’s rate of $100

Question 121

allows deductions for expenses incurred in a trade or business

Answer 121

section 162

Question 122

allows deductions for expenses incurred in connection with investment activities

Answer 122

section 212

Question 123

true or false?

most expenses incurred in a trade or business are below the line (itemized) deductions

Answer 123

false, they are above the line

Question 124

true or false?

investment expenses are itemized (below the line) deductions

Answer 124

true

Question 125

deductions from AGI are also known as _______ deductions

Answer 125

itemized

Question 126

deducions for AGI are also known as ____ deductions

Answer 126

above the line

Question 127

deductions from AGI (itemized) are reported on schedule ____

Answer 127

A

Question 128

True or false?
if a distribution from a C corp is classified as a dividend the distribution will be double taxed. Once by the corporation as earnings and once as a dividend to shareholders

Answer 128

true

Question 129

a distribution to a shareholder is generally treated as a tax-free return in regards to S-corps

Answer 129

true

Question 130

a(n) ____ taxpayer generally receives a deduction when the expense has been paid

Answer 130

cash basis

Question 131

a(n) ____ taxpayer generally receives a deduction when the expense is incurred

Answer 131

accrual basis

Question 132

which items are deductible for Fred if he pays them for his son?

principal payment on automobile
payment of interest on loan
payment for medical expenses
payment for son’s property taxes

Answer 132

medical expenses only

Question 133

if income is tax exempt, can the tax payer deduct expenses and interest related to that income?

Answer 133

no

Question 134

if a taxpayer investigates a business that is a new line of business and acquires the business, up to $_____ of expenses can be deducted immediately

Any expenses over $50,000 reduce the $5,000 deduction by what amount?

Answer 134

$5,000

dollar for dollar

Question 135

true or false?
if a taxpayer investigates a business that is similar to the one he is already in, the expenses are deductible whether or not he acquires the business

Answer 135

true

Question 136

true or false?
if a taxpayer investigates a business that is not already similar to the business he is in, the expenses are deductible whether or not he acquires the business

Answer 136

false, they are not deductible if he does not acquire the business that is not similar to his already existing business

Question 137

when can a taxpayer deduct his expenses related to investigating a similar business regardless if he acquires it or not?

Answer 137

the expenses are currently deductible

Question 138

true or false?

if an activity is deemed to be a hobby, then losses incurred are always fully deductible

Answer 138

false, they may not be fully deductible

Question 139

hobby expenses are reported as ____ deductions

Answer 139

itemized

Question 140

which type of itemized deduction do hobby expenses fall under?

Answer 140

miscellaneous

Question 141

hobby income is reduced by ____ and ____ first then by ____ and then by_______

Answer 141

taxes and interest
other non capital related expenses
expenses that affect basis

Question 142

Assume Sara earns $3,000 from a hobby of selling antique furniture and incurs the following expenses:
cost of goods sold = $2,000
Supplies = $1,200
interest on loan to get business started = $800
advertising = $750

If Sara is unable to itemize her deductions how much of the hobby income should be included in her gross income for tax purposes?

Answer 142

all $3,000 should be included

Question 143

if you rent out property for less than _____ days then you can exclude the income from your gross income, this is known as ____

Answer 143

15 ; primarily personal use

Question 144

if you rent out a property for less than 15 day, what expenses are deductible?

Answer 144

mortgage interest
taxes
casualty losses

Question 145

if the rental property is rented at least ____ days per year and is not used for personal use more than the greater of ____ days per year or ____% of rental days, then the property is classified as ___________

Answer 145

15 ; 14 ; 10 ; primarily rental use

Question 146

if a property is classified as a primary rental property then you can deduct losses up to $____ with an AGI between $____ and $_____

Answer 146

$25k ; $100k ; $150k

Question 147

if the rental property is rented at least _____ days per year and is used for personal use for more than the greater of ____ days or ____^ of rental days, this is known as ____

Answer 147

15 ; 14 ; 10 ; mixed use

Question 148

if property is classified as mixed use, can you deduct losses in the current tax year?

Answer 148

no, they can be carry forward though

Question 149

true or false?

legal fees incurred for personal purposes are nondeductible

Answer 149

true

Question 150

are legal fees in connection with trade or business or for the production of rents and royalties tax deductible?

Answer 150

yes

Question 151

true or false?

legal fees in connection with trade or business or for the production of rents and royalties are an itemized deduction

Answer 151

false, they are an above the line deduction

Question 152

what happens to legal fees that are incurred when acquiring a new asset?

Answer 152

the legal fees get added to the basis of the asset

Question 153

section 1244 losses are limited to ____ for single filers and ______ for joint filers

Answer 153

$50,000 ; $100,000

Question 154

net operating losses may be carried back ___ years preceding the loss year and carried forward ____ years following the loss year

Answer 154

2 ; 20

Question 155

true or false?

the election to forego net operating loss carry back is irrevocable

Answer 155

true

Question 156

why would a taxpayer select to forego the option of net operating loss carry back?

Answer 156

taxpayer expects to be in a higher tax bracket moving forward than previous years

Question 157

true or false?

the oldest net operating loss must be used before using any of the more recent net operating losses

Answer 157

true

Question 158

what type of deduction, above the line or itemized, do unreimbursed transportation expenses while on company business get classified as?

Answer 158

they are itemized deductions

miscellaneous subject to 2% AGI floor

Question 159

uses a fixed dollar amount of money per business mile plus tolls and parking

Answer 159

automatic mileage method

Question 160

uses depreciation, gas, licenses, maintenance, and insurance costs to determine the amount of deduction you can receive for unreimbursed transportation expenses

Answer 160

actual operating cost method

Question 161

a taxpayer’s main location of work

Answer 161

tax home

Question 162

meals while traveling are subject to a ___% limit on the deduction

Answer 162

50%

Question 163

true or false?

unreimbursed travel expenses are an itemized deduction

Answer 163

true

Question 164

Allison took a trip from Alabama to England. She was away from home for 10 days. She spent two days vacationing and eight days on business (including two travel days). Her expenses are as follows:
Airfare = $1,200
Lodging = $1,500
Meals = $900

how much is Allison allowed to deduct?

Answer 164

$1,200 + ($150 x 8) + ($90 x 8 x 50%) = $2,760

Question 165

what are the general requirements for you to be able to deduct education expenses (not your child’s but your own)?

Answer 165

1. to maintain or improve existing skills in the present job

2. To meet legally imposed or employer requirements to retain current job, such as continuing education requirements

Question 166

true or false?

taking education classes to meet the minimum requirements of your present job is a deductible expense

Answer 166

false

Question 167

true or false?

taking education classes to meet requirements for a new job is a deductible expense

Answer 167

false

Question 168

Dawn who holds a bachelor's degree in art history, is a middle school teacher in New Orleans. She wants to further her education in art history, believing this will allow her to become a better teacher. Dawn spent her summer break attending the University of Hawaii taking art history classes. Her expenses are as follows:
books and tuition = $2,000
Meals = $1,000
Lodging = $700
Laundry while in travel status = $200
Transportation = $700
Total = $4,600

What is Dawn’s education expense deduction?

Answer 168

$4,100

she can only deduct 50% of meals but 100% of everything else

Question 169

true or false?

books are allowable education expenditures that can be deducted for a taxpayer

Answer 169

true

Question 170

true or false?

tuition expenses are deductible for a taxpayer trying to improve their job skills

Answer 170

true

Question 171

true or false?
transportation, lodging, and laundry while in travel status are deductible for a taxpayer trying to improve their job skills

Answer 171

true

Question 172

business gifts are limited to $___ per donee per year

Answer 172

$25

Question 173

Kay entertains one of her clients and incurs the following expenses:
Taxi = $30
Door Cover Fee = $25
Dinner = $128
Tips to server = $25
Total = $208

how much is Kay’s allowable deduction?

Answer 173

$119

$30 + 50% ($25 + $128 + $25)

Question 174

Elizabeth made the following gifts during the current year:
To Candace, a key client ($4 of amount listed is for gift wrapping) = $104
To secretary = $24
To boss = $28

how much of these gifts are deductible to Elizabeth?

Answer 174

$53

$25 limit per donee and gifts to superiors do no count
(the $4 wrapping fee can be deducted according to IRS rules)