Business Financial Information

Question 1

One is considered to be an active investor if any of the following are true (5 choices):

Answer 1

1. More than 500 hours of annual participation
2. Essentially all of the business participation
3. More than 100 hours and at least as much as other participants
4. Material participation in any 5 of the last 10 tax years.
5. Material participation in any 3 of the previous tax years for a personal service.

Question 2

For any business expense to be deducted, it must be both

Answer 2

Ordinary and necessary

Question 3

In order to be allowed a depreciation deduction, all three of these must apply:

Answer 3

1. Taxpayer must own property
2. Taxpayer must use property in business
3. Property must have a useful life of more than one year

Question 4

What form is used to report depreciation on a tax return?

Answer 4

Form 4562

Question 5

What is the standard mileage rate for operating a car in 2023?

Answer 5

65.5 cents per mile

Question 6

Are mortgage prepayment penalties deductible as interest?

Answer 6

Yes

Question 7

Are legal fees paid to acquire business property expensed or added to the cost basis and depreciated?

Answer 7

Added to basis

Question 8

The cost basis of property converted from personal to business use is the lesser of:

Answer 8

1. FMV of the property on the date of change
2. The taxpayer’s adjusted basis on the date of change

Question 9

How long is the identification period for a non-taxable exchange?

Answer 9

45 days

Question 10

Property in a non-taxable exchange must be received by the earlier of:

Answer 10

1. 180 days from when the property was given up in the exchange
2. The tax return due date, including extensions, for the applicable tax year

Question 11

What does NAICS stand for?

Answer 11

North American Industry Classification System

Question 12

Can a cash or accrual-based taxpayer deduct expenses paid in advance?

Answer 12

No