Chapter 4 - Business Expenses

Question 1

Cafeteria Plan ( Employee benefit program )

Answer 1

allow employees to choose among two or more benefits consisting of cash and qualified benefits

Question 2

What do Cafeteria plans do?

Answer 2

1) The participant does not include any benefit amounts in gross income unless the cas is chosen

2) The employee must choose the benefit before the tax year begins

3) Any Unused benefit is forfeited

Question 3

Qualified ( cafeteria plan ) benefits include the following:

Answer 3

1) Accident and health benefts ( but not medical savings accounts or long term care insurance )

2) Adoption assistance

3) Dependent care assistance

4) Group term life insurance coverage ( up to 50000 including cost that cannot be excluded from wages ).

5) Group legal services

6) Disability Benefits

Question 4

W 4

Answer 4

Employees provide for mw 4 to their employer to determine the amount from each paycheck to be withheld for federal income taxes . Form w 4 consist of five steps

Question 5

What are the common excise taxes

Answer 5

1) Environmental taxes on the sale or use of ozone - depleting chemicals and imported products containing or manufactured with these chemicals

2) Communications and air transportation taxes

3) Fuel Taxes

4) Tax on the first retail sale of heavy trucks, trailers, and tractors

5) Manufacturers taxes on the sale or use of a variety of different articles

Question 6

8300

Answer 6

Each person engaged in a trade or business who in the course of that trade or business receives more than 10,000 in one transaction

Question 7

What is deductible for interest expense

Answer 7

1) Interest on debt whose proceed were used to purchase or finance a business related property

2) prepayment penalty on a loan

3) unstated interest to the extent that the difference between interest wunder the contract at the applicable federal rate and the contract interest reduces the basis of the purchased property

4) Prepaid interest in any form and must be amortized over the period of the loan

5) investment interest to the eeextent of investment income

6) Points! or loan orgination fees
a) point are amortized over the life of the loan

7) Capitalized interest

8) Interest on income tax owed is not deductible

9)Interest on employment tax deficiency is deductible

10) The allocation of loan proceeds and related interest is generally dependent upon how the loan proceeds are used, not the use of the property that secures the loan

Question 8

When is compensation deductible

Answer 8