Chapter 7 MC Flashcards
Benefits received in excess of medical expenses incurred will be includible in gross income.
The tuition for CLU courses is paid for the purpose of maintaining or improving skills necessary to the agent’s current employment. (B) is incorrect because his primary office is not at home, and the basic cost of his first line is nondeductible. (C) is incorrect because personal insurance premiums are generally nondeductible. (D) is incorrect because commuting expenses are nondeductible.
Which of the following educational expenses would be deductible as a business expense by an individual taxpayer?
A filing clerk pays for a night course in computer-based filing because his supervisor suggested he learn the more modern system since the office will be converting to it soon.
(B). Educational expenses are deductible as business expenses if the education is to improve skills in the taxpayer’s current job or is required by the taxpayer’s employer. However, education leading to a career change does not give rise to a business expense deduction, even though a different tax deduction or credit might be available for the expense.
Which of the following statements concerning the deductibility of business expenses is (are) correct? I. Entertainment expenses are fully deductible if recorded by the taxpayer when incurred. II. Fines for the violation of a state law are deductible if they are incurred in the ordinary course of business.
I is incorrect because with few exceptions, only 50 percent of entertainment expenses are deductible. II is incorrect because fines for violation of law are not deductible, even if they are incurred in the ordinary course of business.
Which of the following legal expenses of an individual taxpayer is (are) deductible in full for a single tax year as a nonbusiness expense?
II is incorrect because legal expenses paid to defend or perfect title to property are generally not deductible in full for a single tax year. Those legal expenses may be capitalized and will be recovered when the property is depreciated or sold.
To substantiate entertainment deductions for business purposes, a record must be kept of which of the following? I. the business relationship to the taxpayer of the person entertained II. the date and place of the entertainment
The answer is (C). Both I and II are correct.
All the following requirements must be met for a corporation to obtain a deduction for payment of its president’s salary EXCEPT
The expense must be directly attributable to the president’s employment within the United States or its territories.
There is no requirement that salaries be earned within the United States or its territories.
All the following statements concerning the deductibility of various expenses in connection with a taxpayer’s trade or business are correct EXCEPT
The expenses of commuting are deductible if the taxpayer lives more than 50 miles away from his place of business.
(C). Commuting expenses are nondeductible regardless of the distance involved.
