R1 M3 Wrong MCQ

Question 1

What amounts can be deducted from a trip where work was done?

Answer 1

If travel is primarily personal with work for a few days, none of the travel expenses (round trip airfare) is deductible.

Can only deduct cost of work related activities

Question 2

What does it mean for salary to be considered a draw? How is it taxed and give an example

Answer 2

A draw means that the payment is guaranteed, which means that it is fully taxable to the receiver.

It is an expense to the business unless it is in payment to an owner as self employment activity.

Question 3

How do cash basis taxpayers treat interest paid in advance?

Answer 3

Deduct current year’s interest and amortize the rest of the balance over the period

Question 4

Are security deposits held in a segregated account included in gross income for cash basis taxpayers?

Answer 4

No because it is held separately and is a liability

Question 5

What is reported on Form 1120S?

Answer 5

Gain or loss from sale of collectibles from S Corporation

Question 6

How does a shareholder in an S Corp record income and dividends?

Answer 6

Taxable income would be the (percent owned*company income) and would be included on the individual tax return

Dividends would be: (percent owned*total dividends paid) and would only reduce the shareholders basis in the S corporation stock. It will not affect taxable income.

Question 7

What can a guaranteed payment agreement not be based on?

Answer 7

Partnership profits or anything relying on partnership profits