TAX

Question 1

*Which of the following is not required for an expenditure to be deductible as a business or investment expense?

Answer 1

*A) recurring in nature
B) ordinary and necessary
C) reasonable in amount
D) incurred by the taxpayer

Question 2

*Various criteria will disqualify the deduction of a business or investment related expenditure. Which of the following criteria will not disqualify a business or investment expenditure?

Answer 2

*A) capital expenditure
B) expenses related to tax-exempt income
C) expenses are not incurred annually
D) expenses are illegal or in violation of public policy

Question 3

What is required for an expenditure to be deductible as a business or investment expense?

Answer 3

ordinary and necessary, reasonable in amount and incurred by the taxpayer

Question 4

*Understand what a capital asset is

Answer 4

A capital would be purchased for business purpose not for personal use.

Capital assets include personal property such as a home or a car. It also includes personal investment property, like stocks and bonds.
Does not include inventory or accounts receivable

For businesses, a capital asset is an asset with a useful life longer than a year
that is not intended for sale in the regular course of the business’s operation.

Question 5

If an item is $450 and the net income is $400, how much can be depreciated according to section 179?

Answer 5

Can only deduct up to my net income, cannot create a loss=400

Question 6

When depreciating 5-year property, the final year of depreciation will be year

Answer 6

6

Question 7

Define ordinary income in relation to a partnership.

Answer 7

Primarily composed of wages, salaries, commissions and interest income from bonds, taxable using ordinary income rates.

All taxable items of income, gain, loss, or deduction that do not have to be separately stated.