Unit 4

Question 1

Define Hobby

Answer 1

Not engaged for profit.
Not a hobby is results in profit any 3 of 5 consecutive years. Expenses related to hobby are not deductible 2018-2025 but income is gross income.

Question 2

Rent business expense rules

Answer 2

Advance rental payments can be deducted only during period which they apply too. (including cash basis) Except 12 month rule, if contract<12 months.

Question 3

Travel business expense rules

Answer 3

only 50% meals, foreign is allocated, person >25%.

only 2k for cruise ships.

Question 4

Transportation business expense

Answer 4

if overnight=travel.

only home-temp location is deductible and 1st to 2nd job

Question 5

Standard Mileage limit

Answer 5

5 cars

Question 6

Insurance business expense

Answer 6

Prepaid is apportioned over period of coverege

Question 7

Bad Debt business expense

Answer 7

Only deductible to extend of adjust basis in debt.

Question 8

Worthless securities business expense

Answer 8

Treat as capital loss not bad debt.

Loss on deposits are treated as personal casualty loss not deductible 3k limit

Question 9

Business gift expense

Answer 9

25$ per year per person (spouses count as 1)

Question 10

Employee Achievement Business Expense

Answer 10

Not Cash . deduct up to 400$ for nonqualified plan awards.

Qualified = 1.6k per year, with written program.

Question 11

Start up costs business expense

Answer 11

up to 5k. Cost os investigating, supplies, excess can be capitalized and amort over 15 years.

Question 12

Reforestation cost business expense

Answer 12

expensed in current year up to 10k. remaining over 7 years

Question 13

Vacant land business expense

Answer 13

interest/taxes are deductible

Question 14

Demolition business expense

Answer 14

NOT deductible, allocated to land

Question 15

Medical Reimbursement Business expense

Answer 15

Plan for employees= Deduct

Political= NOT, except lobbying state/fed level

Question 16

Tax Excempt Income business expense

Answer 16

expenditures related to produce tax exempt income are NOT deductible. (ex interest on loan to buy tax exempt bonds)

Question 17

Withdrawl penalties business expense

Answer 17

Deductible above the line

Question 18

Business Use of Home Expenses

Answer 18

Retailer, Daycare, does not need to meet exclusivity test if main location

Question 19

Deduction for home business home LIMIT

Answer 19

GI - Deduction allocable to home - Deductions allocable to office not office exp.)

Question 20

Simplified Home business use limit

Answer 20

5$ per sq feet up to 300 sp ft max 1.5k.

Question 21

Meals business expense

Answer 21

50%. not over 75$ without proof. DOT 80%

Question 22

Entertainment business expense

Answer 22

NOT deductible, except for benefit of employee, holiday party

Question 23

Ownership of facility business expense,

Answer 23

exp. with connection use of entertainment facility that owns, pools, hotel, NOT deductible.