Practice 2 Fall2009-1

Practice 2 Fall2009-1 - Practice II True/False Indicate...

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Practice II True/False Indicate whether the statement is true or false. ____ 1. A taxpayer who claims the standard deduction can also deduct expenses that are classified as deductions for AGI. ____ 2. A moving expense that is reimbursed by the employer is a deduction for AGI, whereas an unreimbursed mov- ing expense is classified as an itemized deduction. ____ 3. Investment-related expenses such as those related to investments in stocks and bonds are deductions from AGI. ____ 4. Bonnie sells her personal use SUV for $22,000 (adjusted basis of $38,000). Her realized loss of $16,000 ($22,000 – $38,000) can be recognized for income tax purposes. ____ 5. Fines paid in the course of carrying on a trade or business generally are deductible if there is a related busi- ness purpose. ____ 6. Two-thirds of treble damage payments under the antitrust law are deductible. ____ 7. Hollis operates a lawn care service in southeastern Missouri. He incurs $63,000 of expenses determining the feasibility of expanding the business to southwestern Missouri. If he expands the business, the $63,000 is de- ductible in the current year. If he does not do so, then he must amortize the $63,000 over a 180-month period. ____ 8. James is in the business of debt collection. He purchased a $20,000 account receivable from Green Corpora- tion for $15,000. During the year, James collected $13,000 in final settlement of the account. James can take a $7,000 bad debt deduction in the current year. ____ 9. If a business debt previously deducted as partially worthless becomes totally worthless this year, only the amount not previously deducted can be deducted this year. ____ 10. A bona fide debt arises from a debtor-creditor relationship based on a valid and enforceable obligation to pay a fixed sum of money. ____ 11. A loss from a worthless security is always treated as a long-term capital loss. ____ 12. Al, who is single, has a gain of $30,000 on the sale of §1244 stock (small business stock) and a loss of $60,000 on the sale of § 1244 stock. As a result, Al has a $20,000 net capital gain and a $50,000 ordinary loss. ____ 13. A theft loss is taken in the year of discovery of the theft. ____ 14. If qualified production activities income (QPAI) cannot be used in the calculation of the domestic production activities deduction in 2009 because of the taxable income limitation, the product of the amount not allowed multiplied by 6% can be carried over for 5 years.
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____ 15. The basis of cost recovery property must be reduced by the cost recovery allowed and by not less than the cost recovery allowable. ____ 16. The cost recovery method for all personal property under MACRS is 200% declining balance. ____ 17.
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This note was uploaded on 09/30/2009 for the course TAX Tax Accoun taught by Professor Bleh during the Spring '09 term at Ithaca College.

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Practice 2 Fall2009-1 - Practice II True/False Indicate...

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