Chapter 6

Chapter 6 - Acct 3400 Taxation of Individuals Chapter 6...

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Acct 3400 Taxation of Individuals Chapter 6 Practice Questions Question 1: You are a staff member at a local accounting firm. You are working on a client’s return, who is filing MFJ, and are dealing with the following information: Itemized Deductions Total $20,000 Standard Deduction (2009) $11,400 Trade/Business Expenses $5,000 Trade/Business Income $10,000 Would you recommend that the client itemize or take the standard deduction? Explanation: The client should itemize. When determining whether to itemize or take the standard deduction, you should simply compare the two and take the greater. Trade/Business income and expenses are reported on Schedule C and then carried over to Line 12 of the Form 1040. Consequently Trade/Business expenses are For AGI deductions which have no bearing on itemized deductions which are From AGI. Question 2: Gary owns his own landscaping business called Gary’s Great Gardens. He is facing a lot of competition from other landscaping businesses. He decides his problem is lack of marketing. In an effort to get more publicity for his business, he purchases a 35-foot boat for $40,000. He takes the boat to Willard Bay every weekend and puts a large Gary’s Great Gardens logo on the side of the boat. Is this a deductible trade or business expense? Explanation:
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Chapter 6 - Acct 3400 Taxation of Individuals Chapter 6...

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