1. Which of the following expenses is/are deductible?
Transportation and lodging expenses of $3,000 incurred to monitor state legislation that may
affect the taxpayer’s business.
II. Lobby expenses of $300 during the year to influence local town legislators to support pro-
Only statement I is correct
Only statement II is correct.
Both statements are correct
Neither is correct.
Tom and Rosemary own a cabin near Stowe, Vermont. During the current year the cabin is
rented for 31 days for $1,800. Tom and Rosemary used the cabin a total of 12 days during the
year. After making the appropriate allocation of expenses between personal and rental use, the
following rental loss was determined:
Repairs and maintenance
How should Tom and Rosemary report the rental income and expenses for the current year?
Include the $1,800 in gross income, but no deductions are allowed.
Report the $200 loss for AGI
Only expenses up to the amount of $1,800 rental income may be deducted in the current year
Report the interest ($950) and taxes ($150) as itemized deductions and the other expenses for
No reporting for the rental activity should be reported
Dunbar’s employer has a qualified pension plan to which it contributes 6% of his gross salary.
Dunbar’s current annual salary is $50,000. The pension plan also earns $2,500 during the current
year on contributions made to the plan on behalf of Dunbar. What is Dunbar’s gross income
from these transactions for the current year?
William purchases equipment classified as 7-year property on Jan. 5, 2010, at a cost of $80,000.
Section 179 was not elected. He sells the equipment on Feb. 12, 2012. What is William’s 2012
Mary runs a brothel in Two Harbors (illegal under state law. Yes, even in Two Harbors.) and has
the following items of income and expense. What is the amount that she must include in taxable
income from this operation?
Bribes to police
Illegal kickbacks to local government officials