ch06 Student: ___________________________________________________________________________ 1. The profit motive distinguishes "business" activities from "personal" activities. True False 2. All business expense deductions are claimed above the line. True False 3. All investment expenses are itemized deductions. True False 4. Rental or royalty expenses are deductible "for" AGI. True False 5. To be deductible, business expenses must be directly related to a business activity. True False 6. The phrase "ordinary and necessary" means that an expense must be appropriate and helpful for generating a profit. True False 7. All reasonable moving expenses are deductible if the move is a minimum of 35 miles in distance. True False 8. To deduct a moving expense, the taxpayer must be employed or self employed for a specific amount of time after the move. True False 9. Self employed taxpayers can deduct the cost of health insurance as long as they do not actually participate in their spouses' employer-provided health plan. True False 10. Self employed taxpayers can choose between claiming a deduction or a credit for half of self employment taxes paid. True False 11. An individual who forfeits a penalty for prematurely withdrawing a certificate of deposit (CD) is allowed to net the penalty against the interest income from the CD. True False 12. Qualified education expenses for purposes of the deduction of interest on educational loans are expenses paid for the education of the taxpayer, the taxpayer's spouse, or a taxpayer's dependent to attend a post-secondary institution of higher education. True False 13. The definition of qualifying expenses is more restrictive for the qualified educational expense deduction than it is for the education loan interest expense deduction. True False 14. The medical expense deduction is designed to provide relief for doctors and medical practitioners. True False 15. Deductible medical expenses include payments to medical care providers such as doctors, dentists, and nurses and medical care facilities such as hospitals. True False
16. Taxpayers traveling for the primary purpose of receiving essential and deductible medical care may deduct the cost of travel. True False 17. The deduction for medical expenses is limited to the amount of unreimbursed qualifying medical expenses paid during the year reduced by five percent of the taxpayer's AGI. True False 18. The itemized deduction for taxes includes all types of state, local, and foreign taxes. True False 19. Taxpayers may elect to deduct state and local sales taxes instead of deducting state and local income taxes. True False 20. Taxpayers are allowed to deduct mortgage interest on up to $1,000,000 of acquisition debt for their qualified residence and on up to $500,000 of home-equity debt.
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