ch6 - 1. A taxpayer who claims the standard deduction can...

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Unformatted text preview: 1. A taxpayer who claims the standard deduction can also deduct expenses that are classified as deductions from AGI. a. True *b. False 2. Wally is in the 25% tax bracket. He may receive a different tax benefit for a $1,000 expenditure that is classified as a deduction from AGI than he will receive for a $1,000 expenditure that is classified as a deduction for AGI. *a. True b. False 3. Expenses incurred in a trade or business are deductible for AGI. *a. True b. False 4. All employment related expenses are classified as deductions for AGI. a. True *b. False 5. Only certain expenses associated with the production of income are classified as deductions for AGI. *a. True b. False 6. Priscilla incurs qualified moving expenses of $7,000. If she is reimbursed by her employer, the deduction is classified as a deduction for AGI. If not reimbursed, the deduction is classified as an itemized deduction. a. True *b. False 7. Expenses incurred for the production or collection of income generally are deductions from adjusted gross income. *a. True b. False 8. The Code defines what constitutes a trade or business. a. True *b. False 9. For an expense to be deducted as ordinary , it must be recurring in nature. a. True *b. False 10. Rob, a shareholder-employee of Falcon, Inc., receives a $300,000 salary. The IRS classifies $100,000 of this amount as unreasonable compensation. The effect of this reclassification is to decrease Robs gross income by $100,000 and increase Falcons gross income by $100,000. a. True *b. False 11. A salary that is classified as unreasonable by the IRS is disallowed as a deduction to the corporation. *a. True b. False 12. Generally, a closely-held family corporation is not permitted to take a deduction for a salary paid to a family member in calculating corporate taxable income. a. True *b. False 13. A loss on the sale of a personal use asset cannot be deducted. *a. True b. False 14. The income of a sole proprietorship are reported on Schedule C (Profit or Loss from Business). *a. True b. False 15. For an expense to be deducted, the amount must be paid by the taxpayer. a. True *b. False 16. Under certain circumstances, a cash method taxpayer must treat prepayments the same as an accrual method taxpayer. *a. True b. False 17. A cash basis taxpayer who charges an expense on a bank credit card is allowed to claim a deduction currently, whereas a cash basis taxpayer who charges an expense on a department store credit card is not allowed to claim a deduction until payment is made. a. True *b. False 18. Under the one-year rule for the current period deduction of prepaid expenses of cash basis taxpayers, the asset must expire or be consumed by the end of the tax year following the year of payment....
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ch6 - 1. A taxpayer who claims the standard deduction can...

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