a True b False ANSWER False 16 Teresa Terri and Tricia operate Sassy Solutions

A true b false answer false 16 teresa terri and

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a. True
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b. False ANSWER: False 16. Teresa, Terri, and Tricia operate Sassy Solutions, an exclusive boutique. Based on advice from Teresa’s sister, a CPA, the three form a partnership. Teresa owns 50% and Terri and Tricia each own 25%. For the year, Sassy Solutions reports the following: Sales revenues $600,000 Business expenses (320,000) Investment expenses (4,000) Short-term capital gains 26,000 Long-term capital losses (14,000 ) Taxable income $288,000 For tax purposes, what amount will Sassy Solutions report to Teresa as her ordinary income from the partnership? a. $144,000 b. $146,000 c. $148,000 d. $138,000 e. $140,000 ANSWER: 17. Tom, Dick, and Harry operate Quality Stores. Based on advice from Tom’s sister, a CPA, the three form a partnership. Tom owns 50%; Dick and Harry each own 25%. For the year, Quality Stores reports the following: Sales revenues $800,000
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Business expenses (440,000) Investment expenses (4,000) Short-term capital gains 26,000 Long-term capital losses (14,000 ) Taxable income $368,000 By how much will Tom’s adjusted gross income increase because of the above? a. $178,000 b. $180,000 c. $183,000 d. $184,000 e. $186,000 ANSWER: 18. To be deductible, the dominant motive for incurring an expense must be the relationship to a business activity. to reduce income taxes. tax avoidance. the intent to earn a profit. personal. ANSWER: 19. Which of the following is an example of a business purpose as dominant motive? Darren is a full-time plumber and a part-time Amway salesman. He is taking his family to Disney World and plans to take his
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Amway products with him so that he may deduct most of his cost of the trip. Larry is a full-time plumber. He is taking his family with him to a convention in Orlando featuring the latest in plumbing products and techniques. He plans to deduct most of his cost of the trip. Only statement I is correct. Only statement II is correct. Both statements are correct. Neither statement is correct. ANSWER: 20. The Business Purpose Concept means that the economic purpose of the transaction must exceed the tax avoidance motive. that the taxpayer’s dominant motive for an expenditure is to reduce taxation. Only statement I is correct. Only statement II is correct. Both statements are correct. Neither statement is correct. ANSWER: 21. The legislative grace concept dictates that deductible business expenses be grouped into certain categories that include Personal expenses. Trade or business expenses. Expenses for the production of income.
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Statements I and II are correct. Statements I and III are correct. Statements I, II, and III are correct. Statements II and III is correct. ANSWER: 22. Business expenses include expenditures that have a business purpose expenditures that are incurred for the production of income. Only statement I is correct. Only statement II is correct. Both statements are correct. Neither statement is correct. ANSWER: 23. A business expense includes an expenditure that satisfies the dominant profit-motive requirement.
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