Answers to problemschapter 6 topical list of problems

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ANSWERS TO PROBLEMS—CHAPTER 6 Topical List of Problems Hobby v. Trade or Business (¶6215 and ¶6715) 24. Passenger Cars: Part Business/Part Personal Expenses (¶6805) 25. Passenger Cars: Part Business/Part Personal Expenses (¶6805) 26.
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93 Instructor’s Manual © 2009 CCH. All Rights Reserved. Chapter 6 Trade or Business, Production of Income, and Personal Expenses (¶6201, ¶6301, and ¶6725) 27. Trade or Business, Production of Income, and Personal Expenses (¶6201, ¶6301, and ¶6725) 28. Deductions for Losses (¶6401) 29. Trade or Business Deductions (¶6201–¶6245) 30. Deductions for AGI or from AGI (¶6115 and ¶6125) 31. Deductions for AGI or from AGI (¶6115 and ¶6125) 32. Tax Planning and Compliance Expenses (¶6325) 33. Deductible Amounts Paid on Behalf of Another Taxpayer (¶6785) 34. Salaries and Wages Deductions (¶6245) 35. Property Tax Deductions (¶6245) 36. MACRS Depreciation (¶6801) 37. Alternative Straight-Line Depreciation (¶6801) 38. MACRS Depreciation (¶6801) 39. Midquarter Convention Asset (¶6801) 40. MACRS Depreciation and Immediate Expensing (¶6825) 41. MACRS Depreciation and Immediate Expensing (¶6825) 42. MACRS Depreciation and Passenger Cars (¶6805) 43. MACRS Depreciation and Passenger Cars (¶6805) 44. MACRS Depreciation and Nonresidential Real Property (¶6801) 45. MACRS Depreciation and Residential Real Property (¶6801) 46. Conversion of Personal to Business Use Property (¶6855) 47. Conversion of Personal to Business Use Property (¶6855) 48. Research and Experimentation Expenses (¶6875) 49. Depletion Deduction (¶6885) 50. Transportation Expenses: Automobiles (¶6535) 51. Travel Expenses: Two Places of Business (¶6545) 52. Travel Expenses: Business and Personal Travel (¶6545) 53. Employee Moving Expenses (¶6560) 54. Multiple Choice—Rents and Royalties Expenses (¶6115 and ¶6301) 55. Multiple Choice—Trade or Business Expenses (¶6115 and ¶6201) 56. Multiple Choice—Trade or Business Expenses (¶6115 and ¶6201) 57. Multiple Choice—Immediate Expensing of Capital Expenditures (¶6825) 58. Comprehensive Problem—Deductible Expenses 59. Comprehensive Problem—Employee Moving Expenses 60. Research Problem—Trade or Business Deductions 61. Research Problem—Trade or Business Deductions 62. Answers to Problems Hobby v. Trade or Business If Jacob Blue’s stamp collecting activities constitute a hobby, the following expenditures are deductible for 24. tax purposes:
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94 CCH Federal Taxation—Comprehensive Topics Chapter 6 © 2009 CCH. All Rights Reserved. Gross sales $20,000 Cost of sales 8,000 Gross income $12,000 Travel expenses (limited to remaining income) 11,000 Miscellaneous expenses 1,000 Hobby Income $0 If Jacob Blue’s stamp collecting activities constitute a trade or business, the full travel expenses of $11,000 and the full miscellaneous expenses of $4,000 are deductible, and Jacob has a $3,000 business loss for tax purposes. The $14,000 of stamp purchases is not deductible for tax purposes until the stamps are sold. If Jacob Blue’s stamp collecting activities constitute a hobby, all hobby expenses are deductible as miscellaneous itemized deductions subject to the 2 percent of AGI limitation.
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