Fed Tax Test 1

On June 30, 20X0, Sally, who uses the cash method of accounting, borrowed $25,000 from a bank for use in her business. Sally was to repay the loan in one payment with $2,000 interest on December 30, 20X0. On December 30, 20X0, she renewed that loan plus the interest due. The new loan was for $27,000. What is the amount of interest expense that Sally can deduct for 20X0?

$0

You are in charge of sales and marketing at Piggy's Catering Inc. To encourage the continuation of an existing business relationship, you took one of your clients to a Broadway show. The visit to the show occurred directly after a substantial business discussion with that client. You paid a ticket broker $300 for two tickets to that show. The face value of each ticket was $100 ($200 total). What is your total deductible expense for both tickets?

$0

Gary is a calendar-year eligible small employer and wishes to take advantage of the Credit for Small Employer Pension Plan Startup Costs. He incurred $2,000 in qualified startup costs in 20X1 for an eligible plan that will become effective on January 1, 20X2. What is Gary's potential credit for 20X1?

$1,000

Jack's employer offers benefits to its employees using a cafeteria plan. Employees are able to choose between cash and nontaxable benefits. Jack chooses to receive only the health insurance, the value of which is $350 per month and then opts to receive cash instead of the life insurance. Jack received $1,100 in cash instead of life insurance. What amount of income must Jack include in his taxable gross income?

$1,100

During 20X1, Frank gave the following gifts to business clients: (NONE of the employees of the receiving companies were to receive more than ONE gift.) 100 pens with Frank's company name imprinted on them, $400 valued at $4 each, to Corporation X 25 bottles of wine valued at $30 each to Corporation Y $750 Wrapping paper for the 25 bottles of wine $50 15 floral arrangements valued at $25 each to Z Company $375 The amount that Frank can deduct for business gifts in 20X1 is:

$1,450

Horse and Carriage Corporation distributes the following gifts to their clients: 100 clipboards with their company logo on them, valued at $3 each ($300 total); 50 bottles of wine to clients who had orders over $50,000 during the year costing $35 each ($1,750 total) at Christmas. The amount that Horse and Carriage can deduct for business gifts is:

$1,550

You buy an interest in a partnership for $20,000 using borrowed funds. The partnership's only assets include machinery used in the business valued at $60,000 and common stocks valued at $15,000. During the year you paid $2,000 interest on the loan. How much interest is deductible as interest attributed to a trade or business?

$1,600

Rudy, a plumber, paid the following taxes: $800 on the purchase of a new truck, $1,500 for the current year's business related property tax, $150 sales tax on miscellaneous office supplies, $600 sales tax on merchandise he purchased for resale. How much can he deduct as a current business expense for federal tax purposes?

$1,650

Uma is engaged in a not-for-profit activity. The income and expenses of the activity are as follows: Gross income $3,300 Less Expenses: Real estate taxes $600 Home mortgage interest $1,000 Insurance $500 Utilities $600 Maintenance $300 Depreciation on an automobile $600 Depreciation on a machine $300 Total expenses $3,900 Loss $600 The amount of allowable depreciation for the machine only is:

$100

You operate a business and file your tax return on a calendar-year basis. You bought a fire insurance policy on your building effective November 1, 20X0, and paid a premium of $1,200 for 2 years of coverage. How much can you deduct on your 20X0 return?

$100

XYZ Corporation purchased a warehouse for $40,000 in cash. As part of the purchase agreement, XYZ Corporation agreed to assume the mortgage that existed on the warehouse. At the closing, the balance owed on the mortgage was $60,000. Assuming there were no other costs or expenses of the purchase, what is the XYZ's basis in the warehouse immediately after the closing?

$100,000

Jennifer Lloyd sells products to John Smith and Co. She gave the firm five packages of cashews to thank five employees for the referrals. Ms. Lloyd paid $75 for each package. How much can Jennifer deduct for the gifts on her tax return?

$125

Greg and Elaine formed Spring Lawn, Ltd., a calendar year partnership in the current year, to provide yard maintenance to residential customers. Before they began operations in May of the current year, they incurred legal fees of $2,000 and consulting expenses of $1,000 to draft the partnership agreement and file the required forms. They also paid a commission of $600 to a broker to market partnership interests. If Spring Lawn amortizes the applicable costs, what amount of amortization does it report on its current year partnership tax return?

$133

For the year ended December 31, the DEF partnership had the following items of expense or loss: Salaries paid (other than partners) $45,000 Charitable contributions $3,000 Foreign income taxes $2,500 Real estate taxes for partnership office building $7,250 Loss on the sale of machinery held 5 years $8,900 Total $66,650 How much of the $66,650 total is NOT deductible in figuring the partnership's ordinary income or loss?

$14,400

Wilma Smith leased a building for her business for 4 years beginning in March 20X1 for $1,500 per month. On March 1, 20X1, Mrs. Smith paid her landlord $33,000 in rent. How much can she deduct on her 20X1 tax return?

$15,000

During 20X1, Mr. Jones had the following expenditures relating to commercial real estate that he owns: County property tax $1,850 State property tax $920 Assessment for sewer construction $1,200 Charges for sewer and water service $810 What is the amount Mr. Jones can deduct as real estate taxes on his commercial real estate for 20X1?

$2,770

The Acme Corporation paid the following four amounts. Which of these amounts is fully deductible for income tax purposes?

$20 paid to buy a gift for a customer

Colleen started a SIMPLE plan for all five of her employees and herself. It cost her $400 in fees to administer the plan the first year. She never had a pension plan prior to starting this plan. Her tax credit is:

$200

Ernest, a self-employed watchmaker, traveled to Germany in September. During his eight-day stay in Germany, he attended a 2-hour watch making seminar in the city of Berlin on Monday and took a 4-hour tour of a watch manufacturing facility in Dresden on Wednesday. The rest of the time Ernest spent hiking and touring the countryside. Ernest incurred the following costs for this trip: Round trip airfare of $500 Lodging of $1,000 Meals of $300 Seminar and tour registration fees of $200 What is the amount that Ernest can deduct as business expenses for this trip to Germany?

$200

In 20X1, John and George formed a partnership that began business on July 1, 20X2. They spent $4,000 in legal fees for negotiating and preparing the partnership agreement, $2,000 for accounting services setting up the partnership's books, and $1,000 in commissions associated with acquiring assets for the partnership. They made a proper election to amortize organization expenses over a 180 month period. Assuming these are their only expenses in setting up their partnership, what is the proper amortization expense for organizational costs in 20X2?

$200

Jeanne incurred start-up costs for her new business, which opened October 1. The costs were for advertising of $1,000, a market analysis survey of $2,500, employee training costs of $6,000, and travel costs for securing prospective distributors of $2,500. If Jeanne does not elect to deduct any of these costs, what part of the amortizable costs may be deducted in the first year?

$200

Tom Thumb owned a greenhouse that was built on leased land. He used the greenhouse 100% for business. During the current year, the greenhouse was totally destroyed by a hurricane (a federally declared disaster). The greenhouse cost $500,000 to build, had a fair market value of $300,000 and accumulated depreciation of $50,000 when it was destroyed. Tom received $250,000 from his insurance company to reimburse him for the loss. Tom's adjusted gross income for the current year is $54,000. What is the amount of Tom's deductible business loss on the greenhouse?

$200,000

The Andrews Company makes sales on credit of $400,000 in Year One and $500,000 in 20X2 and recognizes those amounts for income tax purposes. The company operates on the accrual basis of accounting and believes that 2 percent of all credit sales will prove to be worthless. In Year One, $3,000 in accounts are judged to be completely worthless along with another $12,000 in 20X2. What is reported by the company as its bad debt expense for income tax purposes?

$3,000 in Year One and $12,000 in 20X2

Walter is an accrual basis taxpayer who has a business with significant accounts receivables. In 20X1, Walter had an $8,000 receivable owed to his business from Fred. Fred was unable to pay the full amount, but did transfer a parcel of land with a fair market value of $6,000 to Walter in partial payment. Walter entered on his books the $2,000 difference as a business bad debt, but was unable to take a tax benefit from this bad debt deduction as he had no taxable income at the end of 20X1. In 20X2, Walter sold the land received from Fred at a $3,000 gain. At the end of 20X2, how much gain from the sale of this land must Walter report in taxable income?

$3,000, the entire gain

Sandy and Buffy formed the S&B Partnership in November of 20X1. They began business operations in December 20X1. During 20X1 they incurred the following costs: $2,500 to their attorney for negotiating and preparing the partnership agreement. $250 for filing fees for the partnership agreement. $1,000 to their CPA for services incident to the organization of the partnership. $500 in costs associated with transferring assets to the partnership. What is the maximum dollar amount that S&B Partnership can elect to amortize as organizational costs?

$3,750

Shawn Smith, a sole proprietor, had the following transactions during 20X2: Received rental income $7,500 Performed legal services for ATI Corporation in return for 10 shares of stock $24,000 Recovered accounts receivable that had been written off and deducted in 20X0 (did not reduce tax) $20,000 What amount must Mr. Smith include in gross income for 20X2?

$31,500

B invested $20,000 cash for a 55% interest in ABC Partnership. B materially participates in the partnership's business and the partnership agreement states he is liable for all of the partnership's debts. The only partnership debt at the year-end was a $17,000 loan from Cook bank. Partner B and the other general partner had a separate agreement that B's liability would not exceed $12,000. The partnership reported a $60,000 ordinary loss for the current year. Assuming there were no other adjustments to B's basis, what is the amount of B's deductible loss for the current year?

$32,000

On July 1, 20X0, Mel leased property for 2 years for $700 a month. On September 30, 20X0, the owner of the property told him if he paid the total in advance for the remainder of the lease the rent would be reduced to $675 a month. Mel accepted his offer and on October 1, 20X0, he paid the owner $14,175. How much can Mel deduct as rental expense in 20X0?

$4,125

Bill, a tax preparer, agreed to prepare the corporate tax return for the EZ Interior Decorating Co. It was agreed that Bill's fee would be $4,500. EZ was experiencing cash flow problems and offered Bill a computer with an adjusted basis of $3,500, a printer with an adjusted basis of $400, and a monitor with an adjusted basis of $250 instead of the agreed-upon $4,500. Ez had paid $6,000 for these items. Bill accepted the equipment in the lieu of cash. What is Bill's basis in the property received?

$4,500

As a business owner of a dress shop in Los Angeles, you take a business trip to Reno. On your way to Reno, you stop in Las Vegas to visit a friend. You spend 3 days in Las Vegas and 4 days in Reno. Your travel expenses for the 7 days are $630. If you had not stopped in Las Vegas, the cost of the trip to Reno would have been $420. How much may be deducted before considering any meals limitation?

$420

Matthews is a 40 percent partner in the WestBrook Partnership. Matthews has a tax basis (capital share) in the partnership of $45,000. Matthews has not loaned the partnership any money but is responsible for her share of the debts. The partnership has $100,000 in assets and $60,000 in liabilities. This year, the partnership reported an ordinary business loss of $120,000. What amount of that loss can Matthews deduct on her individual income tax return this year?

$48,000

Rob and George own an office building that was built in 1975. They opened a tax return business and made numerous renovations to the building to bring it into compliance with the Americans with Disabilities Act. They had gross receipts of $750,000 dollars and ten full-time employees during the year. They spent $15,000 in eligible access expenditures. What is the current year Disabled Access Credit?

$5,000

Ryan runs a manufacturing business employing several people with young children. These employees require daycare as both parents work. He decided that, in order to make it easier for his employees to come to work each day, he would allocate some of the unused space in his manufacturing facility to a child care facility. He incurred $20,000 in qualified childcare facility expenditures. He had no qualified childcare resource and referral expenditures and had no pass through credits. What is Ryan's credit?

$5,000

The F&E Partnership spent $100,000 on eligible access expenditures that qualify for the disabled access credit. The partnership had gross receipts of $1 million and 30 full-time employees during the preceding tax year. What is the amount of the disabled access credit for the year?

$5,000

ABC Corporation incorporated on May 1 of Year One. They incurred $7,500 in organizational expenses. What is the total amount of organizational costs that ABC claims as a deduction its Year One tax return?

$5,111

Joe, a cash basis taxpayer, owned and operated a business. He began having difficulty paying his business debts in late 20X0. Joe owed Gail, his computer consultant, $2,200 for services rendered at his business and $500 for non-business services rendered at his home. In 20X1, Gail forgave the entire debt of $2,700. Joe is neither bankrupt nor insolvent. What amount will Joe be required to include in income on his tax return for 20X1?

$500

Mary, a seamstress, made loans of $5,000 and $1,000 to Buttons & Bows and Thread Bare, respectively. Both of these establishments are partnerships. Mary also made a loan of $2,000 to her cousin Sarah, who was starting her own business as a proprietorship. The loans to both partnerships improved Mary's business, which was the reason Mary made the loans. If all three loans become uncollectible, what amount may Mary deduct as a business bad debt?

$6,000

On January 1, 20X1 Charlie paid $3,000 to purchase a 4-year lease on an office building. At that time, Charlie paid $24,000 in advance for all monthly lease payments through the end of the lease term. How much can Charlie deduct for 20X1?

$6,750

Medford owns a small consulting firm. The company is incorporated and operates as an accrual basis taxpayer. In January of the current year, the firm did work for a client and accepted a note for $60,000 plus interest at a 10 percent annual rate in lieu of immediate payment. After exactly six months, the client went bankrupt and the note was judged to be worthless. That was the only account judged to be worthless during the year. At the end of the year, for financial reporting purposes, the company estimated its bad debt expenses as $69,000 which increased the allowance for doubtful accounts to a balance of $71,000. What is the amount of the bad debt expense deduction that this business is entitled to report for tax purposes?

$60,000 if the company has not accrued interest on the note.

Jeff's car dealership employed 56 full-time employees. Jeff did not offer minimum essential coverage to his employees. For the calendar year, the shared responsibility payment amount is $2,570 for an applicable large employer (ALE) that does not offer minimum essential coverage to at least 95% of its employees. What is the amount of Jeff's employer shared responsibility payment?

$66,820

In his spare time, Robert Granger operates a lawn care service. He owns several lawn mowers and purchased a small shed in which to keep them and his supplies. During Year One, he generated revenues of $11,000. He also spent $220 on a business license and $600 for gasoline, motor oil, and spark plugs. He had taken out a loan to allow him to buy his mowers. He paid $3,000 on the loan this year which included interest of $500. He paid for advertising in a local newspaper at a cost of $900 and he made a noncash contribution of $300 to the local church. He also made an estimated tax payment on his federal taxes of $1,000. Depreciation on his lawn mowers and the shed were $1,200. Granger is currently filing his Form 1040 for the year. He is computing his net income on his sole proprietorship on Schedule C. What is the income from this business?

$7,580

Orlando Waste Company had 75 full-time employees. The company offered minimum essential coverage to 73 employees out of which two employees qualified for the premium tax credit. Using the 2020 shared responsibility payment amount of $3,860 for an applicable large employer (ALE) that offers minimum essential coverage to at least 95% of its employees. What is the expected employer shared responsibility provision payment?

$7,720

A company increased their research expenses by $3,600. What is the maximum credit they can qualify for on their tax return?

$720

On New Year's Eve, Hal sent three bottles of champagne to the three owners of the Day & Night Cleaners to thank them for their business during the year. Each bottle of champagne cost $75. Each of the owners took the champagne home. Earlier in the year, Hal had given a video game to the son of one of the owners. The value of the game was $50. Hal took his biggest customer to a football game where they had a substantial discussion about a new potential contract. The value of the tickets was $100. What is the total amount Hal can deduct as business gifts?

$75

Thomas recently negotiated a substantial sale. Following the signing of the contract, Thomas took the clients to dinner at a cost of $150. How much of this dinner is deductible?

$75

A partnership has $1,000 of nonrecourse liabilities and $500 of recourse liabilities. The recourse liabilities are attributable to Karen who is a 50% partner. Karen contributed property with a fair market value of $400 and an adjusted basis of $250 for her interest in the partnership. The first year of business the partnership incurred a $4,000 loss. How much of this loss, if any, may Karen deduct on her tax return?

$750

In 20X1, Lakewood, a cash-basis partnership, incurred $8,000 of organizational expenses that were not paid until 20X2. The partnership began business on July 1, 20X1, and elected to amortize organizational expenses over a 180-month period on its 20X1 tax return. How much of the $8,000 organizational expense can the partnership deduct in 20X2?

$800

Which of the following statements regarding deductible taxes is correct?

1, 2, 3 and 4

What form does an applicable large employer with 50 or more full-time employees use to report information about health coverage to its employees?

1095-C

The Pine Tree Bakery has just opened for business and has elected to amortize its startup expenses. What is the number of months over which the start-up costs can be amortized?

180 mo.

Laura Wilson leased a building for 5 years beginning July 1, 20X1 and ending June 30, 20X6, for $1,250 per month. On July 1, 20X1 Mrs. Wilson paid $22,500 in rent to her landlord. Under the accrual method, how much can she deduct in each year for 20X1 and 20X2?

20X1 $7,500; 20X2 $15,000

Santergraph, Inc. remodeled and converted a portion of their building into a licensed child care facility open for the care of any of their employees' children. The cost of this remodeling qualifies for which of the following:

A general business tax credit of 25% of the qualified expenses, maximum credit of $150,000, with the balance depreciable.

Which of the following penalties paid by Castle Construction Corp is deductible?

A penalty for late performance of a contract.

An employee that qualifies for the work opportunity credit must be a member of a targeted group. All of the following are considered a targeted group EXCEPT:

A qualified relative of the employer

Which of the following costs qualify as business start-up costs?

A survey of potential markets.

Alex opened a repair garage to fix cars owned by his neighbors. He rented space and purchased equipment and tools. Although he did generate revenues, Alex experienced a loss during each of the first two years of operations. His expenses have exceeded his revenue and he has been using his personal credit cards to pay his bills. Which of the following statements is true?

Alex must make a profit in each of the next three years or he may need to treat this activity as a hobby.

The Lucky Corporation has just been formed. It has organizational costs that the corporation wishes to amortize. Which of the following tests must the Lucky Corporation meet before it can amortize the organizational costs? The costs are for the creation of the corporation The costs are chargeable to a capital account The costs could be amortized over the life of the corporation if the corporation had a fixed life All of the above

All

Which of the following taxpayers could be considered to be self-employed for the purposes of claiming the self-employed health insurance deduction? A sole proprietor of a home improvement business. A general partner in a law firm. A salaried employee of an S corporation who owns 50% of the corporation. All of the above

All

When determining the proper treatment of a corporation's organizational and start-up costs which of the following is correct?

Amortization of organization and start-up costs start with the month business operations begin.

Wages subject to federal employment tax include all but:

Amounts paid under an accountable plan

Which of the following vehicles is eligible for suspension of the heavy highway motor vehicle use tax?

An agriculture vehicle used 7,500 or fewer miles.

All of the following statements about fringe benefits are correct EXCEPT:

An employer can treat all meals furnished to employees on their premises as furnished for the employer's convenience if half of these employees are furnished the meals for a substantial nonpaid business reason.

In Dec. 20X1 Mr. Smith purchased a manufacturing plant for $92,600. The cost was allocated as follows: - Land (20%) - $18,520 - Building (80%) - $74,080 The following items relating to the property occurred before the property was placed in service on Jan. 1, 20X2: - Building remodeling expenses - $15,000 - Storage damage (casualty loss) to building - $9,000 - Amount received for granting easement for right-of-way - $2,500 - Legal fees for perfecting title paid - $3,600 What is the adjusted basis of the building and land on Jan. 1 20X2?

Building $82,960, Land $16,740

Which of the following is NOT a true statement regarding business bad debts?

Cash-basis taxpayers can take a deduction for amounts never received or collected.

Which of the following entities is subject to the passive activity rules at the entity level?

Closely held corporations.

Which of the following are NOT organizational costs that can be amortized?

Costs of issuing and selling stock

All of the following credits are part of the General Business Credit EXCEPT:

Credit for employer paid FICA on employee tips used to meet the federal minimum wage rate

Which of the following credits is not part of the General Business Credit?

Credit for prior year minimum tax

When an employer reimburses an employee for meals under an accountable plan while the employee is away from home, the employer must:

Deduct only 50% of the reimbursement on its tax return.

Kenneth's employer gives him $500 a month ($6,000 for the year) for his business expenses. Kenneth does not have to provide any proof of his expenses to his employer and he can keep any funds that he does not spend. His actual expenses for the year were $1,000 for lodging, $600 for meals while away from home, and $2,000 for entertainment. What reporting is required of Kenneth's employer and what reporting is required of Kenneth?

Employer adds $6,000 to wages reported on Kenneth's Form W-2; Kenneth takes no deductions on Form 2106 or Schedule A.

Which of the following is NOT a potential limitation on S corporation or partnership losses?

Excess business income limitations

If reporting by paper, the deadline to file Form 1095-C is:

Feb. 28

Applicable Large Employers (ALEs) must report to the IRS information about health care coverage, if any, they offered to full-time employees. To do this, they must use:

Forms 1094-C and 1095-C

Wages subject to federal employment tax include all but:

Insurance premia

A cafeteria plan is a written plan that allows employees to choose between receiving cash (or another taxable benefit) and certain qualified benefits for which the law provides an exclusion from wages (deferral). Which of the following can be included in a cafeteria plan?

Life insurance

Which of the following meals qualify for a 100% deduction?

Meals furnished to your employees as part of the expense of a company picnic

Ms. Miller set up a computer system for Mr. Town's business. In return, Mr. Town gave Ms. Miller a storage facility. Ms. Miller plans to use this facility for business purposes and plans to depreciate it. The FMV of Ms. Miller's Services and the storage facility was $50,000. Mr. Town's basis in the storage facility was $30,000. How should Ms. Miller treat the transaction and what is her depreciable basis for the property.

Ms. Miller should include $50,000 in income and use $50,000 as the basis for the storage facility.

Ned accepted stock in his employer's company valued at $1,000 instead of his $1,000 salary payment. Which tax consequence of this transaction is correct?

Ned must recognize $1,000 income because the stock is payment for services

Taxpayer A has $750,000 in net business losses in 2020. After applying the current year loss limitation for a single taxpayer, the remaining amount is:

Net operating loss (NOL) carryforward in subsequent taxable years.

Which of the following would be considered passive activity income? Alaska Permanent Funds dividends State, local, and foreign income tax refunds Personal service income None of the above

None

The Hamerstein Corporation is created in Year One and organization costs to get started amount to $46,000. For income tax purposes, which of the following statements is true with respect to the handling of these costs?

Organizational costs can be immediately deducted up to $5,000 with the remainder amortized to expense over 180 months.

A company begins operations on December 31, Year One and spends $6,000 on organization costs. Which of the following statements is true with respect to organization costs incurred by a corporation?

Organizational expenses can be immediately deducted up to $5,000.

Business taxpayers may deduct certain expenses which relate directly to the conduct of business. Of the following, which is NOT a deductible miscellaneous expense?

Political contributions

The general business credit consists of the following credits EXCEPT:

Qualified electric vehicle credit

Jaqueline's arts and crafts chain, Jaque De Art, offered minimum essential coverage to 15 of her 30 full-time employees. Eight employees qualify for the premium tax credit. What is her expected shared responsibility provision payment?

She does not need to make a shared responsibility payment

Which of the following costs would qualify as business organizational costs? State incorporation fees. State and local taxes. Deductible interest. None of the above.

State incorporation fees.

Which item below is NOT considered material participation for purposes of determining passive activity status?

Taxpayer is a landlord, and is not a real estate professional, who allows a rental agency to handle all rental activity

An election to amortize may be made for qualifying costs of organization for a business. Which of the following is NOT considered a qualifying cost?

The costs of acquiring assets.

Under the Affordable Care Act, Applicable Large Employers (ALEs) must either offer minimum essential coverage or potentially make an employer shared responsibility payment. Employers qualify as an ALE if:

The employer employed an average of at least 50 full time employees on business days during the preceding calendar year.

A corporation has paid several amounts this year and is now trying to determine which costs can be deducted for income tax purposes. Which of the following is necessary for an expense to be deductible?

The expense must be ordinary, necessary and reasonable in amount.

If a corporation transfers its stock to an employee as payment for services, the amount the corporation can deduct would be:

The fair market value of the stock on the date of the transfer less any amount paid by the employee.

On Jan. 2 20X1, XYZ Partnership purchased and placed in service a machine used for production purposes. The machine cost $10,000 plus $500 sales tax. XYZ Partnership financed the entire purchase price. During 20X1, XYZ Partnership paid total interest of $850 on the note. Concerning the income tax treatment of the above expenses, which of the following statements is correct?

The interest should be deducted as a current expense and the sales tax should be included in the basis of the machine.

The Investment Credit includes:

The rehabilitation credit and the qualifying advanced coal project credit.

A taxpayer is provided a $300 per month mileage allowance for business travel from employer. In order for this to be a non-taxable item, which of the following is true?

The taxpayer must adequately account for the expenses within 60 days after they were paid or incurred.

Each month Betsy's employer gives her $600 for her business expenses. Sometimes Betsy spends more than the $600. Once a year, she negotiates the amount of expense money with her employer but she is not required to submit any proof of how she spends the $600 per month. How should Betsy report her expenses on her return?

These expenses are no longer deductible.

Supplemental wages are compensation paid in addition to an employee's regular wages. They do NOT include payments for:

Travel reimbursements paid at the Federal Government per diem rate

Is there a tax credit available to small employers who establish a qualified retirement plan for their employees?

Yes, there is one credit of up to $5,000 for each of the first three years of establishment.

James Miller is a sommelier at boutique wine shop. On a Wednesday evening, he holds a meeting with several of the store's suppliers. The meeting lasts for several hours as they discuss various wines that will become available during the following year. After the meeting, at the request of his employer, Miller takes the entire group to a local minor league baseball game and pays for the entire event with his own money. How much of this cost can he deduct for income tax purposes?

Zero

Julia owns a small consulting firm. The company operates as a cash basis taxpayer. In January of the current year, the firm did work for a client and accepted a note for $40,000 plus interest at a 10 percent annual rate in lieu of immediate payment. After exactly six months, the client went bankrupt and the note was judged to be worthless. What is the amount of the bad debt expense deduction that this business is entitled to report?

Zero

The Hyldina Corporation has an account receivable for $10,000 from Prosgko Corporation that is outstanding at the end of 20X1. Hyldina believes that there is an 8 percent chance of collecting this receivable. Hyldina is an accrual basis taxpayer. What can be deducted by Hyldina on the company's 20X1 income tax return?

Zero