acct508

Match the business entity with the tax form used to report taxable income. Drag and drop application. Schedule C Form 1065 Form 1120S Form 1120

1). Sole proprietorship.2). Partnership3). S corporation.4). C corporation

True or false: In order to deduct travel expenses (as opposed to transportation expenses), the taxpayer must be away from home on a trip of sufficient duration to require sleep or rest.

t

Sonny incurred the following expenses last month in his self-employment business: Khaki pants and a blue button-down shirt to wear to work; tuition for a course in marketing to improve his current job skills as a fashion designer; and groceries so that he could take his lunch to work. Which of these expenses is/are deductible business expenses? Multiple choice question. none are deductible groceries for his lunches while at work tuition and clothing khaki pants and blue shirt tuition for the marketing course

tuition for the marketing course

The term----- is used to describe an expense that is normal or appropriate for the business under the circumstances.

ordinary

Ordinary and necessary business expenses are deductible only to the extent they are----- in amount.

reasonable

Which one of the following terms does the Internal Revenue Code use to describe deductible business expenses? Multiple choice question. Crucial Relevant Necessary Important

Necessary or ordinary

Alex purchased a personal lawn mower to use for mowing his lawn and the lawns at his rental properties. The depreciation expense for the mower was $300. At the end of the season, he documents that he used the mower 70% for his rental properties and 30% for personal purposes. How much can he deduct as a business expense? Multiple choice question. $0 $300 $90 $210

210

On December 1 of the current year, Jonathon pays $2,400 for a 12-month advertising contract that begins immediately. If Jonathon uses the cash method of accounting for his business, he will be able to deduct -----

2400

Lesa drives her car approximately 18,000 miles per year. During the most recent year, she drove 7,000 miles commuting to and from work, 4,500 miles for business-related conferences and client visits, and 6,500 miles for personal trips. How many miles are considered business miles and can be used to determine the tax deduction for transportation expenses? Multiple choice question. 11,500 0 4,500 18,000

4500

Due to the personal enjoyment element involved with meals, taxpayers may only deduct -----% of the actual cost.

50

Taxpayers are generally limited to deducting no more than -----percent of their adjusted taxable income, plus their business interest income, as a business interest deduction.

Blank 1: 30 or thirty

Although there are exceptions, a taxpayer or business using the cash method of accounting recognizes revenue when property or -----services are actually or received and recognizes deductions when the expense is------ .

Blank 1: constructively Blank 2: paid

In order to deduct the business portion of mixed motive expenses, taxpayers must have sufficient -----to prove the business use of the asset.

Blank 1: documentation, records, evidence, support, record-keeping, substantiation, record, documents, document, or record keeping

In reporting financial statement income, businesses have incentives to select accounting methods that accelerate----- and defer----- . In reporting taxable income, businesses have incentives to select accounting methods that accelerate----- and ------defer .

Blank 1: income, revenue, or revenues Blank 2: deductions, expenses, deduction, or expense Blank 3: deductions, expenses, deduction, or expense Blank 4: income, revenues, or revenue

All----- and------ expenses that are reasonable in amount and incurred in carrying on a trade or business are deductible for tax purposes.

Blank 1: ordinary Blank 2: necessary

The objective of business activities is to make a(n)----- . When a taxpayer's activity is pursued for personal pleasure, that activity is treated as a(n)----- when revenues and expenses are incurred.

Blank 1: profit Blank 2: hobby or hobbies

For 2020, taxpayers with average annual gross -----during the prior 3 years of------ million dollars are not subject to the business interest deduction limitation.

Blank 1: receipts or sales Blank 2: 26 or twenty-six

Which of the following statements is correct when describing the accounting methods used for tax versus financial reporting? Multiple choice question. Businesses have an incentive to maximize financial reporting income, but minimize taxable income. Taxable income and financial reporting income should equal the same amount. All reporting requirements for GAAP are permissible methods of reporting for tax purposes. Businesses must use the same accounting method for tax purposes that they use for financial reporting purposes.

Businesses have an incentive to maximize financial reporting income, but minimize taxable income. Taxable income and financial reporting income should equal the same amount. Reason: Certain deductions and revenues have different reporting requirements for tax purposes than for financial reporting purposes. All reporting requirements for GAAP are permissible methods of reporting for tax purposes. Reason: The tax code does not always follow GAAP requirements (i.e. deducting bad debts). Businesses must use the same accounting method for tax purposes that they use for financial reporting purposes. Reason: The tax code may require a different accounting method from the one currently used by a business for financial reporting.

Which of the following expenses is NOT included with deductible business travel expenses? Multiple choice question. Charlie paid $15 for dinner, eaten alone, at a restaurant adjoining his hotel while at the business conference. Charlie incurred $90 in transportation expenses when driving his personal car to a 3-day business conference. Charlie paid $50 to attend a play during his 3-day business trip. Charlie paid $200 for a hotel room in the hotel where the business conference was being held.

Charlie incurred $90 in transportation expenses when driving his personal car to a 3-day business conference.

Which of the following business expenses are deductible for tax purposes? (Check all that apply.) Multiple select question. Depreciation expense on a building used to store company vehicles Interest expense paid on loans to purchase tax-exempt securities Contributions to the governor's reelection campaign Legal fees incurred to defend the business in a lawsuit Traffic fines incurred by an over-the-road truck driver Advertising cost for ads placed in the local newspaper

Depreciation expense on a building used to store company vehicles Interest expense paid on loans to purchase tax-exempt securities no Contributions to the governor's reelection campaign Reason: Political contributions are not deductible. Legal fees incurred to defend the business in a lawsuit Reason: Legal fees are deductible, but fines and penalties are generally not deductible. Traffic fines incurred by an over-the-road truck driver Reason: Expenditures against public policy are not deductible. Advertising cost for ads placed in the local newspaper

Which of the following business expenses are disallowed or limited for tax purposes? (Check all that apply.) Multiple select question. Interest expense paid on loans to purchase automobiles owned and used by the business Entertainment expense Political contributions Lobbying expenses Interest expense paid on loans to purchase tax-exempt securities Rent expense Bribes and kickbacks Advertising expenses

Entertainment expense Political contributions Lobbying expenses Interest expense paid on loans to purchase tax-exempt securities Bribes and kickbacks

Which of the following choices is INCORRECT when defining the gross income of a business? Multiple choice question. Revenues from renting property is included in gross profit for rental businesses. Gross income for a business may be calculated as sales less returns and discounts. Gross income from a business includes gross profit from inventory sales. Gross income for a service business can be calculated as income from services provided.

Gross income for a business may be calculated as sales less returns and discounts.

Which of the following describes the difference between business activities and hobbies? Multiple choice question. Hobbies are not primarily profit-motivated. Hobbies do not generate revenue. Business activities do not have net losses. Business activities require a full-time work schedule.

Hobbies are not primarily profit-motivated.

Which of the following choices constitutes gross income from a business? (Check all that apply.) Multiple select question. Income from services provided Gross profit from inventory sales Income from renting property Revenue less business expenses

Income from services provided Gross profit from inventory sales Income from renting property

Which one of the following terms does the Internal Revenue Code use to describe deductible business expenses? Multiple choice question. Important Crucial Necessary Relevant

Necessary

On December 1 of the current year, Rhianna pays $2,400 for a 12-month advertising contract that will begin on March 1 of next year. Rhianna uses the cash method of accounting for her business. How much will Rhianna be able to deduct in the current year? Multiple choice question. $150 $2,400 $200 $0

Reason: Since the contract extends beyond the end of the following year and the effective date doesn't start until March, she can't deduct anything in the current year. $0

Which of the following criteria is NOT required for a business expense to be considered ordinary and necessary? Multiple choice question. Conducive to the business activities Helpful to the business Repetitive in nature Appropriate under the circumstances

Repetitive in nature

If a company uses a cash method of accounting, which of the following statements will be true? (Check all that apply.) Multiple select question. Revenue is recognized when cash is received no matter when the sale actually took place. Payments received in a noncash form (such as property or services) are NOT included in gross income. Prepaying expenses other than interest can result in an immediate tax deduction if the prepayment will be used up within 12 months. Expenditures for prepaid interest expense are deducted when paid.

Revenue is recognized when cash is received no matter when the sale actually took place. Prepaying expenses other than interest can result in an immediate tax deduction if the prepayment will be used up within 12 months.

Evan incurred education-related expenditures related to his self-employment job. Under which of the following circumstances will Evan NOT be allowed to deduct these expenditures as a BUSINESS expense? Multiple choice question. The course or courses only improve Evan's skills in his existing business. The course or courses qualify Evan for a new trade or business. The course or courses meet the requirements necessary to keep his job.

The course or courses qualify Evan for a new trade or business.

Which one of the following statements is correct regarding an asset that is used for both business and personal purposes? Multiple choice question. One-half of the expense related to the asset is deductible as a business expense. None of the expense related to the asset is deductible since this treatment would lend itself to taxpayer abuse. The entire amount of any expense related to the asset is deductible since it is necessary to have the asset for the business. The deductible business expense is determined by prorating the expenses based on the percentage of time it is used for business.

The deductible business expense is determined by prorating the expenses based on the percentage of time it is used for business.

Which of the following criteria is NOT required for a meal to be considered a tax-deductible business meal? Multiple choice question. The taxpayer or an employee of the taxpayer must be present for the meal. The meal must be directly associated with the active conduct of the business. The meal must be eaten on the business premises. The amount must be reasonable under the circumstances.

The meal must be eaten on the business premises.

Which of the information listed below is NOT a requirement of the documentation needed to substantiate the business portion of mixed motive expenses? Multiple choice question. The records should be contemporaneous. The time and business purpose should be included. The records should be written. The records should include written evidence of personal use. The records should include the amount.

The records should be contemporaneous. Reason: Taxpayers must maintain specific, written, contemporaneous records (of time, amount, and business purpose) for mixed-motive expenses. The time and business purpose should be included. Reason: Taxpayers must maintain specific, written, contemporaneous records (of time, amount, and business purpose) for mixed-motive expenses. The records should be written. Reason: Taxpayers must maintain specific, written, contemporaneous records (of time, amount, and business purpose) for mixed-motive expenses. a:The records should include written evidence of personal use. The records should include the amount. Reason: Taxpayers must maintain specific, written, contemporaneous records (of time, amount, and business purpose) for mixed-motive expenses.

Which of the following choices is NOT correct regarding deductible transportation expenses for a taxpayer using her personal vehicle for business purposes? Multiple choice question. The taxpayer can deduct the business portion of the actual costs of operating the vehicle plus depreciation. The taxpayer can deduct a standard mileage rate based on business miles driven. The taxpayer can deduct the business portion of the vehicle operating costs, plus depreciation, plus a standard mileage rate based on business miles. The taxpayer can NOT deduct the costs of commuting from her home to her regular place of business.

The taxpayer can deduct the business portion of the vehicle operating costs, plus depreciation, plus a standard mileage rate based on business miles.

When is a business expense deemed to be reasonable in amount? Multiple choice question. When it is not illegal When it is not extravagant When it is paid to a person or entity that is not related to the taxpayer

When it is not extravagant