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Activities that are profit-motivated and require a relatively high level of involvement from the taxpayer are referred to as----- activities. (Enter only one word per blank.)

Blank 1: business or trade

Investment interest expense is deducted----- AGI while self-employed business expenses are deducted -----AGI. (Enter only one word per blank.) Listen to the complete question

Blank 1: from Blank 2: for

True or false: Business expenses are deducted for AGI and reported directly on Form 1040.

False Reason: The revenues and expenses of a business are reported on a separate schedule. The resulting profit or loss is transferred to the Form 1040.

Which of the following characteristics are required for a business expense to be deductible? (Check all that apply.) Multiple select question. Repetitive Directly related to business activity Ordinary Critical for business success Necessary

Directly related to business activity Ordinary Necessary

The deduction for qualified business income cannot exceed the greater of: (i) -----percent of the wages paid with respect to the qualified trade or business, or (ii)-----the sum of percent of the wages with respect to the qualified trade or businesses plus 2.5% of the unadjusted basis, immediately after acquisition, of all qualified property in the qualified trade or businesses.

Blank 1: 50 or fifty Blank 2: 25, twenty five, or twenty-five

Which of the following statements are CORRECT when comparing For AGI deductions to From AGI deductions? (Choose all that apply.) Multiple select question. From AGI deductions are generally preferred over deductions for AGI. Certain from AGI deductions may not have an effect on taxable income despite the taxpayer incurring the expense. Deduction for AGI reduce AGI thus reducing the limitations on other tax benefits that are decreased or phased out for higher income taxpayers. For AGI deductions are also called deductions "below the line" or "itemized deductions." For AGI deductions are subtracted directly from adjusted gross income.

Deduction for AGI reduce AGI thus reducing the limitations on other tax benefits that are decreased or phased out for higher income taxpayers. Certain from AGI deductions may not have an effect on taxable income despite the taxpayer incurring the expense.

Which of the following expenses are deductible FOR AGI? (Check all that apply.) Most expenses generated by investment activities Unreimbursed employee business expenses Expenses generated by rental and royalty activities Most expenses generated by business activities

Expenses generated by rental and royalty activities Most expenses generated by business activities

Chose the statement that is INCORRECT regarding a loss that is generated from the disposal or sale of assets for individuals? When capital losses exceed capital gains, up to $3,000 can be deducted for AGI. Losses from personal use assets are deductible for AGI. Losses from capital assets are deductible against gains from capital assets. Losses from business assets are deductible for AGI.

Losses from personal use assets are deductible for AGI.

Horatio and Maria are married and have three children. Horatio is self-employed and pays health insurance premiums for himself and his family. Which of the following situations would disqualify part or all of the premium costs from being deductible for AGI? Multiple choice question. Horatio's net income from his business exceeds the cost of the health insurance premiums. Maria has an employer-sponsored health insurance plan available at work, but they do not participate. One of Horatio's children is not a dependent because she is 25 and earns too much income. Horatio and Maria's children are all dependents for tax purposes.

Maria has an employer-sponsored health insurance plan available at work, but they do not participate.

Which of the following terms describes business expenses that would be deductible by the taxpayer? (Check all that apply.) Multiple select question. Necessary Appropriate Crucial Ordinary Helpful Authorized Repetitive in nature

Necessary Appropriate Ordinary Helpful

Bruce is a CPA who operates his tax service business as a sole proprietorship. He files a joint tax return with his wife. Their tax return reported $445,000 in taxable income before any QBI deduction. Is Bruce eligible to claim the deduction for QBI for his tax service?

No Reason: Since their taxable income is above the $326,600 threshold for MFJ + $100,000, Bruce may not claim the QBI deduction.

Multiple Choice Question Which of the following descriptions BEST defines business activities? Multiple choice question. Profit-motivated, but not requiring a high level of effort from the taxpayer Profit-motivated and requiring a high level of effort from the taxpayer Motivated primarily by personal enjoyment and requires a high level of effort from the taxpayer Motivated primarily by personal enjoyment, but does not requires a high level of effort from the taxpayer

Profit-motivated and requiring a high level of effort from the taxpayer

Mike sold equipment he is no longer using in his business at a loss of $4,000, and he sold investments at a loss of $8,000. Mike had no other sales of property in the current year. What are the tax implications of these losses to Mike? Multiple choice question. Deduct $3,000 of the loss on equipment and $3,000 of the loss on investment in the current year. The remaining losses are carried forward. Deduct the $4,000 loss on equipment and $3,000 of the loss on investment in the current year. The remaining investment loss is carried forward. Deduct both losses in their entirety in the current year. Deduct the $4,000 loss on equipment but not the $8,000 investment loss as this is considered a personal asset.

Reason: Business losses are fully deductible for AGI, but taxpayers are only allowed to deduct capital losses (investment) against capital gains. Any excess capital loss is allowed to reduce AGI by $3,000 in the current year. The remainder is carried forward. Deduct the $4,000 loss on equipment and $3,000 of the loss on investment in the current year. The remaining investment loss is carried forward.

Bruce is a CPA who operates his tax service business as a sole proprietorship. He files a joint tax return with his wife. Their tax return reported $361,600 in taxable income and $375,000 in profit from the tax service, before the deduction for qualified business income (QBI). How much of the income from Bruce's tax services is eligible for the QBI deduction?

Reason: Since their taxable income is above the $326,600 threshold for MFJ but below $426,600, the phase-out rules apply. ($361,600 - $326,600) = $35,000 ÷ $100,000 phase out = 35% is not eligible for the QBI deduction. $243,750 is eligible ($375,000 × 65%). $243,750

Which of the following statements regarding the deduction for qualified business income is incorrect? Multiple choice question. The wage-based limits only apply to taxpayers with taxable income in excess of $326,600 (in the case of a joint return). The wage-based limit is phased in ratably over $100,000 for married filing joint returns. For purposes of the wage-based limit, each partner is treated as having wages for the year equal to his or her allocable share from the partnership. The deduction cannot be claimed unless the taxpayer also itemizes his or her deductions.

The deduction cannot be claimed unless the taxpayer also itemizes his or her deductions.

Which of the following statements is correct? Multiple choice question. A business calculates net income or loss for tax purposes. Details do NOT have to be reported on the tax return, but records must be retained by the company to present in the event of an audit. Businesses attach financial accounting income statements to tax returns and report the profit or loss reported directly on Form 1040. The revenues and expenses from a business are reported on Schedule C and the resulting profit or loss is transferred to Form 1040.

The revenues and expenses from a business are reported on Schedule C and the resulting profit or loss is transferred to Form 1040.

Expenses associated with generating rental or royalty income are deductible AGI. (Enter only one word per blank.)

for

Taxpayers have a choice of deducting the standard deduction or their itemized deductions. Therefore, ______ AGI deductions are considered to be beneficial to more taxpayers because: Multiple choice question. for; they are available to all eligible taxpayers, not just those that itemize deductions. from; they result in a lower AGI which reduces the limitations based on AGI that decrease some tax benefits. from; these deductions reduce a taxpayer's tax liability dollar for dollar. for; these deductions increase the amount of the standard deduction.

for; they are available to all eligible taxpayers, not just those that itemize deductions. from; they result in a lower AGI which reduces the limitations based on AGI that decrease some tax benefits. Reason: Since from AGI deductions are subtracted AFTER determining AGI, they do not affect AGI or the corresponding limitations. from; these deductions reduce a taxpayer's tax liability dollar for dollar. Reason: Tax deductions reduce taxable income. Tax credits reduce the tax liability dollar for dollar. for; these deductions increase the amount of the standard deduction. Reason: The regular standard deduction amounts are based on filing status. They do not increase due to other deductible expenses.

Multiple Choice Question Rental activities ______. Multiple choice question. may be classified as investment activities or business activities, but the expenses are always deducted for AGI are always classified as business activities and the expenses are deducted for AGI are always classified as investment activities and the expenses are deducted from AGI may be classified as investment activities or business activities, but the expenses are always deducted from AGI

may be classified as investment activities or business activities, but the expenses are always deducted for AGI