Chapter 6: Deductions And Losses

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subject School Berkeley University of Califor
subject Course TAX ACCOUNTING
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True/False
1.Deductionsareallowedunlessaspecificprovisioninthetaxlawprovidesotherwise.
a.True
b.False
ANSWER: False
RATIONALE: Deductionsareamatteroflegislativegrace.Theonlydeductionsallowedarethose
specificallyprovidedforbystatute,rulings,etc.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-01-LO:6-01
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
CopyrightCengageLearning.PoweredbyCognero.Page1
Chapter06:DeductionsandLosses:InGeneral
2.Mitchisinthe24%taxbracket.Hemayreceiveadifferenttaxbenefitfora$2,000expenditurethatisclassifiedas
adeductionfromadjustedgrossincome(AGI)thanhewillreceivefora$2,000expenditurethatisclassifiedasa
deductionforAGI.
a.True
b.False
ANSWER: True
RATIONALE: ThevalueofthetaxbenefittoMitchforthedeductionfromAGImaybelessthanthat
forthedeductionforAGI.ThevalueofthedeductionforAGIforataxpayerinthe
24%bracketfora$2,000expenditureis$480($2,000×24%).IfMitchtakesthe
standarddeductionratherthanitemizingdeductions,thenthe$2,000expenditurethatis
classifiedasadeductionfromAGIhasnotaxbenefit.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-01-LO:6-01
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Measurement-
AICPA:FN-Measurement
KEYWORDS: Bloom's:Analysis
OTHER: Time:5min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
3.UnreimbursedemploymentrelatedexpensesareclassifiedasdeductionsforAGI.
a.True
b.False
ANSWER: False
RATIONALE: Unreimbursedemployeeexpensesaremiscellaneousitemizeddeductionssubjecttothe
2%ofAGIfloor,whicharenolongerdeductible.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-01-LO:6-01
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
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Chapter06:DeductionsandLosses:InGeneral
4.Section212expensesthatarerelatedtorentandroyaltyincomearedeductionsforAGI.
a.True
b.False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-01-LO:6-01
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
5.Aliceincursqualifiedmovingexpensesof$12,000in2019.Ifsheisnotreimbursedbyheremployer,thedeductionis
classifiedasadeductionforAGI.
a.True
b.False
ANSWER: False
RATIONALE: Movingexpensesarenolongerdeductiblefor2019.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-01-LO:6-01
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
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Chapter06:DeductionsandLosses:InGeneral
6.Investmentrelatedexpenses,suchaspayingafeetoaninvestmentmanager,generallyaredeductionsfrom
adjustedgrossincomein2019.
a.True
b.False
ANSWER: False
RATIONALE: Suchexpenseare2%miscellaneousitemizeddeductions,whicharenolonger
deductiblefor2019.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-01-LO:6-01
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
7.TheCodedoesnotspecificallydefinewhatconstitutesatradeorbusiness.
a.True
b.False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-01-LO:6-01
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
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Chapter06:DeductionsandLosses:InGeneral
8.Anexpenseneednotberecurringinordertobe“ordinary.”
a.True
b.False
ANSWER: True
RATIONALE: Anexpenseisordinaryifitisnormal,usual,orcustomaryinthetypeofbusiness
conductedbythetaxpayerandisnotcapitalinnature.However,theexpenseneednot
berecurringtobedeductibleasordinary.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-01-LO:6-01
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
9.Aaron,ashareholder-employeeofPigeon,Inc.,receivesa$300,000salary.TheIRSclassifies$100,000ofthis
amountasunreasonablecompensation.TheeffectofthisreclassificationistodecreaseAaron’sgrossincomeby
$100,000andincreasePigeon’sgrossincomeby$100,000.
a.True
b.False
ANSWER: False
RATIONALE: WhileAaron’sdividendincomeincreasesby$100,000,hissalaryincomedecreasesby
$100,000.Thus,hisgrossincomedoesnotchange.Pigeon’sgrossincomedoes
increaseby$100,000.(Pigeon'sdeductionsdecreaseby$100,000asdividend
paymentsarenotdeductiblebyacorporationwhichcausesPigeon'staxableincometo
increaseby$100,000).
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-01-LO:6-01
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Measurement-
AICPA:FN-Measurement
KEYWORDS: Bloom's:Application
OTHER: Time:5min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
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Chapter06:DeductionsandLosses:InGeneral
10.Theportionofashareholder-employee’ssalarythatisclassifiedasunreasonablehasnoeffectontheamountofthe
shareholder-employee’sgrossincomebutresultsinanincreaseinthetaxableincomeofthecorporation.
a.True
b.False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-01-LO:6-01
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Measurement-
AICPA:FN-Measurement
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
11.Generally,acloselyheldfamilycorporationisnotpermittedtotakeadeductionforasalarypaidtoafamilymember
incalculatingcorporatetaxableincome.
a.True
b.False
ANSWER: False
RATIONALE: Onlyunreasonablesalariesarenotdeductible.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-01-LO:6-01
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
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Chapter06:DeductionsandLosses:InGeneral
12.Onlyunderlimitedcircumstancescanalossonthesaleofapersonaluseassetbededucted.
a.True
b.False
ANSWER: False
RATIONALE: Undernocircumstancescansuchalossbededucted.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-01-LO:6-01
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:5min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
13.TheincomeofasoleproprietorshipisreportedonScheduleC(ProfitorLossfromBusiness).
a.True
b.False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-01-LO:6-01
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
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Chapter06:DeductionsandLosses:InGeneral
14.Dependingonthenatureoftheexpenditure,expensesincurredinatradeorbusinessmaybedeductiblefororfrom
AGI.
a.True
b.False
ANSWER: False
RATIONALE: SuchexpensesaredeductibleforAGI.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-01-LO:6-01
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
15.Thecashmethodcanalwaysbeusedbyacorporationevenifinventoryandcostofgoodssoldareasignificant
income-producingfactorinthebusiness.
a.True
b.False
ANSWER: False
RATIONALE: Theaccrualmethodmustbeusedinthesecasesunlessthegrossreceiptstestismet.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-02-LO:6-02
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
CopyrightCengageLearning.PoweredbyCognero.Page8
Chapter06:DeductionsandLosses:InGeneral
16.Ataxpayer’snoteorpromisetopaysatisfiesthe“actuallypaid”requirementforthecashbasismethodof
accounting.
a.True
b.False
ANSWER: False
RATIONALE: Promisingtopayorissuinganotedoesnotsatisfytheactuallypaidrequirement.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-02-LO:6-02
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
17.Isabellaownstwobusinessentities.Shemaybeabletousethecashmethodforoneandtheaccrualmethodforthe
other.
a.True
b.False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-02-LO:6-02
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
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Chapter06:DeductionsandLosses:InGeneral
18.Underthe12-monthruleforthecurrent-perioddeductionofprepaidexpensesofcashbasistaxpayers,theasset
mustexpireorbeconsumedbytheendofthetaxyearfollowingtheyearofpayment.
a.True
b.False
ANSWER: True
RATIONALE: Iftheone-yearruleisnotsatisfied,theprepaymentisproratedanddeductedoverthe
benefitperiod.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-02-LO:6-02
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
19.NoneoftheprepaidrentpaidonSeptember1byacalendaryearcashbasistaxpayerforthenext18monthsis
deductibleinthecurrentperiod.
a.True
b.False
ANSWER: False
RATIONALE: Theamountpaidforthe18-monthperiodisnotalldeductibleinthecurrenttaxyear
becausetheprepaymentperiodextendssubstantiallybeyondtheendofthetaxyear
followingtheyearofpayment(i.e.,mustbecapitalized).However,thatportionofthe
prepaidrentthatrelatestoSeptemberthroughDecemberofthecurrenttaxyearmay
bedeductedinthecurrenttaxyear.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-02-LO:6-02
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
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Chapter06:DeductionsandLosses:InGeneral
20.Theperiodinwhichanaccrualbasistaxpayercandeductanexpenseisdeterminedbyapplyingtheeconomic
performanceandalleventstests.
a.True
b.False
ANSWER: True
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-02-LO:6-02
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
21.Theamountoftheadditiontothereserveforbaddebtsforanaccrualmethodtaxpayerisallowedasadeductionfor
taxpurposesbutisnotallowedforacashmethodtaxpayer.
a.True
b.False
ANSWER: False
RATIONALE: Areserveforestimatedexpenses(e.g.,baddebt)isnotallowedtoanaccrualmethod
taxpayerfortaxpurposesbecausetheeconomicperformancetestcannotbesatisfied.
Foracashmethodtaxpayer,thereisnoadditiontothereserveforbaddebtsbecause
incomethatwouldhavegeneratedadebthasnotbeenrecognized.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-02-LO:6-02
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
CopyrightCengageLearning.PoweredbyCognero.Page11
Chapter06:DeductionsandLosses:InGeneral
22.Alldomesticbribes(i.e.,toaU.S.official)aredisallowedasdeductions.
a.True
b.False
ANSWER: True
RATIONALE: However,apaymenttoaforeignofficialisdeductibleifitisnotinviolationofthe
ForeignCorruptPracticesActof1977.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-03-LO:6-03
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
23.Finesandpenaltiespaidforviolationsofthelaw(e.g.,illegaldumpingofhazardouswaste)aredeductibleonlyifthey
relatetoatradeorbusiness.
a.True
b.False
ANSWER: False
RATIONALE: Finesandpenaltiespaidforviolationsoflawsareneverdeductible.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-03-LO:6-03
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
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Chapter06:DeductionsandLosses:InGeneral
24.SusanisasalesrepresentativeforaU.S.weaponsmanufacturer.Shemakesa$100,000“grease”paymenttoa
U.S.governmentofficialassociatedwithaweaponspurchasebytheU.S.Army.Shemakesasimilarpaymenttoa
SaudiArabiangovernmentofficialassociatedwithasimilarsale.NeitherofthesepaymentsisdeductiblebySusan’s
employer.
a.True
b.False
ANSWER: False
RATIONALE: ThepaymenttotheU.S.officialisnotdeductible.However,unlessthepaymentis
illegalundertheForeignCorruptPracticesActof1977,thepaymenttotheSaudi
officialcanbededucted.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-03-LO:6-03
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:5min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
25.Thecostoflegaladviceassociatedwiththepreparationofanindividual’sFederalincometaxreturnthatispaidin
2019isnotdeductiblebecauseitisapersonalexpense.
a.True
b.False
ANSWER: True
RATIONALE: ThisdeductionisdisallowedundertheTaxCutsandJobsAct(TCJA)of2017.
Miscellaneousitemizeddeductionssubjecttothe2%ofAGIfloorarenolonger
allowedasadeduction.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-03-LO:6-03
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
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Chapter06:DeductionsandLosses:InGeneral
26.Two-thirdsoftrebledamagepaymentsundertheantitrustlawarenotdeductible.
a.True
b.False
ANSWER: True
RATIONALE: Onlyone-thirdofsuchpaymentsisdeductible.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-03-LO:6-03
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Measurement-
AICPA:FN-Measurement
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
27.Thelegalcostofhavingawillpreparedisnotdeductible.
a.True
b.False
ANSWER: True
RATIONALE: Thisisanondeductiblepersonalexpense.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-03-LO:6-03
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
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Chapter06:DeductionsandLosses:InGeneral
28.LegalexpensesincurredinconnectionwithrentalpropertyaredeductionsfromAGI.
a.True
b.False
ANSWER: False
RATIONALE: ThisisadeductionforAGI.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-03-LO:6-03
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
29.Legalfeesincurredinconnectionwithacriminaldefensearenotdeductibleevenifthecrimeisassociatedwitha
tradeorbusiness.
a.True
b.False
ANSWER: False
RATIONALE: Inthiscircumstance,thelegalfeesaredeductible.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-03-LO:6-03
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
CopyrightCengageLearning.PoweredbyCognero.Page15
Chapter06:DeductionsandLosses:InGeneral
30.Ifataxpayeroperatesanillegalbusiness,nodeductionsarepermitted.
a.True
b.False
ANSWER: False
RATIONALE: Theusualexpensesforoperatinganillegalbusinessaredeductible.But§162disallows
adeductionforfines,bribestopublicofficials,illegalkickbacks,andotherillegal
payments.However,forillegaltraffickingindrugs,§280Edisallowsalldeductions.
POINTS: 1
DIFFICULTY: Easy
QUESTIONTYPE: True/False
HASVARIABLES: False
LEARNINGOBJECTIVES:IITX.SWFT.2020.LO:6-03-LO:6-03
NATIONALSTANDARDS: UnitedStates-BUSPROG:Comprehension
STATESTANDARDS: UnitedStates-AK-AICPA:FN-Reporting
KEYWORDS: Bloom's:Knowledge
OTHER: Time:2min.
DATECREATED: 1/9/20192:02PM
DATEMODIFIED: 2/22/20192:38PM
Chapter06:DeductionsandLosses:InGeneral

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