1. Business expenses. Nayla spent the evening entertaining a business client. She spent $50 on their meal and $90 on show tickets. She hired her son to chauffeur them and paid him $220. She could have hired a professional chauffeur for $74. While her son was napping in the car, a parking enforcement officer issued a $25 parking ticket. How much of these expenses could Nayla deduct on Schedule C of her tax return?

2. Passive activities. Jhudora owns one rental property. She actively participates in managing the property, including identifying tenants and arranging for maintenance. She has suspended losses of $12,000 with respect to the property. This year, the property lost $24,000. Jhudora earns a salary of $85,000 this year working full time as a teacher. She has no other income or "for AGI" deductions. What is Jhudora's adjusted gross income (AGI)?

3. Sale of principal residence. Nabuwami and Idela, who are married and file jointly, bought a house on January 1, 2014, for $490,000. They used it as a principal residence until January 1, 2018. After that, they used it as a vacation home until they eventually sold it on January 1, 2020, for $860,000. (They did not take any depreciation deductions during the time it was a vacation home.) How much capital gain do they have to report on the sale?

4. Qualified business income. Quincy owns a small but fancy restaurant in Los Angeles. This is NOT a specified service trade or business. In 2020, he earned a net profit of $600,000 (i.e., profit after paying employee wages and other expenses). He is single. He also had $22,400 of interest income and took the standard deduction ($12,400). He had no other income. He had several employees who he paid a total of $200,000 in wages. He owned depreciable equipment he had bought 5 years earlier for $100,000 and no other property. How much is his qualified business income (QBI) deduction?

A. $100,000 [$200,000 wages x 50%]

B. zero

C. $120,000 [$600,000 QBI x 20%]

D. $52,500 [$200,000 wages x 25% + $100,000 property x 2.5%]

E. $122,000 [$610,000 taxable income x 20%]

5. Sale of principal residence. Felicia files her tax returns as head-of-household. For many years, she had lived in an apartment that she rented. She purchased a house on August 1 of last year, and lived in it as her principal residence. However, because the house did not have enough closet space for all of her clothes, Felicia had to sell the house on August 1 of this year and move to a more spacious condominium. She bought the house for $430,000 and sold it for $700,000. How much capital gain does Felicia have to report on this sale?