1. Factors to determine if an activity is profit-motivated include all of the following except:

A. The number of employees the taxpayer employs in carrying on the activity.

B. The time and effort expended by the taxpayer in carrying on the activity.

C. The taxpayers history of income or losses with respect to the activity.

D. The expertise of the taxpayer or the taxpayers advisors.

2. Legal and accounting fees are only deductible from AGI as miscellaneous itemized deductions.

True

False

3. The burden of proof lies with the taxpayer; therefore, it is necessary to maintain proper documentation to support expenditures. Supporting documentation should include receipts, cancelled checks, and paid bills. However, it is possible for a deduction to be allowed without proper substantiation if the expenditure clearly has been made.

True

False