1. Generally, taxpayers are not permitted to deduct losses on personal-use property. However, under certain circumstances, an individual may deduct a casualty or theft loss on personal-use property as an itemized deduction if: A. The loss is also a qualified business income deduction. B. It is attributable to a federally declared disaster. C. It is a loss greater than $4,000. D. The loss is solely attributable to a hurricane.

2. Individuals may take a for AGI deduction for interest paid on qualified education loans. The maximum amount of the deduction is: A. $1,000 B. $1,500 C. $2,500 D. $22,500 if the taxpayers filing status is married filing jointly.

3. Unreimbursed employee expenses are A. Deductible in full as a for AGI deduction. B. Not deductible C. Deductible in full as an itemized deduction. D. Subject to a 50% limit for their deductibility as a for AGI deduction.

4. The deductibility of a business meal expense must meet five tests to be deductible. Which of these is NOT one of the tests? A. Food and beverages are provided to a current or potential business contact. B. The expense is not lavish or extravagant under the circumstances. C. The amount paid for alcoholic beverages must be clearly itemized on the receipt. D. The taxpayer is present in the furnishing of the food or beverages.

5. The deductibility of education expenses has been a frequent source of controversy and litigation. The principal area of disagreement has been A. The amount of CPE paid by a CPA. B. Whether the education has been paid for by the employer. C. The amount of money paid by the taxpayer for their education. D. The interpretation of the term qualifies the taxpayer for a new trade or business.

6. Regarding deferred compensation, one of the distinguishing features of a defined benefit plan is A. The contributions are not currently deductible, as the compensation is deferred. B. Forfeitures related to unvested amounts are used to reduce future employer contributions. C. A contribution formula is established based on actuarial techniques. D. A Revenue Ruling, issued by the IRS must be used to determine the deductibility of the deferred compensation.

7. Bad debt losses from nonbusiness bad debts are A. Not currently deductible. B. Deductible, but only to the extent of ordinary losses. C. Treated as an itemized deduction. D. Deductible as a short-term capital loss.

8. Mr. Frdric Chopin acquires three machines for $60,000, which have FMVs of $30,000, $20,000, and $10,000, respectively. Mr. Chopin pays $3,000 to have the machines delivered and installed. What is the basis of machine number 3? A. Zero B. $10,500 C. $21,000 D. $31,500

9. LTCGs for corporations are taxed at a rate of A. 20% B. 21% C. 25% D. 28%, if the capital gain is related to the sale of collectibles.

10. On October 20, 2018, Clarence Henderson paid $400 for an option to acquire 100 shares of Greensboro Corporation stock for $50 a share at any time before February 19, 2019. The price never exceeds $50 before February 19, 2019. As a result, Clarence does not exercise the option. As a result, A. Clarence recognizes a STCL of $400 in 2019 B. Clarence has a realized, but unrecognized STCL of $400 in 2019. C. Clarence recognizes a STCL of $400 in 2018 D. Clarence has a realized, but unrecognized STCG of $400 in 2018.

11. The IRS imposes stringent recordkeeping requirements for travel, entertainment, gifts, and similar types expenses incurred by the taxpayer. Which of these is NOT one of the recordkeeping requirements. A. The date and a description of the gift B. The business purposes of the expenditure. C. A signature from the taxpayers employer, authorizing the expenditure. D. The time and place of the travel or entertainment.

12. The tax laws place restrictions and disallowances on certain types of deductions and losses. Which of these is NOT one of the restrictions/disallowances. A. Gambling winnings/gains. B. Wash sales. C. Hobby activities D. Office-in-the-home

13. Certain activities of a taxpayer have both a profit motive and personal (pleasurable) attributes. Reg. Sec. 1.183-2(b) list factors the IRS uses to determine whether an activity is profit-motivated. Which of these is NOT a factor? A. The taxpayers financial status. B. The expertise of the taxpayer. C. Whether the assets used in the activity are expected to appreciate in value. D. The filing status of the taxpayer.

14. For a business or investment expense to be deductible, it must meet three tests. Which of these is NOT one of the tests? A. Expected. B. Ordinary C. Necessary D. Reasonable

15. Unlike individual taxpayers, a corporation may take a deduct for a charitable contribution it accrues, if the corporation actually makes the contribution by A. The first day of the next taxable year. B. The fifteenth day of the third month following the close of the year in which the pledge is made. C. The first day of the fourth month, following the close of the year in which the pledge is made. D. The fifteenth day of the fourth month, following the close of the year in which the pledge is made.

16. In general, the amount of a donation of long-term capital gain property is its FMV. However, if long-term capital gain property is donated to a private non-operating foundation, the amount of the contribution is the propertys FMV and A. Is increased by the 8.3% excise tax the non-operating foundation must pay to accept such a gift. B. The non-operating foundation must immediately sell the property for the donation to be deductible to the donee. C. Is reduced by the capital gain that would be recognized if the property was sold at its FMV on the date of the contribution. D. Is reduced by the 8.3% excise tax the non-operating foundation must pay to accept such a gift.

17. Hugh Masekela exchanges land, subject to a liability of $20,000 for $40,000 of stock owned by Herbert Von Karajan. Herbert takes the property, subject to the liability. If Hughs basis in the land is $53,000, what is Hughs gain or loss? A. $113,000 gain. B. $73,000 gain. C. $33,000 loss D. $7,000 gain.

18. Qualifying expenditures for medical treatment are A. Deductible for AGI. B. Only deductible for chronically ill taxpayers. C. Deductible from AGI, to the extent they exceed 7.5% of AGI. D. Deductible from AGI, to the extent they exceed 10% of AGI.

19. Certain types of taxes are deductible as an itemized deduction. Which of these taxes is NOT deductible. A. State income taxes. B. Real estate taxes. C. The employees portion of Social Security and other payroll taxes. D. Property taxes.

20. Business gifts are deductible, but are subject to an annual ceiling amount of A. $10 per donee. B. $20 per donee. C. $25 per donee. D. $100 per donee.

21. A safe harbor allows a taxpayer the option of claiming a home office deduction. (Assuming all the other strict rules as to eligibility are met.) The maximum total deduction under this safe harbor is: A. $500 B. $750 C. $1,250 D. $1,500

22. One of the distinguishing features of a SEP (Simple Retirement Plan) is A. The plan can be adopted by employers who have 125 employees. B. All contributions to an employees SIMPLE account must be fully vested. C. Elective contributions by employees cannot be matched by the employer. D. The SEP must be reviewed and approved by a Certified Public Accountant

23. One of the requirements for a business expense to be deductible is that it must also be necessary. The U.S. Supreme Court has indicated that an expense is considered necessary if it is A. Legal B. Appropriate and helpful C. Not lavish or extravagant under the circumstances D. Properly substantiated.

24. Occasionally, the courts have allowed taxpayers a deduction that has not been properly substantiated. This is known as A. The Diamond rule. B. The recognized rule C. The expectation rule. D. The Cohen rule

25. Legal fees incurred with the purchase of property are A. Fully deductible in the year incurred. B. Capitalized and added to the cost of the property. C. Deductible to the extent they exceed 10% of AGI. D. Capitalized, then amortized over the life of the property.