10/ Sue is a small business owner who often gives gifts to clients. She gives a $40 gift to her client, Mr. Smith, and his wife. Sue spent $6 to wrap the gift. She also gave out 400 calendars with her company name on them. Each calendar cost $1. Sue also gave her secretary a $370 watch for his 10 years of service. How much of the above expenses may she deduct?

a.$801

b.$795

c.$816

d.$446

e.None of these choices are correct.

11/

Which of the following would be a business bad debt if it were uncollectible?

a.A taxpayer loans his son $10,000 to purchase a rental house.

b.A dentist, using the accrual basis of accounting, records income when it is earned and extends credit to a patient for services provided.

c.A taxpayer loans his brother $3,000 to purchase a truck for use in his brother's business.

d.A taxpayer loans his father $1,000 to start a business.

e.None of these choices are correct.

13/ Which of the following factors are considered by the IRS in evaluating whether an activity is classified as a business or a hobby?

a.Financial status of the taxpayer

b.Income and loss history from the activity

c.The expertise of the taxpayer

d.The time and effort expended by the taxpayer

e.All of these choices are correct.