5 multiple choice questions

1. A sample of multiple choice problems is provided below. are available at money-education.com by accessing" choice problems is provided below. Additional multiple choice problem money-education.com by accessing the Student Practice Portal All of the following expenses incurred when an indi individual travels from his office to a di place of business to discuss business matters will quan es to discuss business matters will qualify as a business deduction, EXCEP a. A $6 toll to cross the commerce bridge. b. Mileage expense for the round trip to visit the client. c. A $30 parking ticket for parking in a no-parking zone since no other parkin spaces were available. d. Cost of printing material for the client meeting. 2. Happy Harry not only uses d appy Harry not only uses drugs, he also sells them to a circle of friends and associates Tz year, Harry grossed $650,000 from drug sales. He paid $125,000 to his street pushers compensate them for their services, $200,000 for the raw drugs, $30,000 for rent for the du processing and packaging plant, and $30,000 in supplies and equipment leasing costs. How much income will be subject to tax on Harry's income tax return? a. $275,000. b. $325,000. c. $450,000. d. $650,000. 3. John, a single individual, is an avid coin collector. To raise some money to support his hobby, John began to occasionally buy and sell coins about 10 years ago, incurring business-related expenses in those transactions. John does not consider himself to be in the business of dealine in coins, and over the time he has been selling coins, he has never made a profit. This year, John grossed $4,000 in sales, and had $4,500 in expenses associated with the activity. John's AGI for the year (including any inclusion due to the coin trading activity) is $50,000, and aside from the coin trading loss, his only other permissible itemized deductions are mortgage interest of $8,000 and real estate taxes of $2,500. Which of the following statements concerning this situation is correct? a. John will take the $500 loss from the coin business into his gross income. b. Since he has never made money from the activity, he is not required to report the purchase and sale transactions on his return. C. John can offset the $4,000 in income with $4,000 of his expenses, so the coin trading activity will have no impact on his AGI. d. The increase in John's taxable income as a result of the coin trading activity is equal to the income of $4,000. Seth owns a mansion built year, an international saj descend on the town orporation, a custom designer of ile on the cliff of a large island overlooking the Atlantic Ocean. Each onal sailing race takes place around the Island, and large co clients and business associates to entertain them. Carman designer of racing sailboats, is particularly interested in this event cach week and a half of the race, they rent Seth's mansion, paving him $20 ant to rent the home, but decided that since it would only be a week on vacation himself at that time. Seth incurs some costs associated storage charges for his valuables of $10,000, cleaning expenses after the rental of $8,000 and he estimates that the pro-rata portion od of the rental is $1,000. How much income from this rental activity will be year, and for the week and Ar first, Seth was hesitant to rent th and a half, he could go on vacation bime with the rental, including storage taxes for the period of the rentalis included in Seth's AGI? a $0. b. $181,000 c. $190,000 d. $200,000 Keegan owns and operates an engineering consulting business as a sole proprietorship. For max reporting, Keegan uses the cash method. Last year, he provided services to a local builder. and upon completing the task he was asked to do, he sent an invoice to the builder for $5.000. The builder never paid the bill, and recently filed for bankruptcy, so Keegan will not be able to collect the amount due. How should this bad debt be treated for income tax purposes? a. No bad debt deduction is permitted. b. Keegan may deduct $5,000 from his business income. c. Keegan may deduct $5,000 as a short-term capital loss. d. Keegan may deduct $5,000 as a long-term capital loss