5. XYZ Company leased an office suite. The lease term was 5 years. XYZ spent $5,000 to have the space divided into office cubicles prior to taking possession of the property. At the end of the five year lease XYZ moved to another location. XYZ had taken $700 of depreciation deductions for the leasehold improvements when they moved. What happens to the remaining $4,300 of leasehold improvements?

a) XYZ continues to depreciate the $4,300 over the next 10 years.

b) XYZ should deduct the $4,300 as a loss on abandonment in the year they leave the property.

c) XYZ should continue to depreciate the improvements as if they had not moved.

d) XYZ will never be able to deduct the $4,300.

6. Susan purchased a piece of land two years ago. She planned to build a new building for her landscape business. (Sole-proprietorship). She did not construct the building and decided to sell the land and made a $5,000 profit on the sale of the land.

Which form or forms (other than the 1040) will Susan use to report the gain?

a) Schedule C

b) Form 4797 Part I and Schedule D

c) Schedule B

d) Form 4797 Part III and Schedule D

7. Section 1245 refers to all of the following except:

a) Gains from real property

b) Timber

c) Gains from the sale of MACRS personal property

d) Gains from claimed or allowable depreciation

Complete Schedule C (Form 1040) based on the following scenario: Sophie Dubois is self-employed as a motivational speaker. The office for her company, Dubois Drives, is located at 3671 Williamsburg Road. At the end of the year she receives Form 1099-MISC from the various colleges where she has worked instead of receiving Form W-2. The total from all of the 1099-MISC forms she received is $38,474 for the current tax year. In addition to speaking engagements, Sophie sells DVDs and CDs of her speeches. The income from this is $19,000 received through credit card sales.

Sophie's expenses include:

Advertising $ 1,050 Office supplies $ 235 Personal draw $14,000 Rent $9,000

Electricity $ 924 Travel (hotels) $3,246 Health insurance $ 2,460 Travel (meals) $ 692 Business license $ 120 Travel (airfare) $4,864

Sophie drove a total of 13,636 miles for the year. Included in this total were her 721 commuting miles and 4,643 business miles. Sophie's car was put into service on July 16, 2014; this is the only vehicle she owns. She has written proof of her mileage and wishes to use the standard mileage rate. Answer the following questions based on the Schedule C (Form 1040) you completed for Sophie Dubois:

Select the gross income: a) $54,474 b) $57,474 c) $38,474 d) $43,474

Select the total expenses: a) $22,455 b) $36,455 c) $22,801 d) $22,870

Select the net profit or (loss): a) $34,673 b) $35,019 c) $21,019 d) $34,604