5-1. George operates a business that generated revenues of $55 million and allocable taxable income of $1.30 million. Included in the computation of allocable taxable income were deductible expenses of $242,500 of business interest and $252,500 of depreciation. What is the business interest limitation that George will be subject to this year if the business does not qualify under the gross income test? Multiple Choice

a. $495,000

b. $462,750

c. $390,000

d. $314,250

e. $230,500

2. Bill operates a proprietorship using the cash method of accounting, and this year he received the following:

• $200 in cash from a customer for services rendered this year
• a promise from a customer to pay $180 for services rendered this year
• tickets to a football game worth $200 as payment for services performed last year
• a check for $190 for services rendered this year that Bill forgot to cash

How much income should Bill realize on Schedule C? Multiple Choice

a. $200

b. $380

c. $400

d. $390

e. $590

3. Don operates a taxi business, and this year one of his taxis was damaged in a traffic accident. The taxi was originally purchased for $24,500, and the adjusted basis was $1,750 at the time of the accident. The taxi was repaired at a cost of $2,625 and insurance reimbursed Don $715 of this cost. What is the amount of Don's casualty loss deduction? Multiple Choice

a. $1,035

b. $2,625

c. $1,910

d. $1,750

e. Don is not eligible for a casualty loss deduction

4. Mike started a calendar-year business on September 1^st of this year by paying 12 months of rent on his shop at $550 per month. What is the maximum amount of rent that Mike can deduct this year under each type of accounting method? Multiple Choice

a. $6,600 under the cash method and $6,600 under the accrual method

b. $2,200 under the cash method and $6,600 under the accrual method

c. $6,600 under the cash method and $2,200 under the accrual method

d. $2,200 under the cash method and $2,200 under the accrual method

e. $2,200 under the cash method and zero under the accrual method

5. Ed is a self-employed heart surgeon who lives in Michigan and has incurred the following reasonable expenses. How much can Ed deduct?

$1,720 in airfare to repair investment rental property in Colorado. Primary purpose is business.

$570 in meals at restaurants while attending a medical convention in New York.

$335 for tuition for an investment seminar, "How to pick stocks."

$134 for tickets to a football game with hospital administrators to celebrate successful negotiation of a surgical contract earlier in the day.

The correct answer is _____ blank.

Multiple Choice

a. $2,290 "for AGI"

b. $2,055 "for AGI" and $352 "from AGI"

c. $532 "for AGI"

d. $114 "for AGI" and $2,055 "from AGI"

e. None of the choices are correct.