For a taxpayer to be engaged in a trade or business, the expenses must be ordinary, necessary, and reasonable and have a business purpose. Which of the following would be allowed as a business expense? O Shifty Auto pays a bribe to the local police to look the other way O A-1 plumbing paints the outside of their building Mr. Nelson pays $5,000 for a present for his favorite client. O Amanda takes her brother out to lunch to talk about purchasing his car > Question 2 3 pts Veronica owns a building she uses to operate her bakery. During 2020, Veronica has several things done to the building. Which one is fully deductible as a repair & maintenance expense? O Replaced the roof O Installed new flooring throughout the building o Installed a new lighting system O Had the outside windows calked and weather proofed During 2020, Anthony has the following startup costs for his new restaurant business: Employee Training & Orientation Costs: $8,000 Legal and Accounting fees: $5,000 Market Research and Surveys: $7,000 . Anthony's business begins operations on January 1, 2021. Determine the amount that Anthony should deduct and when. O $5,000 in the 2020 tax year. $20,000 in the 2021 tax year. $20,000 in the 2020 tax year. O $6,000 in the 2021 tax year. Big-Time Business has $140,000 of revenues for the year. They also have the following expenses during the year: Cost of Goods Sold: $15,000 Meals : $6,000 Speeding Tickets: $7,000 Salaries: $20,000 What is the amount of Big-Time's Taxable Income? 102,000 $95,500 $92,000 99,000 Which one of the following costs is NOT fully deductible? O X-Corp writes off a $12,000 debt owed by Sam because he has not responded to their numerous requests for payment. O Travis owns a CPA firm and pays his son Joe as an associate. Joe is a CPA and is paid the same salary as the other associates. Ron pays $5,000 to the local community college to take classes to become an electrician O Sandra owns a mini golf course. She pays $12,000 in payroll taxes for her employees. Matt is a full-time engineer for Y-Corporation. On the weekends, Matt rents a booth at Budget Barbers where he styles hair. Matt made $5,000 in income and incurred the following expenses during the year for his hair-styling activities: Booth rent: $5,000 Property taxes on equipment: $200 Styling supplies: $1,000 Depreciation on equipment: $500 Which of the following statements is NOT true about Matt's hair styling activities? Matt's hair styling activities constitute a hobby and the income is nontaxable O If Matt qualifies for the standard deduction, he is required to claim the hobby income and receives no offsetting deductions. O Hobby expenses are only allowed to the extent of income O Since hobby expenses are considered personal in nature, only category 1 expenses are deductible as itemized deductions. Donna is self-employed as a consultant. She has the following taxes during the year: . City of Denver Tax: $2,000 State Income Tax: $4,000 Federal Income Tax: $12,000 Self-Employment tax: $5,000 . How much can she deduct for taxes paid for the year? O 8,500 O 6,000 0 23,000 O 17,000 Pamela earns a salary of $75,000 this year as an employee at a CPA firm. She pays the following amounts: . Continuing Professional Education credits: $3,000 (unreimbursed by her employer) Investment into her Traditional IRA: $5,500 . Child Support of $8,000 What is Pamela's Adjusted Gross Income (AGI)? O 69,500 O 58,000 O 72,000 O 67,000 Juan, Bob, and Susan each own a 1/3 interest in WOW! Partnership. Juan is in charge of day-to-day operations and manages the business while Bob and Susan sit on a beach sipping beverages. In the first year of operations, the partnership had a $30,000 loss. Who will be able to deduct the loss against other forms of income? O Juan & Bob O Juan only O No one, because it is a passive activity for all O Juan, Susan & Bob Question 10 3 pts Gerome started a dog grooming business in 2018. In his first year of operations, he made a profit of $20,000. For tax year 2019, he was able to generate a profit of $25,000. In 2020, things are slow and he made some new equipment purchases that he will be able to take depreciation on, resulting in a loss of $40,000. Which of the following statements is true: O Gerome can take $3,000 per year of the loss until it is used up. O Gerome can carry-back the loss 2 years and forward 20 years. Gerome cannot take any of the loss. O Gerome is required to carry the loss forward indefinitely. Amy earns an income of $50,000 this year as an employee of Rooster Enterprises. She pays the following amounts during the year: . Contribution to Traditional IRA: $5,000 Alimony paid to her ex-husband (they were divorced in 2017): $10,000 Medical Expenses: $6,000 . What is Amy's Adjusted Gross Income (AGI)? O 29,000 45,000 0 34,000 O 35,000 Alex earns an income of $60,000 this year as a sole proprietor. He pays the following amounts during the year: . . Contribution to Roth IRA: $5,000 Self-Employment Tax: $9,000 Health Insurance Premiums: $3,000 . What is Alex's Adjusted Gross Income (AGI)? O 51,000 52,500 47,500 O 52,000