Linda is self-employed and spends $600 for business meals and $900 for business entertainment in the current year. What is Linda allowed to deduct in the current year for these expenses? a. $1,000 b. $600 c. $800 d. $750 e. None of these choices are correct

2-

Mikey is a self-employed computer game software designer. He takes a week-long trip to Maui, primarily for business. He takes 2 personal days at the beach. How should he treat the expenses related to this trip?

a.None of the expenses are deductible since there was an element of personal enjoyment in the trip.

b.50 percent of the trip should be deducted as a business expense.

c.The cost of all of the airfare and the expenses related to the business days should be deducted, while the expenses related to the personal days are not deductible.

d.100 percent of the trip should be deducted as a business expense since the trip was primarily for business.

3-

The net operating loss (NOL) provisions of the Internal Revenue Code

a.Allow the deduction for home mortgage interest to create an NOL.

b.Require the use of a 2-year carryback in all cases.

c.Apply only to individuals with wages, itemized deductions, and personal exemptions.

d.Are primarily designed to provide relief for trade or business losses.

e.Would not be necessary if tax rates were progressive.

4-

The home office deduction is an easy way for a taxpayer to show a loss on his or her tax return.

True

False

5-

Tim loaned a friend $4,000 to buy a used car. In the current year, Tim's friend declares bankruptcy and the debt is considered totally worthless. What amount may Tim deduct on his individual income tax return for the current year as a result of the worthless debt, assuming he has no other capital gains or losses for the year?

a.$3,000 short-term capital loss

b.$4,000 short-term capital loss

c.$4,000 ordinary loss

d.$2,000 short-term capital loss

e.$3,000 ordinary loss

6-

Generally, for an activity to be treated as a trade or business, which of the following is required?

a.Regular and continual effort designed to seek profit

b.Organization as a corporation or partnership

c.Always generate a profit

d.No more than intermittent effort toward the activity

7-

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

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

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

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

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

e.None of these choices are correct.

8-

During the 2016 holiday season, Bob, a barber, gave business gifts to 34 customers. The values of the gifts, which were not of a promotional nature, were as follows: 10 at $10 each 8 at $25 each 8 at $50 each 8 at $100 each For 2016, what is the amount of Bob's business gift deduction?

a.$1,500

b.$700

c.$850

d.$0

e.None of these choices are correct.

9-

Which of the following is not a test to deduct business expenses?

a.The expense must be reasonable

b.The expense must have a legitimate business purpose

c.The expense must be lavish and extravagant

d.The expense must be ordinary and necessary