Q1) Susan and Alan are students. During the summer, Susan worked for a painting company, painted 3 houses, and was paid $15 per hour by the company. Alan also painted 3 houses, but under contract to each of the owners for a fixed fee. Which of the following best describes the tax position of Susan and Alan?

1) Susan earned employment income and can deduct a limited number of expenses. Alan earned business income and, subject to some limitations, may be able to deduct most expenses incurred to earn that income.

2) Both Susan and Alan earned business income and can deduct expenses incurred to earn their income.

3) Both Susan and Alan earned employment income, and income tax must be withheld from their remuneration by the payer.

4) Susan earned employment income and Alan earned business income. Both Susan and Alan must have income tax withheld from their remuneration by the payer.

Q2) Which of the following statements is not correct regarding business income?

1) A profit made from an organized gambling business can be taxable.

2) An amount won in a lottery is taxable.

3) A profit made from an illegal business can be taxable.

4) A profit made from private betting for mere pleasure is generally not taxable

Q3)Hank operates a small consulting business from his home. The office in his home is his principal place of business. Which of the following correctly describes the home office expenses that can be deducted for tax purposes?

1) He does not qualify for home office deductions.

2) He can only deduct property taxes, utilities, and repairs.

3) He can only deduct property taxes and utilities.

4) He can deduct mortgage interest, property taxes, utilities, insurance, and repairs.