Question 6:

i) Generally, deductions FOR adjusted gross income on an individual's tax return include all the following types of expenses except those:

A) incurred in gambling activities.

B) incurred in a trade or business.

C) incurred in the production of rent income.

D) incurred in the production of royalty income.

ii) In 2019, Sean, who is single and age 44, received $55,000 of gross income and had $5,000 of deductions for AGI and $12,600 of itemized deductions. Sean's taxable income is:

A) $37,400.

B) $37,800.

C) $42,400.

D) $50,000.

iii) To be tax deductible, an expense must be all of the following except:

A) ordinary and necessary.

B) paid in cash.

C) reasonable in amount.

D) an expense of the taxpayer.

iv) Which of the following individuals is not considered a relative for purposes of the related parties loss disallowance rules under Sec. 267?

A) brother

B) husband

C) sister-in-law

D) grandfather

v) Which of the following factors is not used to determine whether an activity is a hobby or a business?

A) the taxpayer's expertise in the activity

B) the taxpayer's financial status

C) the personal pleasure derived from the activity

D) the success of the taxpayer in other dissimilar activities