Which of the following tests is not used to determine whether an employees pay is

deductible as an expense?

Depending upon the taxpayers method of accounting, payments are made or

expenses are incurred for services rendered during the year.

A.Payments are made for services

B. actually performed.

C. Payments for services an employee rendered are ordinary and necessary and are

directly or indirectly connected with your trade or business.

D. Payments for services an employee rendered are reasonable. This test is based on

the circumstances at the time you contract for the services, not on those existing

when the amount of pay is questioned.

For a domestic corporation to deduct a percentage of the dividends it receives from a

foreign corporation, certain tests must be met. Which of the following conditions need

not be present?

A. The domestic corporation owns at least 10% of the foreign corporation.

B. The corporation is not a foreign personal holding company.

The foreign corporation has derived income effectively connected with its U.S.

business amounting to at least 50% of its gross income from all sources for a 36-

month period.

C. The foreign corporation has derived income effectively connected with its U.S.

business amounting to at least 50% of its gross income from all sources for a 36-

month period.

D. The foreign corporation has income effectively connected with a trade or business

in the U.S.

Which of the following is a characteristic of a simple trust?

A. A trust in the final year of administration.

B. A trust that is partially liquidated during the taxable year.

C. A trust that is allowed a personal exemption deduction of $300.

D. A trust that distributes an amount out of corpus.