Income Tax
1. Near year end, P, a cash basis, calendar year taxpayer, paid for various deductible expenses as described below.
1. The payment was dropped in the mail before year end.
2. P gave a note evidencing her promise to pay the amount in three months.
3. The amount was charged on her Master Card on December 28. The charge appeared on her bill for the period December 1 through December 31, which she received in January and which she paid on January 20. The bank actually paid the expense in January.
4. The amount was paid using the pay by phone service provided by her bank. P called in the charge on December 20. The bank sent her a statement indicating that it had paid the charge on January 3.
P may deduct the expense in which cases?
a. 1
b. 1 and 2
c. 1 and 3
d. 1, 3, and 4
e. 1, 2, 3, and 4
2. The crucial reason for determining whether an item is deductible as an expense under § 162 or under § 212 is that
a. production of income expenses are not deductible.
b. § 162 business expenses usually are deductions for A.G.I., while § 212 production of income expenses usually are miscellaneous itemized deductions.
c. § 162 business expenses are deductions from A.G.I., while § 212 production of income expenses are deductions for A.G.I.
d. it resolves certain ownership questions.
3. C purchased two cars in 2010 a Corvette for $20,000 and a Buick for $10,000. Both cars were used solely for personal purposes. During the year, C sold the Corvette to a car collector for $24,000 and the Buick for $7,000. Based on these two transactions he will report
a. a gain of $1,000.
b. a gain of $4,000.
c. a gain of $4,000 and a loss of $3,000.
d. no gain or loss.
4. F, a calendar year, cash basis taxpayer, started a business on June 1. Her lease required monthly payments of $1,000 beginning on June 1. Insurance for the premises, also begun on June 1, was to be paid every six months and cost $600 for each six month period (she paid her premiums due on June 1 and
1. The payment was dropped in the mail before year end.
2. P gave a note evidencing her promise to pay the amount in three months.
3. The amount was charged on her Master Card on December 28. The charge appeared on her bill for the period December 1 through December 31, which she received in January and which she paid on January 20. The bank actually paid the expense in January.
4. The amount was paid using the pay by phone service provided by her bank. P called in the charge on December 20. The bank sent her a statement indicating that it had paid the charge on January 3.
P may deduct the expense in which cases?
a. 1
b. 1 and 2
c. 1 and 3
d. 1, 3, and 4
e. 1, 2, 3, and 4
2. The crucial reason for determining whether an item is deductible as an expense under § 162 or under § 212 is that
a. production of income expenses are not deductible.
b. § 162 business expenses usually are deductions for A.G.I., while § 212 production of income expenses usually are miscellaneous itemized deductions.
c. § 162 business expenses are deductions from A.G.I., while § 212 production of income expenses are deductions for A.G.I.
d. it resolves certain ownership questions.
3. C purchased two cars in 2010 a Corvette for $20,000 and a Buick for $10,000. Both cars were used solely for personal purposes. During the year, C sold the Corvette to a car collector for $24,000 and the Buick for $7,000. Based on these two transactions he will report
a. a gain of $1,000.
b. a gain of $4,000.
c. a gain of $4,000 and a loss of $3,000.
d. no gain or loss.
4. F, a calendar year, cash basis taxpayer, started a business on June 1. Her lease required monthly payments of $1,000 beginning on June 1. Insurance for the premises, also begun on June 1, was to be paid every six months and cost $600 for each six month period (she paid her premiums due on June 1 and