Income Tax Chapter 6
a. True
b. False
ANSWER: False
RATIONALE: Deductions are a matter of legislative grace. The only deductions allowed are those specifically provided for by statute, rulings, etc.
2. Mitch is in the 28% tax bracket. He may receive a different tax benefit for a $2,000 expenditure that is classified as a deduction from AGI than he will receive for a $1,000 expenditure that is classified as a deduction for AGI.
a. True
b. False
ANSWER: True
RATIONALE: The value of the tax benefit to Mitch for the deduction from AGI may be less than that for the deduction for AGI. The value of the deduction for AGI for a taxpayer in the 28% bracket for a $2,000 expenditure is $560 ($2,000 × 28%). If Mitch takes the standard deduction rather than itemizing deductions, then the $2,000 expenditure that is classified as a deduction from AGI has no tax benefit.
3. Depending on the nature of the expenditure, expenses incurred in a trade or business may be deductible for or from AGI.
a. True
b. False
ANSWER: False
RATIONALE: Such expenses are deductible for AGI.
4. Only some employment related expenses are classified as deductions for AGI.
a. True
b. False
ANSWER: True
RATIONALE: Unreimbursed employee expenses are classified as deductions from AGI while reimbursed employee expenses are classified as deductions for AGI.
5. Section 212 expenses that are related to rent and royalty income are deductions for AGI.
a. True
b. False
ANSWER: True
6. Alice incurs qualified moving expenses of $12,000. If she is reimbursed by her employer, the deduction is classified as a deduction for AGI. If not reimbursed, the deduction is classified as an itemized deduction.
a. True
b. False
ANSWER: False
RATIONALE: Moving expenses are classified as deductions for AGI.
7. Expenses incurred for the production or collection of income generally are deductions from adjusted gross income.
a. True
b. False
ANSWER: True
RATIONALE: Two exceptions are those
b. False
ANSWER: False
RATIONALE: Deductions are a matter of legislative grace. The only deductions allowed are those specifically provided for by statute, rulings, etc.
2. Mitch is in the 28% tax bracket. He may receive a different tax benefit for a $2,000 expenditure that is classified as a deduction from AGI than he will receive for a $1,000 expenditure that is classified as a deduction for AGI.
a. True
b. False
ANSWER: True
RATIONALE: The value of the tax benefit to Mitch for the deduction from AGI may be less than that for the deduction for AGI. The value of the deduction for AGI for a taxpayer in the 28% bracket for a $2,000 expenditure is $560 ($2,000 × 28%). If Mitch takes the standard deduction rather than itemizing deductions, then the $2,000 expenditure that is classified as a deduction from AGI has no tax benefit.
3. Depending on the nature of the expenditure, expenses incurred in a trade or business may be deductible for or from AGI.
a. True
b. False
ANSWER: False
RATIONALE: Such expenses are deductible for AGI.
4. Only some employment related expenses are classified as deductions for AGI.
a. True
b. False
ANSWER: True
RATIONALE: Unreimbursed employee expenses are classified as deductions from AGI while reimbursed employee expenses are classified as deductions for AGI.
5. Section 212 expenses that are related to rent and royalty income are deductions for AGI.
a. True
b. False
ANSWER: True
6. Alice incurs qualified moving expenses of $12,000. If she is reimbursed by her employer, the deduction is classified as a deduction for AGI. If not reimbursed, the deduction is classified as an itemized deduction.
a. True
b. False
ANSWER: False
RATIONALE: Moving expenses are classified as deductions for AGI.
7. Expenses incurred for the production or collection of income generally are deductions from adjusted gross income.
a. True
b. False
ANSWER: True
RATIONALE: Two exceptions are those