2. To be deductible for tax purposes, trade or business expenses must be:

a. Ordinary and necessary

b. Reasonable in amount

c. Related to an activity which is deemed to be a trade or business

d. All of the above

7. A business tax deduction for business gifts is restricted to $25 per year per:

a. Individual donor

b. Salesman

c. Business establishment

d. Individual donee

10. A deduction for salaries and wages can include:

a. Bonus payments

b. Payments for services performed in prior years

c. Advance payments for services to be performed in future years

d. Both (a) and (b)

13. An example of an expense not allowed as a deduction under Code Sec. 162(a) would be:

a. a speeding ticket.

b. an expense incurred while operating an illegal gambling business.

c. a government imposed penalty.

d. both a and c.

e. all of the above.

15. Which of the following types of taxes is not deductible?

a. State property taxes.

b. State income taxes.

c. Federal income taxes.

d. All of the above types of taxes are deductible.

17. A calendar-year corporation incurs $53,000 of start-up costs. If the corporation began business on August 1 of the current year, what is the maximum amount of the start-up costs that it can deduct against business income in the current year? (round your answer to the nearest dollar)

a. $3,417

b. $5,000

c. $2,000

d. $6,333

19. Moving expenses qualify as deductions if:

a. the employee's commute to the new job increases by at least 50 miles (before moving).

b. the employee is employed full-time in the new location for at least 39 of the first 52 weeks after the move.

c. both a and b.

d. none of the above.

24. Billy Ray owns several parcels of rental real estate, and he actively participates in managing the properties. His total loss from these activities in 2019 is $30,000. Assuming that his AGI for 2019 is $110,000, what is the allowable deduction from these properties in 2019?

a. $0

b. $15,000

c. $20,000

d. $30,000

25. Which of the following statements is incorrect?

a. A vacation home becomes a personal residence when its owner uses it more than the greater of 14 days or 10 percent of the number of rental days.

b. If a dwelling is classified as a personal residence, rental losses are not deductible.

c. If an individual rents out a vacation home for more than 14 days and does not use it excessively for personal purposes, losses are allowed to be deducted from AGI.

d. If an individual actively participates in the rental real estate activity, up to $25,000 of losses can be used to offset nonpassive income.

27. Fred's at-risk amount in a passive activity is $50,000 at the beginning of the current year. His current loss from the activity is $60,000. He had no passive activity income during the year. At the end of the year, which of the following statements is incorrect?

a. Fred has a loss of $50,000 suspended under the passive loss rules.

b. Fred has an at-risk amount in the activity of $0.

c. Fred has a loss of $10,000 suspended under the at-risk rules.

d. Fred has a loss of $60,000 suspended under the passive loss rules.

28. Which of the listed dispositions for a passive activity allow a taxpayer to keep the suspended losses from the disposed activity and utilize them on a subsequent taxable disposition?

a. Disposition of death.

b. Disposition by gift.

c. All of the above.

d. None of these.

29. Mark Miller, 52, paid the following medical expenses during 2019 (all in excess of reimbursement):

Hospital and doctor bills (for self and wife, 50)	$840
Medicine and drugs (for self and wife)	$730
Hospitalization insurance premiums	$6,200
Medicine and drugs (for dependent mother, age 71)	$1,060

Assuming the Millers' adjusted gross income was $60,000, how much of a medical expense deduction may the Millers claim on their joint return?

a. $1,770

b. $2,830

c. $4,330

d. $8,830

31. Karen Baker, a cash basis calendar year taxpayer, paid the following during 2018:

Social security tax (withheld from wages)	$6,120
Personal property taxes (ad valorem)	520
State income tax	5,000
State sales tax	3,800
Cigarette taxes	500
Fine for speeding	250

What itemized deduction may Karen claim for taxes on her return?

a. $5,520

b. $9,820

c. $10,000

d. $15,420

e. None of these

32. A business machine valued at $800 was contributed to a charitable organization during the year. The machine cost $1,000 but was depreciated down to $600 before the donation was made. Indicate the correct income tax treatment with respect to the donation.

a. Contribution of $600 (no income recognized)

b. Contribution of $1,000 (income of $200 recognized)

c. Contribution of $800 (income of $200 recognized)

d. Contribution of $800 (no income recognized)

e. None of these

TRUE or FALSE

43. Medical expenses recovered after being claimed as a deduction in the previous year must be included in income in the year of recovery to the extent that the deduction decreased taxable income in the year they were deducted

.

44. Vitamin pills taken daily for general health are qualified medical expense.

45. The itemized deduction for state and local taxes is limited to $10,000 after 2017.

46. Insurance proceeds received in the year of the casualty in a business casualty loss do not reduce the amount of the loss.

49. When a business borrows money to purchase tax exempt bonds, the interest paid on the loan is not deductible.