MULTIPLE CHOICE PROBLEMS awal wriple choice w ll e problem is provided below. Adelina e a mang dwon.com by accessing the Studio Student Practice A wal travels from his or Lify as a business dedustan the following expenses incurred when an individual play of business to discuss business matters will qualify A $6 roll to cross the commerce bridge, Mileage expense for the round trip to visit the clien A S10 parking ticket for parking in a no-parking spaces were available, d. Cost of printing material for the client meeting. o Since not Grends and to his with 000 for rent for the leasingcom Happy Harry not only uses drugs, he also sells them to a circle of Harry grossed $650,000 from drug sales. He paid $125.000 compensate them for their services, $200,000 for the raw drugs $20 processing and packaging plant, and $30,000 in supplies and equipment much income will be subject to tax on Harry's income tax return a $275,000 b. $325,000. C $450,000 d. $650,000 oney to support his hot wing business- nd over the actions. John dore coins about 10 selling der himself, 50incurrin Pport business of mafu. This you Pear Ginesales, and 3. John, a single individual, is an avid coin collector. To raise some money to suppo John began to occasionally buy and sell coins about 10 years ago, incurring bus expenses in those transactions. John does not consider himself to be in the business in coins, and over the time he has been selling coins, he has never made a profit. Th John grossed $4,000 in sales, and had $4,500 in expenses associated with the activity Al for the year (including any inclusion due to the coin trading activity) is so aside from the coin trading loss, his only other permissible itemired deductions are interest of $8,000 and real estate taxes of $2,500. Which of the following state concerning this situation is correct? a lohn will take the $500 loss from the coin business into his gross income b. Since he has never made money from the activity, he is not required to report the purchase and sale transactions on his return. John can offset the $4.000 in income with $4,000 of his expenses, so the com trading activity will have no impact on his AGI. d. The increase in John's taxable income as a result of the coin trading activity equal to the income of $4,000. ons are more 336 CHAPTER 8: OTHER DEDUCTIONS, PENALTIES, AND Loss DISALLOWANCE Chapter 8 w a mansion bini an internationala and on the town, invi warioa custom desie, for the week and a half of the ile on the cliff of a large island overlooking the Atlantic ocean. Each sailing race takes place around the Island, and large corporations inviting clients and business associates to entertain them. Carman designer of racing sailboats, is particularly interested in this event cach a half of the race, they rent Seth's mansion, paying him $200.000. or to rent the home, but decided that since it would only be week vacation himsell at that time. Seth incurs some costs associated ing storage charges for his valuables of $10,000, cleaning expenses of $8.000 and he estimates that the pro-rata portion of real estate a rental is $1,000. How much income from this rental activity will be of the race, that is particlates to cand large co and for to rent the home, buy sent Seth's mainterested in this first, Seth was hesita half. he could go on vaca al with the rental, inch after the rental of $8,000 and he Active and after for the period of the re cluded in Seth's AGI? # $0. b. $181.000. c. $190,000. d. $200,000. Kagan owns and on tax reporting. Keegan use and upon completing the $5.000. The builder be able to collect the amo and operates an engineering consulting business as a sole proprietorship. For can uses the cash method. Last year, he provided services to a local builder, erine the task he was asked to do, he sent an invoice to the builder for bilder never paid the bill, and recently hled for bankruptcy, so Keegan will not che amount due. How should this bad debt be treated for income tax purposes a. No bad debt deduction is permitted. b. Keegan may deduct $5,000 from his business income c. Keegan may deduct $5,000 as a short-term capital loss. d. Keegan may deduct $5,000 as a long-term capital loss