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Course 611065- Small Business Tax Secrets
  Final Exam
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611065v - Small Business Tax Secrets

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Taxation
13 CPE Credit Hours
4/23/2024
Final Exam
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Read 'Chapter 1: What is a Business for Tax Purposes?' & answer the following question(s):
1. Investors report gains and losses on Schedule C.
2. A dealer or trader of real estate reports rental income and deductions on Schedule E, Part I.
3. Relevant factors in determining a profit motive include:
4. The financial status of a taxpayer is relevant in determining profit motive for a trade or business.
5. Hobby expenses are subject to the reduction by 2% of Adjusted Gross Income (AGI).
6. According to the Supreme Court, 'ordinary' means:
7. According to the Supreme Court, an expense which occurs only once in a taxpayer's lifetime may not be considered 'ordinary'.
8. 'Necessary' according to the Supreme Court means no more than "appropriate and helpful' in running your business.
Read 'Chapter 2: Choices for Business Organization' & answer the following question(s):
9. As an employee earning in excess of $87,000 in 2003, your additional income from your part time sole proprietorship is only subject to 2.9% self-employment tax.
10. This type of entity is treated as a partnership for tax purposes:
11. A general partner is personally liable for the debts of the partnership.
12. A partner reports his share of partnership profits shown on Schedule K-1 only if it was distributed to him in the current taxable year.
13. For tax purposes, special allocations of a partnership must have:
14. Guaranteed payments as compensation for services are subject to self employment tax for:
15. A partner's basis in the partnership is increased by:
16. The penalty tax on accumulated earnings of a corporation can be avoided if the corporation can prove that the accumulation is for reasonable business needs.
17. A shareholder may recognize a loss on boot received.
18. Capital losses that cannot be taken in the current year can be carried forward to future years.
19. Capital losses are fully deductible against capital gains.
20. A corporation will not be disallowed S Corp status if it:
21. S Corp shareholders must pay tax on their shares of corporate income regardless of whether it is actually distributed.
22. If you form a corporation and immediately elect S Corp status, there may be certain situations in which you are taxed at the corporate level.
23. The advantages of a Limited Liability Company (LLC) organizational structure include:
24. A potential advantage of an S Corp organizational structure is the ability of S Corp shareholders to avoid Social Security taxes on their share of corporate income above a reasonable wage.
Read 'Chapter 3: Tax Accounting Methods and Periods' & answer the following question(s):
25. The following taxpayers are required to use accrual accounting for tax purposes:
26. The IRS position, in general, is that prepaid income is recognized when received by accrual method taxpayers.
Read 'Chapter 4: Limitations on Use of Your Home' & answer the following question(s):
27. Deductions for the business use of your home may not exceed net income derived from the business use.
28. Disallowed home office expenses may not be carried forward.
29. Pursuant to IRC Section 280A, qualified use of a home office includes:
30. The burden of proof for any deductions you claim is on you.
31. Balancing your personal checkbook in your home office violates the exclusivity test of IRC Section 280A.
32. A taxpayer's ability to claim home office deductions is not affected by the taxpayer conducting substantial nonadministrative or nonmanagement activities at a fixed location of business outside the home.
33. If you meet clients at your home office, you must still meet the 'principle place of business' requirement in order to deduct your home office expenses.
34. You may avoid the 'principle place of business' requirement by housing your home office in a separate free standing structure on your residential property that you use regularly and exclusively in connection with your trade or business.
35. According to the Seventh Circuit Court of Appeals, but not necessarily the IRS, if you can show that your facilities at work are inadequate for the work you are required to do as an employee, your home office will meet the 'convenience of the employer' test.
36. Unreimbursed employee expenses are deducted as miscellaneous itemized deductions on Schedule A and are subject to the reduction by 2% of AGI.
Read 'Chapter 5: Form 8829 Line by Line' & answer the following question(s):
37. Tier one deductions reported on Part II of Form 8829, Expenses for Business Use of Your Home, are deductions that would be allowed on Schedule A even if you had no home office.
38. Direct expenses reported on Form 8829 should be multiplied by the business percentage calculated earlier.
39. Telephone expenses should be included on Form 8829, Line 19, Utilities.
40. For purposes of computing depreciation on the business portion of your home, your home's adjusted basis generally includes:
Read 'Chapter 6: Planes, Trains, and (Especially) Automobiles' & answer the following question(s):
41. If your home office does not qualify as your 'principle place of business' and you have another regular work location in the same city, transportation costs between your home and the other work location is considered:
42. In determining an automobile's adjusted basis when using the standard mileage allowance, for year 2002, depreciation will be considered to have been allowed at the rate of:
43. A business use Escalade SUV, weighing in excess of 6000 pounds, will depreciate faster than a business use Pinto, weighing 3000 pounds because the luxury automobile limit will not apply.
44. To qualify for the new 30% depreciation allowance, your car must:
45. If you lease a car to use for your business, and use the actual cost method, the lease payments are deductible in lieu of depreciation, subject to certain limits for luxury cars.
Read 'Chapter 7: Other Common Business Deductions' & answer the following question(s):
46. An employee who is reimbursed for all business related expenses may be able to skip Form 2106 and not report either the reimbursement or the expense.
47. Computers are considered to be:
48. General requirements for property qualified for the new 30% depreciation allowance include:
49. The new 30% depreciation allowance is deductible for:
50. The Section 179 election must be made within a three year period beginning the first year the property was placed in service.
51. You may allocate a Section 179 deduction amongst different properties.
52. Excess Section 179 deductions limited by taxable income cannot be carried forward to future years.
53. Taxable business income for purposes of calculating the limit on Section 179 deductions includes net income from all businesses you and your spouce (if filing a joint return) actively conduct during the year.
54. Business gifts are deductible to the extent of $25 per donee per year.
55. Effective in tax year 2003, self-employed individuals can deduct 100% of their health insurance premiums above the line.
56. A Savings Incentive Match Plan for Employees (SIMPLE) can be set up by:
Read 'Chapter 8: Other Taxes' & answer the following question(s):
57. Generally, you are not an independent contractor if you are receiving payments from someone who has the right to control or direct only the result of your work, not specifically what you do or how you do it.
58. The following worker is considered a 'statutory employee':
Read 'Chapter 9: Records You Better Keep' & answer the following question(s):
59. The elements you must be able to prove for travel expenses DO NOT include:
60. Listed property generally includes:
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