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| 1 | |
Self-employed individuals are required to report income and expense items related to the business on Schedule C. |
| | A) | True |
| | B) | False |
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| 2 | |
To be deductible on Schedule C, expenditures must be ordinary and reasonable but not necessary. |
| | A) | True |
| | B) | False |
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| 3 | |
Depreciation is deductible on all business assets including buildings and land. |
| | A) | True |
| | B) | False |
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| 4 | |
In order for non-client meals to be deducted during business travel, an overnight stay is required. |
| | A) | True |
| | B) | False |
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| 5 | |
There is an income limit on which the Medicare portion of self-employment tax is assessed. |
| | A) | True |
| | B) | False |
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| 6 | |
Trade or business expenses are deductible if: |
| | A) | the activity is considered a hobby. |
| | B) | only if they are ordinary, necessary, and reasonable. |
| | C) | the activity has income.. |
| | D) | A deduction from AGI. |
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| 7 | |
Which of the following is a "trade or business" expense? |
| | A) | Interest on investment indebtedness. |
| | B) | A capital loss sustained on business property. |
| | C) | Depreciation on business property. |
| | D) | Mortgage interest expense. |
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| 8 | |
On June 6, 2004, Cline purchased equipment for $25,000 to be used in his business. He did not elect to expense the equipment under Section 179. On January 3, 2007, he sells the equipment to a scrap metal dealer. What is the cost recovery deduction for 2007? |
| | A) | $0. |
| | B) | $1,561. |
| | C) | $3,123. |
| | D) | $3,573. |
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| 9 | |
Computer equipment is depreciated for regular MACRS purposes under what method and for how many years. |
| | A) | Straight-line; 5 years. |
| | B) | Double-declining balance; 5 years. |
| | C) | Straight-line; 7 years. |
| | D) | Double-declining balance; 7 years. |
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| 10 | |
On July 8, 2007, Davis purchased some furniture and fixtures for $18,000 to be used in his business. He did not elect to expense the equipment under Section 179. What is the cost recovery deduction for 2007? |
| | A) | $0. |
| | B) | $1,286. |
| | C) | $2,572. |
| | D) | $3,600. |
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| 11 | |
Sabrina purchased an office building on December 30, 2007 for $378,000, $55,000 of which was for the land. What is the cost recovery deduction for 2007? |
| | A) | $0. |
| | B) | $346. |
| | C) | $404. |
| | D) | $491. |
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| 12 | |
Section 179 expense is available for all of the following business assets except: |
| | A) | Office equipment. |
| | B) | Business auto. |
| | C) | Bulldozer used in business. |
| | D) | All of the above. |
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| 13 | |
Samantha purchased (equally through-out the year) $200,000 worth of business equipment. Before the cost recovery deduction, Samantha has business income of $400,000. What is Samantha's maximum cost recovery concerning the equipment? |
| | A) | $0. |
| | B) | $28,580. |
| | C) | $125,000. |
| | D) | $135,718. |
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| 14 | |
Which of the following is true with respect to the standard mileage rate? |
| | A) | It encompasses depreciation or lease payments, maintenance and repairs, gasoline, oil, insurance, and vehicle registration fees. |
| | B) | It can not be used if the taxpayer owns the vehicle and uses the standard mileage rate for the first year it was placed in service. |
| | C) | It includes parking fees, tolls, and property taxes on the vehicle. |
| | D) | It includes interest expense on acquisition of the automobile. |
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| 15 | |
Jake goes on a business trip and has the following expenditures:
| Meeting Registration Fees | $700 | | Airfare | $350 | | Meals | $300 | | Taxis | $ 75 | | Entertainment for Clients | $500 | | Hotel | $450 |
How much can Jake deduct as a business expense? |
| | A) | $1,875. |
| | B) | $1,975. |
| | C) | $2,125. |
| | D) | $2,375. |
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| 16 | |
Which of the following individuals can deduct the stated educational expenses? |
| | A) | A police detective who attends courses to become a real estate agent. |
| | B) | A medical doctor attending an investment seminar. |
| | C) | A para-legal attending law school. |
| | D) | A CPA taking a tax planning seminar. |
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| 17 | |
Darion runs a business out of his home. He uses 800 square feet of his home exclusively for the business. His home is 3200 square feet in total. Darion had $33,000 of business revenue and $26,000 of business expenses from his home based business. The following expenses related to his home:
| Mortgage interest | $ 15,800 | | Real Estate Taxes | 2,200 | | Utilities | 3,400 | | Insurance | 800 | | Repairs | 1,400 | | Depreciation (on business use portion of home) | 1,800 |
What is Darion's total home office deduction? |
| | A) | $0. |
| | B) | $6,350. |
| | C) | $7,000. |
| | D) | $7,700. |
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| 18 | |
If an activity is considered a hobby, which of the following is false? |
| | A) | None of the expenses connected with the activity are deductible. |
| | B) | All of the income connected with the activity is included in income. |
| | C) | The deductible expenses connected with the activity are limited to the income from the activity. |
| | D) | The taxpayer has the burden to prove an activity is a hobby. |
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| 19 | |
Sharon is employed by a local bank where she earned $65,000 in 2007. During the year, she also had self-employment income of $15,000. Her self-employment tax is: |
| | A) | $0. |
| | B) | $435. |
| | C) | $2,119. |
| | D) | $2,295. |
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| 20 | |
Ruffus has self-employment income of $230,000. His self-employment tax is: |
| | A) | $0. |
| | B) | $14,918. |
| | C) | $18,250. |
| | D) | $32,498. |
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