Income Tax Fundamentals 2020
38th Edition
ISBN: 9780357391129
Author: WHITTENBURG
Publisher: Cengage
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Chapter 3, Problem 12MCQ
To determine
Concept Introduction:
Deductions are the allowance given to the taxpayer as a deduction from the gross income to calculate the taxable income. Every deduction has some conditions and limits of the amount. Deductions can be for business or personal expenses.
To choose:The deductible expenses as an entertainment expense.
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Which of the following statements are TRUE?(i) Interest expense incurred on loan to purchase motor cars for salesmen’s use is deductible as the salesmen use the cars only for meetings with customers and suppliers.(ii) Expenses which qualify for special deduction under Section 14Q relates to capital expenditure which do not qualify for capital allowances claim.(iii) Donation of computers to institutions of public character by an individual is not deductible.
-Which of the following should not be claimed as deductions from gross income? *
interest payment on loans for the purchase of machinery and equipment used inbusiness.
salaries and bonuses paid to employees.
discounts given to senior citizens on certain goods and services.
advertising expense to maintain some form of goodwill for the taxpayer’s business.
When a plant asset is traded for another of similar asset, losses on the asset traded are not recognized.
____ 7. Receiving payment prior to delivering goods or services causes a current liability to be incurred.
____ 8. One of the most popular defined benefit plans is the 401K plan.
____ 9. All long-term liabilities eventually become current liabilities.
____ 10. The cost of new equipment is called a revenue expenditure because it will help generate revenues in the future
True and false questions....
Chapter 3 Solutions
Income Tax Fundamentals 2020
Ch. 3 - Prob. 1MCQCh. 3 - Prob. 2MCQCh. 3 - Prob. 3MCQCh. 3 - Which of the following formulas represents the...Ch. 3 - Prob. 5MCQCh. 3 - Prob. 6MCQCh. 3 - Heather drives her minivan 953 miles for business...Ch. 3 - Prob. 8MCQCh. 3 - Prob. 9MCQCh. 3 - Under the high-low method, the federal per diem...
Ch. 3 - Prob. 11MCQCh. 3 - Prob. 12MCQCh. 3 - Prob. 13MCQCh. 3 - Prob. 14MCQCh. 3 - Prob. 15MCQCh. 3 - Prob. 16MCQCh. 3 - Prob. 17MCQCh. 3 - Prob. 18MCQCh. 3 - Prob. 19MCQCh. 3 - Prob. 20MCQCh. 3 - Prob. 21MCQCh. 3 - Prob. 22MCQCh. 3 - Prob. 23MCQCh. 3 - Stewie, a single taxpayer, operates an activity as...Ch. 3 - Prob. 2PCh. 3 - Lawrence owns a small candy store that sells one...Ch. 3 - Business with gross receipts of $25 million or...Ch. 3 - Teresa is a civil engineer who uses her automobile...Ch. 3 - Prob. 7PCh. 3 - Martha is a self-employed tax accountant who...Ch. 3 - Prob. 9PCh. 3 - Go to the U.S. General Services Administration...Ch. 3 - Prob. 11PCh. 3 - Prob. 12PCh. 3 - Marty is a sales consultant. Marty incurs the...Ch. 3 - Prob. 14PCh. 3 - Prob. 15PCh. 3 - Cooper and Brandy are married and file a joint...Ch. 3 - Prob. 17PCh. 3 - Prob. 18PCh. 3 - Prob. 19PCh. 3 - Prob. 20PCh. 3 - Cindy operates a computerized engineering drawing...Ch. 3 - Prob. 22PCh. 3 - Prob. 23PCh. 3 - Prob. 24PCh. 3 - Lew is a practicing CPA who decides to raise...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- The disadvantage of actual cash value coverage of personal property compared to replacement cost coverage is that it A) will reimburse you for replacement cost minus estimated depreciation. B) will reimburse you for the cash value of a new item. C) must be reported as a loss on your tax return. D) does not have to be reported as a loss on your tax return. E) none of the abovearrow_forwardAc. Which of the following statements regarding the home office deduction is true? In order to qualify for the deduction, a portion of the taxpayer's home must be used regularly and exclusively to meet with clients or customers. A home office deduction is not allowed for using the home office for administrative or management activities only. The home office deduction is limited to the taxable income of the business before the deduction. A depreciation deduction is not allowed for a home office.arrow_forwardDeductions (Obj. 3) Use the knowledge you have acquired from Chapters 1 through 6 to identify the following expenditures as (A) deductible for AGI (B) deductible from AGI or (C) not deductible. Ignore any AGI limitations. A Purchase of uniforms for work suitable for street wear B Homeowner’s insurance on the taxpayer’s main home C Union Dues paid by a steelworker D Unreimbursed employee business travel expense E Mortgage interest on rental property F Unreimbursed storm damage to trees in main home’s yard in federally-declared disaster area G Loss on sale of the taxpayer’s personal car not in federally declared disaster area H Repairs to friend’s car for damage caused when taxpayer’s car hit friend’s cararrow_forward
- Which of the following transactions would most likely be a deductible repair under s 25-10? a. Repair of damage to property that existed at the time of purchase but was not known to the purchaser. b. Repainting a rental property after purchase but before tenants move in. c. Repainting a rental property in-between tenants vacating and new tenants moving in. d. Mechanical repairs to a vehicle that was not drivable at the time of purchase.arrow_forwardWhich of the following is deductible from gross income? O Loss from a business receivable from a customer which is estimated to be doubtful of collection. O Loss suffered from a casualty which was compensated for by insurance O Loss incurred in selling a used delivery truck to an uncle. Loss from an illegal transaction.arrow_forwardRIGHT OR WRONG For taxation purposes, the house and lot as family home of taxpayer is his ordinary asset. When inventory of goods are sold at price lower than cost, the seller has capital loss. When production machine of the business is sold at a mark up on cost, the seller has ordinary business income. When personal valuable necklace of the taxpayer is stolen, the taxpayer has capital loss. Capital gain tax is an income tax. The mark up on the sale of an equipment used in business activities is reportable in 1701 tax return of the sole owner of such business. 7. The sole proprietor sold for P500,000 its inventory with carrying cost of P400,000. The sale will result to BUSINESS INCOME OF 100k CAPITAL GAIN OF 100k BUSINESS INCOME OF 500k CAPITAL GAIN OF 500k 8. The investment in bond was sold by the resident citizen at mark up of P200,000 on carrying cost. If the bond has maturity of 5 years, the mark up on cost is EXEMPT FROM INCOME TAX TAXABLE INCOME BUSINESS INCOME…arrow_forward
- What would happen if an investor, did not take depreciation deductions for their property and after they sold the property they calimed a 0 dollar depreciation recapture liability on their tax return? Group of answer choices 1) The IRS will sue you for tax evasion 2) The IRS would compute the depreciation that could have been taken and then compute the depreciation recapture tax based on this amount 3) None of these are correct 4) Nothing. Thee IRS does not have any clear rules on this specific issue 5) This makes sense, as it avoids a costly taxarrow_forwardWhich of the following items would not be depreciable in computing income taxes? a. A company’s corporate headquarter building b. Land on which a company’s factory sits c. A machine tool used for production d. A company’s office furniture.arrow_forwardA landlord who receives prepaid rent is required to report that amount as gross income when the payment is received. Why would Congress choose to do this? What problem does this create for the taxpayer? C O A. Congress taxes prepaid rental income due to the concern that taxpayers who spend the money will be unable to pay the tax when t comes due. The problem created for taxpayers is that they are taxed before they incur related expenses, such as repairs, insurance, and depreciation. Therefore, there is a mismatching of revenue and expense. O B. O C. Congress taxes prepaid rental income to collect more taxes from a taxpayer by increasing their tax bracket with the additional income. The problem this causes for the taxpayer is inconsistent taxable income from year to year and increases the risk of an audit. O D. Congress taxes prepaid rental income due to numerous landlords not reporting this income in the following tax year. The problem created for taxpayers is that they are taxed…arrow_forward
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