Concepts in Federal Taxation 2019 (with Intuit ProConnect Tax Online 2017 and RIA Checkpoint 1 term (6 months) Printed Access Card)
26th Edition
ISBN: 9781337702621
Author: Kevin E. Murphy, Mark Higgins
Publisher: Cengage Learning
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Chapter 5, Problem 79IIP
To determine
Ascertain the tax consequences for the situation, whether Person R is engaged in the trade or business or whether Person R is engaged in a hobby activity.
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Shanice owns a food delivery business. She picks up meals from restaurants and
delivers them to his clients' homes. One year Shanice's revenue is $25,000 and her
costs (such as gas and maintenance on her car) is $10,000. If Shanice did not run this
business, she could get a job at a grocery store and make $15,000 that year. Which
of the following statements is true?
Shanice's accounting profit is $15,000. Shanice's economic profit is $0.
Shanice's accounting profit is $10,000. Shanice's economic profit is $20,000.
Shanice's accounting profit is $0. Shanice's economic profit is $15,000.
OShanice's accounting profit is $20,000. Shanice's economic profit is $10,000.
To support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations,
Daun purchased the stereo systems for $240,000 and sold them for $350,000 cash. She provided her customers with a one-year
warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to 3
percent of sales. During the year, she paid $3,820 cash to replace a defective tuner.
Required
Prepare an income statement and statement of cash flows for Daun's first year of operation. (Statement of Cash Flows only, items to
be deducted must be indicated with a negative amount.)
DAUN'S STEREOS
Income Statement
Molly is a full-time engineer for Y-Corporation. On the weekends, Molly enters fishing competitions in order to earn cash prizes. Molly really enjoys the relaxation of fishing and being near the water. Molly made $5,200 in income and incurred the following expenses during the year for her fishing activities:
Contest Entrance Fees: $5,000
Property taxes on boat: $200
Fishing supplies: $1,000
Depreciation on equipment: $500
Which of the following statements is FALSE about Molly’s fishing activities?
Group of answer choices
Molly’s income from her fishing activities is taxable, even though the fishing activities constitute a hobby.
Hobby losses are not allowed as a deduction.
Since hobby expenses are categorized as miscellaneous itemized deductions, they are currently disallowed as deductions.
Molly’s hobby expenses are fully deductible.
Chapter 5 Solutions
Concepts in Federal Taxation 2019 (with Intuit ProConnect Tax Online 2017 and RIA Checkpoint 1 term (6 months) Printed Access Card)
Ch. 5 - Prob. 1DQCh. 5 - Why does the computation of adjusted gross income...Ch. 5 - Prob. 3DQCh. 5 - Prob. 4DQCh. 5 - Prob. 5DQCh. 5 - Prob. 6DQCh. 5 - Prob. 7DQCh. 5 - Prob. 8DQCh. 5 - Prob. 9DQCh. 5 - What is the difference between a trade or business...
Ch. 5 - Prob. 11DQCh. 5 - Prob. 12DQCh. 5 - Prob. 13DQCh. 5 - Prob. 14DQCh. 5 - Prob. 15DQCh. 5 - Prob. 16DQCh. 5 - Prob. 17DQCh. 5 - Prob. 18DQCh. 5 - Prob. 19DQCh. 5 - Prob. 20DQCh. 5 - Prob. 21DQCh. 5 - Prob. 22DQCh. 5 - Prob. 23DQCh. 5 - Prob. 24DQCh. 5 - Prob. 25DQCh. 5 - Prob. 26PCh. 5 - Prob. 27PCh. 5 - Prob. 28PCh. 5 - Prob. 29PCh. 5 - Prob. 30PCh. 5 - Prob. 31PCh. 5 - Prob. 32PCh. 5 - Prob. 33PCh. 5 - Prob. 34PCh. 5 - Prob. 35PCh. 5 - Prob. 36PCh. 5 - Prob. 37PCh. 5 - Prob. 38PCh. 5 - Prob. 39PCh. 5 - Prob. 40PCh. 5 - Prob. 41PCh. 5 - Prob. 42PCh. 5 - Prob. 43PCh. 5 - Prob. 44PCh. 5 - Prob. 45PCh. 5 - Prob. 46PCh. 5 - Prob. 47PCh. 5 - Prob. 48PCh. 5 - Prob. 49PCh. 5 - Prob. 50PCh. 5 - Prob. 51PCh. 5 - Prob. 52PCh. 5 - Prob. 53PCh. 5 - Prob. 54PCh. 5 - Prob. 55PCh. 5 - Prob. 56PCh. 5 - Ray, 83, is a used car dealer. He lives in a rural...Ch. 5 - Prob. 58PCh. 5 - Prob. 59PCh. 5 - Prob. 60PCh. 5 - Prob. 61PCh. 5 - Prob. 62PCh. 5 - Prob. 63PCh. 5 - Prob. 64PCh. 5 - Prob. 65PCh. 5 - Prob. 66PCh. 5 - Prob. 67PCh. 5 - Prob. 68PCh. 5 - Prob. 69PCh. 5 - Prob. 70PCh. 5 - Prob. 71PCh. 5 - Prob. 72IIPCh. 5 - Prob. 73IIPCh. 5 - Prob. 74IIPCh. 5 - Prob. 75IIPCh. 5 - Prob. 76IIPCh. 5 - Prob. 77IIPCh. 5 - Prob. 78IIPCh. 5 - Prob. 79IIPCh. 5 - Prob. 80IIPCh. 5 - Prob. 81IIPCh. 5 - Prob. 91CPCh. 5 - Prob. 92DCCh. 5 - Prob. 93DCCh. 5 - Prob. 94DCCh. 5 - Prob. 95TPCCh. 5 - Allison and Paul are married and have no children....
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