Chapter 05 Taxes

3297 Words Oct 8th, 2011 14 Pages
Chapter 5—Introduction to Business Expenses

1. Tina, Terri, and Tricia operate Capstone Fashions an exclusive boutique. e. $140,000

2. To be deductible, the dominant motive for incurring an expense must be d. the intent to earn a profit.

3. Which of the following is an example of a business purpose as dominant motive? b. Only statement II is correct.

4. The Business Purpose Concept means c. Both statements are correct.

5. The legislative grace concept dictates that business expenses are grouped into certain categories that include d. Statements II and III is correct.

6. A reference to a business expense means c. Both statements are correct.

7. A reference to a
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e. Statements I, III, and IV are correct.

23. An ordinary expense c. Both statements are correct.

24. An ordinary expense a. Only statement I is correct.

25. Which of the following is not a required test for the deduction of a business expense?
a.|Be personal in nature.|

26. Ann CPA operates a financial and d. reasonable.

27. Which of the following payments are currently deductible?
I.|Sweeney Corporation purchases a grinding machine costing $40,000.|
II.|Amber’s Construction Company pays the tuition for Karl’s son. Karl is a local building inspector and has no other relationship with the company.|
d.|Neither statement is correct.|

28. Which of the following payments are currently deductible?
I.|Steve is a self-employed attorney. He pays another attorney $14,000 to represent him in a lawsuit that alleged that he had failed to adequately represent his client.|
II.|Connie has an investment portfolio in excess of $450,000. She pays Chris $350 to do an analysis of her investments and make recommendations on restructuring the portfolio.|

c.|Both statements are correct.|

29. Which of the following is a currently deductible trade or business expense.
c.|$25,000 fee paid to a TV station to advertise a new product.|

30. Which of the following is/are currently deductible trade or business expenses?
I.|Membership dues to an environmental lobbying group.|

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