Question

1. The employees of Mauve Accounting Services are permitted to use the copy machine for personal purposes, provided the privilege is not abused. Ed, an employee of Mauve, is also the president of a civic organization and uses the copier to make several copies of the organization’s agenda for its meetings. The copies made during the year would have cost $150 at a local office supply.

	a.	Ed must include $150 in his gross income.
	b.	Ed may exclude the cost of the copies only if the organization is a client of Mauve.
	c.	Ed may exclude the cost of the copies as a no-additional cost fringe benefit.
	d.	Ed may exclude the cost of the copies as a de minimis fringe benefit.

2. On January 1, 2018, cash basis taxpayer pays $6,000 for an insurance policy which covers his business property for the period beginning March 1, 2018, and ending on February 28, 2019. How much, if any, of the $6,000 can the taxpayer deduct in 2018 (the year of payment)?

	a.	nothing because it is a prepayment
	b.	only 10/12ths, or $5,000
	c.	only 2/12ths, or $1,000
	d.	the entire $6,000

Answer 1

1.The employees of Mauve Accounting Services are permitted to use the copy machine for personal purposes, provided the privilege is not abused. Ed, an employee of Mauve, is also the president of a civic organization and uses the copier to make several copies of the organization’s agenda for its meetings. The copies made during the year would have cost $150 at a local office supply.

	a.	Ed must include $150 in his gross income.
	b.	Ed may exclude the cost of the copies only if the organization is a client of Mauve.
	c.	Ed may exclude the cost of the copies as a no-additional cost fringe benefit.
	d.	Ed may exclude the cost of the copies as a de minimis fringe benefit.

Answer: b. Ed may exclude the cost of Copies only if the Organisation is a Client of Mauve other wise it will not be come under business use even if company policy excuses

2. On January 1, 2018, cash basis taxpayer pays $6,000 for an insurance policy which covers his business property for the period beginning March 1, 2018, and ending on February 28, 2019. How much, if any, of the $6,000 can the taxpayer deduct in 2018 (the year of payment)?

	a.	nothing because it is a prepayment
	b.	only 10/12ths, or $5,000
	c.	only 2/12ths, or $1,000
	d.	the entire $6,000

Answer: b. Only 10/12ths , or $5,000 as Balance $1000 pertains to next year and it is prepaid expenses and will be allowed next year