Question

1) Phil Armonic is actively engaged in the oil business and owns numerous oil leases in the Southwest. During 2017, he made several trips to inspect oil wells on the leases. As a result of these overnight trips, he paid the following.

Plane fares $4,000

Hotels 1,000

Meals 800

Entertaining leases 500

Of the $6,300 in experience incurred he can claim as deduction expenses

a) 6,300

b) 5, 650

c) 5,000

d) 4, 650

2) What is the maximum number of distribution rollovers a taxpayer can make during one tax year for an IRA?

a) ten

b) four

c) two

d) one

e) there is no limit

3) JNN Corporation had inventory of $200,000 on December 31, 2017 ( ending inventory ). Other information is as follows:

Purchases $3,500,000

Sales 4,000,000

INventory 1/1/17 ( beginning inventory ) 600,000

what is the amount of Acacia's cost of goods sold for 2017?

a) 3,100,000

b) 1,600,000

c) 1,700,000

d) 3,000,000

e) none of the above

4) Charles is a self employed attorney who travels to Boston on a business trip during 2017. Barry's expenses where as follows:

Air fare $460

Taxis 60

Meals 200

Lodgings 550

Laundry 25

How much may Charles deduct as travel expenses for the trip?

a) 1,170

b) 950

C) 1,000

d) 1,195

5) Ann invested into limited partnership tax shelter in 2017. During 2017, his losses from the parnership amount to $50,000. If Ann has no passive income, what is the amount of Ann's deduction for passive losses for 2017?

a) 0

b) 50,000

c) 25,000

d) 20,000

e) 10,000

6) A taxpayer who has rental losses and also actively manages the rental property should be allowed to deduct rental loss againist other income if his/her AGI ( Adjusted Gross Income ) is below $100,000. The maximum amount allowed per year is

a) 0

b) 25,000

c) 10,000

d)100,000

Answer 1

1. A. (All the expeses incurred by Phil Armonic is for the purpose busines so he can claim the entire amount of $ 6300 as deduction expenses).

2. D. (As per guidance issued by Internal Revenue Service,beginning in 2015 only one rollover per year a taxpayer can make during one tax year for an IRA).

3. E.

Cost of goods sold = Begining Inventory+Purchases-Ending Inventory

Begining Inventory(01/01/2017)               $ 600,000

Add: Purchases                                      $ 3,500,000

                                                                $4,100,000

Less:Ending Invetory(12/31/2017)            $ 200,000

Cost of Good sold                                    $3,900,000

4. 1295 is the correct answer but there is no amount of $ 1295 is available in above question.

(As per Internal Revenue Service, Deductible travel expenses includes Travel by airplane,Fares for taxis,Meals,lodging and laundry so Charles can deduct the entire expense amount of $ 1295 (460+60+200+550+25) as a travel expenses for the trip).

5.A (Passive losses can only be matched against passive income.If there is no passive income then no loss can be deducted).

6. B.(The Internal Revenue Service allows a deduction of up to $25,000 for losses incurred on a rental property if a tax payer actively participated in the rental activity).