Question

True or False

1. If a taxpayer and his spouse file a joint tax return and both have self-employment earnings from separate businesses, they can combine their self-employment earnings and report them on a single Schedule SE.

2. Education expenses of a sole proprietor are deductible for AGI as long as they are ordinary, necessary, and reasonable in amount.

3. Sole proprietors cannot deduct the per diem amount for lodging while away from home for business travel.

4. Under MACRS, the basis for depreciation of personal property is its cost less salvage value.

5. Under MACRS, residential realty is depreciated over 27.5 years.

6. Property acquired by a Christmas gift from your parents and immediately used in the taxpayer's business is not eligible for Section 179 expensing on Form 4562.

7. Expenses paid by the tenant on behalf of the landlord must be included in the landlord's income if the expense paid is substituted for rent.

8. In general, losses from passive activities are allowed up to the amount of passive activity income.

9. The rules for meeting material participation are more strict than the rules for meeting active participation.

10. A taxpayer who has a full-time job in an area that does not involve rental realty will find it virtually impossible to meet the material participation test for rental real estate activities.

Answer 1

1. If a taxpayer and his spouse file a joint tax return and both have self-employment earnings from separate businesses, they can combine their self-employment earnings and report them on a single Schedule SE.

TRUE

2. Education expenses of a sole proprietor are deductible for AGI as long as they are ordinary, necessary, and reasonable in amount.

TRUE

3. Sole proprietors cannot deduct the per diem amount for lodging while away from home for business travel.

FALSE

4. Under MACRS, the basis for depreciation of personal property is its cost less salvage value.

TRUE

5. Under MACRS, residential realty is depreciated over 27.5 years.

TRUE

6. Property acquired by a Christmas gift from your parents and immediately used in the taxpayer's business is not eligible for Section 179 expensing on Form 4562.

TRUE

7. Expenses paid by the tenant on behalf of the landlord must be included in the landlord's income if the expense paid is substituted for rent.

TRUE

8. In general, losses from passive activities are allowed up to the amount of passive activity income.

FALSE

9. The rules for meeting material participation are more strict than the rules for meeting active participation.

FALSE

10. A taxpayer who has a full-time job in an area that does not involve rental realty will find it virtually impossible to meet the material participation test for rental real estate activities.

TRUE