Combined Depreciation

6. Answer_____________ Michelle has an advertising business that she reports on Schedule C of her personal tax return. On May 1, 2006, Michelle purchased a Toyota Camry for $22,000. She purchased a copier for $30,000 on October 15th and office furniture for $50,000 on November 1st. All assets acquired are new. The Camry is used 90% for business. Her income before depreciation and Section 179 expense is $250,000. If she wants to maximize her deductions in 2006, what is the maximum combined depreciation and Section 179 deduction? a. $82,664 b. $82,960 c. $99,800 d. $102,000

Deductible Amounts

7. Answer_____________ Gayle owns a successful consulting business with over 100 employees. Her business has the following meals and entertainment related expenses this year: $16,000 for meals and $12,000 for entertainment directly related to the active conduct of business, $10,000 for the annual holiday party and $2,000 for Super Bowl tickets awarded to the business’ top salesman. The value of the tickets was included in the salesman’s wages for the year. None of the expenses are lavish or extravagant. What is the deductible amount on Gayle’s tax return? a. $20,000 b. $21,000 c. $26,000 d. $40,000

Itemized deductions: which interest paid is deductible

8. Sharon sold her home on February 14th and purchased a new home one month later. The home cost $900,000 and was funded by obtaining an interest only mortgage from Chase for $900,000. She paid $9,000 of points to Chase to obtain this mortgage. On July 1st she refinanced the loan with Bank of America to obtain a lower interest rate on a 30 year fully amortizable loan. She paid another $9,000 of points to obtain this mortgage. On November 1st she obtained an equity line of credit on the home from Wells Fargo Bank for $75,000. She immediately advanced the entire amount to pay off her credit cards. She had the following interest expense for the year: $6,100 for old home loan, $26,250 to Cha... click for more

AGI and partnerships: calculate Teresa's AGI

9. Teresa, an attorney, earns $300,000 from her practice. During the year, she paid $50,000 to acquire a 20% interest in a partnership that produces a $200,000 loss ($40,000 distributive share to Teresa). She also receives $35,000 in interest and dividends on other investments. What is Teresa’s AGI if she is a material participant in the partnership? What is her AGI if she does not participate in the partnership? a. $295,000 if material and $295,000 if she does not participate b. $295,000 if material and $335,000 if she does not participate c. $285,000 if material and $335,000 if she does not participate d. $335,000 if material and $335,000 if she does not participate

Points of taxation: Records for basis, limitations and carryover items

As a tax professional, how would you advise a taxpayer about how to keep track of basis, at risk limitations, and passive activity limitation rules in a partnership interest?