Rebecca is a calendar year taxpayer

1.

value:

15.00 points

Indicate the amount (if any) that Josh can deduct as ordinary and necessary business deductions in each of the following situations. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

a.

Josh borrowed $87,000 from the First State Bank using his business assets as collateral. He used the money to buy City of Blanksville bonds. Over the course of a year, Josh paid interest of $13,300 on the borrowed funds, but he received $12,000 of interest on the bonds.

  Deductible amount

$ [removed]

b.

Josh purchased a piece of land for $50,000 in order to get a location to expand his business. He also paid $5,400 to construct a new driveway for access to the property.

  Deductible amount

$ [removed]

c.

This year Josh paid $23,400 to employ the mayor’s son in the business. Josh would typically pay an employee with these responsibilities about $19,200 but the mayor assured Josh that after his son was hired, some city business would be coming his way.

  Deductible amount

$ [removed]

d.

Josh paid his brother, a mechanic, $5,550 to install a robotic machine for Josh’s business. The amount he paid to his brother is comparable to what he would have paid to an unrelated party to do the same work. Once the installation was completed by his brother, Josh began calibrating the machine for operation. However, by the end of the year, he had not started using the machine in his business.

  Deductible amount

$ [removed]

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2.

value:

15.00 points

Melissa recently paid $640 for round-trip airfare to San Francisco to attend a business conference for three days. Melissa also paid the following expenses:

$590 fee to register for the conference,

$255 per night for three night’s lodging,

$170 for meals, and

$605 for cab fare.

(Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

a.

What amount of the travel costs can Melissa deduct as business expenses? (Round your answer to the nearest dollar amount.)

  Deductible amount

$ [removed]

b.

Suppose that while Melissa was on the coast, she also spent two days sightseeing the national parks in the area. To do the sightseeing, she paid $1,990 for transportation, $940 for lodging, and $295 for meals during this part of her trip, which she considers personal in nature. What amount of the travel costs can Melissa deduct as business expenses? (Round your answer to the nearest dollar amount.)

  Deductible amount

$ [removed]

c.

Suppose that Melissa made the trip to San Francisco primarily to visit the national parks and only attended the business conference as an incidental benefit of being present on the coast at that time. What amount of the airfare can Melissa deduct as a business expense?

  Deductible amount

$ [removed]

d.

Suppose that Melissa’s permanent residence and business was located in San Francisco. She attended the conference in San Francisco and paid $590 for the registration fee. She drove 107 miles over the course of three days and paid $156 for parking at the conference hotel. In addition, she spent $560 for breakfast and dinner over the three days of the conference. She bought breakfast on the way to the conference hotel and she bought dinner on her way home each night from the conference. What amount of the travel costs can Melissa deduct as business expenses? (Round your intermediate calculations and final answer to one decimal place. Use standard mileage rate.)

  Deductible amount

$ [removed]

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3

value:

15.00 points

Renee manufactured and sold a “gadget,” a specialized asset used by auto manufacturers that qualifies for the domestic production activities deduction. Renee incurred $17,200 in direct expenses in the project, which includes $4,200 of wages Renee paid to employees in the manufacturing of the gadget.

What is Renee's domestic production activities deduction for the gadget in each of the following alternative scenarios? (Omit the "$" sign in your response.)

a.

Renee sold the gadget for $32,200 and she reported AGI of $76,700 before considering the manufacturing deduction.

  Domestic production activities deduction

$ [removed]

b.

Renee sold the gadget for $30,200 and she reported AGI of $9,100 before considering the manufacturing deduction.

  Domestic production activities deduction

$ [removed]

c.

Renee sold the gadget for $48,700 and she reported AGI of $57,200 before considering the manufacturing deduction.

  Domestic production activities deduction

$ [removed]

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 4.

value:

15.00 points

Jeremy is a calendar-year taxpayer who sometimes leases his business equipment to local organizations. He recorded the following receipts this year. Indicate the extent to which these payments are taxable income to Jeremy this year if Jeremy is (1) a cash-method taxpayer and (2) he is an accrual-method taxpayer. (Leave no cells blank - be certain to enter "0" wherever required. Omit the "$" sign in your response.)

a.

$2,500 deposit from the Ladies’ Club, which wants to lease a trailer. The club will receive the entire deposit back when the trailer is returned undamaged.

  Income under cash method

$ [removed]

  Income under accrual method

$ [removed]

b.

$1,020 from the Ladies’ Club for leasing the trailer from December of this year through March of next year ($255 per month).

  Income under cash method

$ [removed]

  Income under accrual method

$ [removed]

c.

$495 lease payment received from the Men’s Club this year for renting Jeremy’s trailer last year. Jeremy billed the club last year but recently he determined that the Men’s Club would never pay him, so he was surprised when he received the check.

  Income under cash method

$ [removed]

  Income under accrual method

$ [removed]

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5.

value:

15.00 points

Rebecca is a calendar-year taxpayer who operates a business. She made the following business-related expenditures in December of year 0. (Leave no cells blank - be certain to enter "0" wherever required. Round your answers to the nearest dollar amount. Omit the "$" sign in your response.)

Indicate the amount of these payments that she may deduct in year 0 under both the cash method of accounting and the accrual method of accounting.

a.

$1,500 for an accountant to evaluate the accounting system of Rebecca’s business. The accountant spent three weeks in January of year 1 working on the evaluation.