Income tax concept unit 4


Using your text, complete the following. In these problems, apply your knowledge of the rules and laws associated with Schedule C.

● Problem 37, on page 6-54.

● Problem 38, on page 6-55.

● Problem 39, on page 6-55.

● Problem 41, on page 6-55.

● Problem 46, on page 6-56.

● Problem 48, on page 6-56.

● Problem 54, on page 6-57.

● Problem 55, on page 6-58.

37.Kelly is a self-employed tax attorney whose practice primarily involves tax planning. During the year, she attended a three-day seminar regarding new changes to the tax law. She incurred the following expenses:

Lodging $400

Meals 95

Course registration 350

Transportation 150

How much can Kelly deduct? ____________________________

Kelly believes that obtaining a CPA license would improve her skills as a tax attorney. She enrolls as a part-time student at a local college to take CPA review courses. During the current year, she spends $1,500 for tuition and $300 for books. How much of these expenses can Kelly deduct? Why?

38.Jackie owns a temporary employment agency that hires personnel to perform accounting services for clients. During the year, her entertainment expenses for her clients include the following:

Cab fare to and from restaurants $ 350

Gratuity at restaurants 300

Meals 4,000

Cover charges 250

Jackie also held a holiday party for her employees, which cost $1,500. All expenses are reasonable.

Can Jackie deduct any of these expenses? If so, how much? _________________

How is the deduction classified? __________________________________ 

39.David is a college professor who does some consulting work on the side. He uses 25% of his home exclusively for the consulting practice. He is single and 63 years old. His AGI (without consideration of consulting income) is $45,000. Other information follows:

Income from consulting business $4,000

Consulting expenses other than home office 1,500

Total costs relating to home:

Interest and taxes 6,500

Utilities 1,500

Maintenance and repairs 450

Depreciation (business part only) 1,500

41.Charles, a self-employed real estate agent, attended a conference on the impact of some new building codes on real estate investments. His unreimbursed expenses were as follows:

Airfare $480

Lodging 290

Meals  100

Tuition and fees 650

How much can Charles deduct on his return? _______________________

46. Michael is the sole proprietor of a small business. In June 2019, his business income is $12,000 before consideration of any § 179 deduction. He spends $245,000 on furniture and equipment in 2019. If Michael elects to take the § 179 deduction and no bonus on a conference table that cost $25,000 (included in the $245,000 total), determine the maximum cost recovery for 2019 with respect to the conference table: ____________________________

48. Brittany purchased a building for $500,000 on January 1, 2011. The purchase price does not include land. Calculate the cost recovery for 2011 and 2019 if the real property is

Residential real property: ____________________________________

A warehouse: __________________________________________________

54.Rebecca is a doctor with an AGI of $125,000 before consideration of income or loss from her dog breeding business. Her home is on 15 acres, 10 of which she uses to house the animals and provide them with ample space to play and exercise. Her records show the following related income and expenses for the current year:

Income from fees and sales $2,500


Dog food $4,000

Veterinary bills 3,500

Supplies 1,200

Publications and dues 350

a.How must Rebecca treat the income and expenses of the operation if the dog breeding business is held to be a hobby? __________________________________

b.How would your answer differ if the operation were held to be a business?

55. Eric, who is single, has income from his Schedule C of $150,000. His taxable income is $120,000 after his other deductions. What is Eric’s QBI deduction for 2019?

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