Test Bank for McGraw Hill's Taxation of Individuals and Business Entities 2025 Evergreen Release By Brian Spilker, Benjamin Ayers, John Barrick, Troy Lewis

Test Bank For
McGraw Hill's Taxation of Business Entities 2025 Evergreen Release By Brian
Spilker, Benjamin Ayers, John Barrick, Troy Lewis, John Robinson, Connie
Weaver, Ronald Worsham and Edmund Outslay
Chapter 1-14

Chapter 1
Student name:
TRUE/FALSE - Write 'T' if the statement is true and 'F' if the statement is false.
1) The Internal Revenue Code authorizes deductions for trade or business activities if the
expenditure is "ordinary and necessary."
1)

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
AICPA : BB Critical Thinking
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Topic : Business Deductions
Accessibility : Screen Reader Compatible
Type : Static
Gradable : automatic
Learning Objective : 01-01 Identify common business deductions.



2) Business activities are distinguished from personal activities in that business activities are
motivated by the pursuit of profits.
2)

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
AICPA : BB Critical Thinking
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Topic : Business Deductions
Accessibility : Screen Reader Compatible
Type : Static
Gradable : automatic

,Learning Objective : 01-01 Identify common business deductions.



3) The phrase "ordinary and necessary" has been defined to mean that an expense must be
essential and indispensable to the conduct of a business.
3)

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
AICPA : BB Critical Thinking
Accessibility : Keyboard Navigation
Topic : Business Deductions
Accessibility : Screen Reader Compatible
Type : Static
Difficulty : 2 Medium
Bloom's : Understand
Gradable : automatic
Learning Objective : 01-01 Identify common business deductions.



4) Reasonable in amount means that expenditures can be exorbitant if the activity is
motivated by profit.
4)

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
AICPA : BB Critical Thinking
Accessibility : Keyboard Navigation
Topic : Business Deductions
Accessibility : Screen Reader Compatible
Type : Static
Difficulty : 2 Medium
Bloom's : Analyze
Gradable : automatic
Learning Objective : 01-01 Identify common business deductions.



5) The test for whether an expenditure is reasonable in amount is whether the expenditure
was for an "arm's length" amount.
5)

⊚ true
⊚ false

,Question Details
AACSB : Reflective Thinking
AICPA : BB Critical Thinking
Accessibility : Keyboard Navigation
Bloom's : Remember
Topic : Business Deductions
Accessibility : Screen Reader Compatible
Type : Static
Difficulty : 2 Medium
Gradable : automatic
Learning Objective : 01-01 Identify common business deductions.



6) Illegal bribes and kickbacks are not deductible business expenses, but fines imposed by a
governmental unit are deductible as long as the fines are incurred in the ordinary course of
business.
6)

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
AICPA : BB Critical Thinking
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
Type : Static
Difficulty : 2 Medium
Bloom's : Understand
Topic : Limitations on Business Deductions
Gradable : automatic
Learning Objective : 01-02 Determine the limits on deducting business expenses.



7) Although expenses associated with illegal activities are not deductible, political
contributions can be deducted if the donation is not made to a candidate for public office.
7)

⊚ true
⊚ false

, Question Details
AACSB : Reflective Thinking
AICPA : BB Critical Thinking
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Accessibility : Screen Reader Compatible
Type : Static
Topic : Limitations on Business Deductions
Gradable : automatic
Learning Objective : 01-02 Determine the limits on deducting business expenses.



8) When a taxpayer borrows money and invests the loan proceeds in municipal bonds, the
interest paid by the taxpayer on the debt will not be deductible.
8)

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
AICPA : BB Critical Thinking
Accessibility : Keyboard Navigation
Bloom's : Remember
Accessibility : Screen Reader Compatible
Type : Static
Difficulty : 2 Medium
Topic : Limitations on Business Deductions
Gradable : automatic
Learning Objective : 01-02 Determine the limits on deducting business expenses.



9) A business can deduct the cost of uniforms supplied to employees if the uniforms are not
suitable for normal wear.
9)

⊚ true
⊚ false