TAX 4001 EXAM 2 2024/2025 Exam
Questions and Verified Answers |
Already Graded A+
Substantiation requirements for taxpayer to get deductions - 🧠ANSWER
✔✔taxpayer has burden of proof for proving all expenses
adequate records of expenses must be maintained
Can deductions FOR AGI be claimed if taxpayer does not itemize? -
🧠ANSWER ✔✔Yes - itemized deductions are a type of deduction FROM
AGI
AGI as a function - 🧠ANSWER ✔✔Income - Exclusions - Deductions for
AGI
Deductions from AGI (specifically _________ deductions) must _________
the Standard Deduction to provide any tax benefit - 🧠ANSWER
✔✔itemized
exceed
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
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PRIVACY STATEMENT. ALL RIGHTS RESERVED
,Deductions FOR AGI can include: (1st 5) - 🧠ANSWER ✔✔Business or
Trade Expenses
When you reimburse your employees (i think?)
Deductions from Losses on Sale/exchange of Property
Deductions from Expenses paid for Rental and Royalty Property (Section
212)
Alimony
Deductions FOR AGI can include: (4) - 🧠ANSWER ✔✔1/2 of Self-
Employment Tax Paid
100% of Health Insurance Premiums paid by a Self-Employed Individual
Contributions to a Pension, Profit Sharing, Annuity Plan, IRA, etc.
Penalty on Premature Withdrawals from Time Savings Accounts or
Deposits
Deductions for AGI can include: (5) - 🧠ANSWER ✔✔Moving Expenses
Interest on Student Loans
Qualified Tuition and Related Expenses under Tax Code 222
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
2
PRIVACY STATEMENT. ALL RIGHTS RESERVED
,Up to $250 for Teacher Supplies for elementary and secondary school
teachers
Employee contributions to Health Savings Accounts
Expenditures for deductions can be any of 3 mutually exclusive categories:
- 🧠ANSWER ✔✔Investment/Production of Income (Section 212)
Trade or Business (Section 162)
Personal Activity
Trade or Business Deductions (162)
(line item 1 under Deductions FOR AGI) - 🧠ANSWER ✔✔All ordinary and
necessary expenditures paid or incurred in carrying on a trade or business
Trade or Business Deductions include: - 🧠ANSWER ✔✔Reasonable
Salaries Paid for Services
Expenses for the Use of Business Property
1/2 of Self-Employment Taxes Paid
Trade or Business (162) Deductions are Deductible _______ AGI -
🧠ANSWER ✔✔FOR
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
3
PRIVACY STATEMENT. ALL RIGHTS RESERVED
, A key distinction between trade/business expense and not a trade/business
expense is whether or not the activity is a: - 🧠ANSWER ✔✔Hobby
If the taxpayer's ventures are not extensive enough to indicate that a trade
or business exists, the activity is a _______, and expenses related to the
activity are __________ - 🧠ANSWER ✔✔Hobby
Limited to the activity's income (cannot report a loss from the activity on
taxes)
For Business/Trade Expenses (162) and for Investment/Production of
Income (212) expenses to be deductible, they must be: - 🧠ANSWER
✔✔Ordinary: Normal, usual, or customary for others in similar businesses,
and NOT capital (big exp) in nature
Necessary: a Prudent Businessperson would incur the same Expense
Reasonable: salaries, compensation for services
Common Personal Expenses classified as ITEMIZED Deductions (FROM
AGI) include: - 🧠ANSWER ✔✔Medical Expenses in excess of 10% of AGI
Certain State and Local Taxes
Contributions to Qualified Charitable Organization
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
4
PRIVACY STATEMENT. ALL RIGHTS RESERVED
Questions and Verified Answers |
Already Graded A+
Substantiation requirements for taxpayer to get deductions - 🧠ANSWER
✔✔taxpayer has burden of proof for proving all expenses
adequate records of expenses must be maintained
Can deductions FOR AGI be claimed if taxpayer does not itemize? -
🧠ANSWER ✔✔Yes - itemized deductions are a type of deduction FROM
AGI
AGI as a function - 🧠ANSWER ✔✔Income - Exclusions - Deductions for
AGI
Deductions from AGI (specifically _________ deductions) must _________
the Standard Deduction to provide any tax benefit - 🧠ANSWER
✔✔itemized
exceed
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
1
PRIVACY STATEMENT. ALL RIGHTS RESERVED
,Deductions FOR AGI can include: (1st 5) - 🧠ANSWER ✔✔Business or
Trade Expenses
When you reimburse your employees (i think?)
Deductions from Losses on Sale/exchange of Property
Deductions from Expenses paid for Rental and Royalty Property (Section
212)
Alimony
Deductions FOR AGI can include: (4) - 🧠ANSWER ✔✔1/2 of Self-
Employment Tax Paid
100% of Health Insurance Premiums paid by a Self-Employed Individual
Contributions to a Pension, Profit Sharing, Annuity Plan, IRA, etc.
Penalty on Premature Withdrawals from Time Savings Accounts or
Deposits
Deductions for AGI can include: (5) - 🧠ANSWER ✔✔Moving Expenses
Interest on Student Loans
Qualified Tuition and Related Expenses under Tax Code 222
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
2
PRIVACY STATEMENT. ALL RIGHTS RESERVED
,Up to $250 for Teacher Supplies for elementary and secondary school
teachers
Employee contributions to Health Savings Accounts
Expenditures for deductions can be any of 3 mutually exclusive categories:
- 🧠ANSWER ✔✔Investment/Production of Income (Section 212)
Trade or Business (Section 162)
Personal Activity
Trade or Business Deductions (162)
(line item 1 under Deductions FOR AGI) - 🧠ANSWER ✔✔All ordinary and
necessary expenditures paid or incurred in carrying on a trade or business
Trade or Business Deductions include: - 🧠ANSWER ✔✔Reasonable
Salaries Paid for Services
Expenses for the Use of Business Property
1/2 of Self-Employment Taxes Paid
Trade or Business (162) Deductions are Deductible _______ AGI -
🧠ANSWER ✔✔FOR
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
3
PRIVACY STATEMENT. ALL RIGHTS RESERVED
, A key distinction between trade/business expense and not a trade/business
expense is whether or not the activity is a: - 🧠ANSWER ✔✔Hobby
If the taxpayer's ventures are not extensive enough to indicate that a trade
or business exists, the activity is a _______, and expenses related to the
activity are __________ - 🧠ANSWER ✔✔Hobby
Limited to the activity's income (cannot report a loss from the activity on
taxes)
For Business/Trade Expenses (162) and for Investment/Production of
Income (212) expenses to be deductible, they must be: - 🧠ANSWER
✔✔Ordinary: Normal, usual, or customary for others in similar businesses,
and NOT capital (big exp) in nature
Necessary: a Prudent Businessperson would incur the same Expense
Reasonable: salaries, compensation for services
Common Personal Expenses classified as ITEMIZED Deductions (FROM
AGI) include: - 🧠ANSWER ✔✔Medical Expenses in excess of 10% of AGI
Certain State and Local Taxes
Contributions to Qualified Charitable Organization
COPYRIGHT©PROFFKERRYMARTIN 2025/2026. YEAR PUBLISHED 2025. COMPANY REGISTRATION NUMBER: 619652435. TERMS OF USE.
4
PRIVACY STATEMENT. ALL RIGHTS RESERVED
