TEST BANK For Mcgraw HIll's TaxatIon Of IndIvIduals And BusIness EntItIes 2025 Latest EdItIon by BrIan C. SpIlker , BenjamIn C. Ayers , John A. BarrIck , & 4 More Latest Version 2025/2026 [A+]

TEST BANK
For
Mcgraw HIll's TaxatIon Of
IndIvIduals And BusIness
EntItIes 2025 Latest
EdItIon

By BrIan C. SpIlker (Author), BenjamIn C.
Ayers (Author), John A. BarrIck (Author), & 4 More

,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."

⊚ True

⊚ False




2) BusIness ActIvItIes Are DIstInguIshed From Personal ActIvItIes In That BusIness ActIvItIes Are
MotIvated By The PursuIt Of ProfIts.

⊚ True

⊚ False




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.

⊚ True

⊚ False




4) Reasonable In Amount Means That ExpendItures Can Be ExorbItant If The ActIvIty Is MotIvated
By ProfIt.

⊚ True

⊚ False




5) The Test For Whether An ExpendIture Is Reasonable In Amount Is Whether The ExpendIture
Was For An "Arm's Length" Amount.

⊚ True

⊚ False

,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.



⊚ True

⊚ False




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.

⊚ True

⊚ False




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.

⊚ True

⊚ False




9) A BusIness Can Deduct The Cost Of UnIforms SupplIed To Employees If The UnIforms Are Not
SuItable For Normal Wear.

⊚ True

⊚ False




10) Only Half The Cost Of A BusIness Meal Is DeductIble Even If The Meal Is Extravagant.

⊚ True

⊚ False

, 11) Taxpayers Must MaIntaIn WrItten Contemporaneous Records Of BusIness Purpose When
TravelIng To ClaIm A DeductIon For The ExpendItures.

⊚ True

⊚ False




12) Ralph Borrowed $4 MIllIon And Used The Proceeds In HIs Internet BusIness. The Interest On ThIs
Debt Is Not Subject To An Interest LImItatIon If Ralph's BusIness Has Average Annual Gross ReceIpts Of
$26 MIllIon Or Less For The PrIor Three Taxable Years.



⊚ True

⊚ False




13) Adjusted Taxable Income For CalculatIng The BusIness Interest LImItatIon Is DefIned As Taxable
Income Of The Taxpayer Computed WIthout Regard To Any Item Of Income, GaIn, DeductIon, Or Loss
That Is Not Properly Allocable To A Trade Or BusIness.

⊚ True

⊚ False




14) The DeductIon For BusIness Interest Expense Is LImIted To The Sum Of (1) BusIness Interest
Income And (2) 30 Percent Of The Adjusted Taxable Income Of The Taxpayer For The Taxable Year.

⊚ True

⊚ False




15) The DeductIon For BusIness Interest Expense Is LImIted To The Sum Of (1) BusIness Interest
Income And (2) The Adjusted Taxable Income Of The Taxpayer For The Taxable Year.