TAX 4001 EXAM 2 2024/2025 Exam Questions and Verified Answers | Already Graded A+

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




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,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




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,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




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, 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



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