Question

TRUE OR FALSE

1. In 2018, unreimbursed employment related expenses are classified as deductions for AGI.

2. Section 212 expenses that are related to rent and royalty income are deductions for AGI.

3. Alice incurs qualified moving expenses of $12,000 in 2018. If she is not reimbursed by her employer, the deduction is classified as a deduction for AGI.

4. The Code does not specifically define what constitutes a trade or business.

5. An expense need not be recurring in order to be "ordinary".

6. Aaron, a shareholder-employee of Pigeon, Inc., receives a $300,000 salary. The IRS classifies $100,000 of this amount as unreasonable compensation. The effect of this reclassification is to decrease Aaron's gross income by $100,000 and increase Pigeon's gross income by $100,000.

7. Only under limited circumstances can a loss on the sale of a personal use asset be deducted.

8. The income of a sole proprietorship is reported on Schedule C (Profit or Loss from Business).

9. Fines and penalties paid for violations of the law (e.g., illegal dumping of hazardous waste) are deductible only if they relate to a trade or business.

10. The cost of legal advice associated with the preparation of an individual's Federal income tax return that is paid in 2018 is not deductible because it is a personal expense.

11. If a taxpayer operates an illegal business, no deductions are permitted.

12. For a taxpayer who is engaged in a trade or business, the cost of investigating a business in the same field is deductible only if the taxpayer acquires the business.

13. In determining whether an activity should be classified as a business or as a hobby, the satisfaction of the presumption (i.e., profit in at least 3 out of 5 years) ensures treatment as a business.

14. Mitch is in the 24% tax bracket. He may receive a different tax benefit for a $2,000 expenditure that is classified as a deduction from AGI than he will receive for a $2,000 expenditure that is classified as a deduction for AGI.

15. Deductions are allowed unless a specific provision in the tax law provides otherwise.

Answer 1

As per policy only first four questions should be answered. However I am ready to help you with half of your work.

1. False (this was true before 2018)

2. True (rent and royalty income are related to Section 212 expenses)

3. False (Moving expenses are classified as deductions for AGI)

4. True (the code fails to provide definition regarding constitution of trade and business)

5. True (recurrence of expenses is necessary for being them to be referred as ordinary)

6. False (It will not have any effect on any body's gross income)

7. False. under all circumstances can a loss on the sale of a personal use asset be deducted.

8. True. Schedule C is referred as a Profit or Loss from Business and income of a sole proprietorship is reported over there.