Question : 61. During the 2014 holiday season, Bob, a barber, gave business : 1313516

61. During the 2014 holiday season, Bob, a barber, gave business gifts to 34 customers. The values of the gifts, which were not of a promotional nature, were as follows:

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8 at $10 each

8 at $25 each

8 at $50 each

10 at $100 each

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For 2014, what is the amount of Bob’s business gift deduction?

a. $0

b. $280

c. $730

d. $850

e. None of the above

62. Ellen loans Nicole $45,000 to start a hair salon. Unfortunately, the business fails in 2014 and she is unable to pay back Ellen. In 2014, Ellen also had $20,000 of income from her part-time job and $12,000 of capital gain from the sale of stock. How much of the $45,000 bad debt can Ellen claim as a capital loss in 2014?

a. $45,000, with $33,000 carried forward to 2015

b. $12,000

c. $32,000

d. $15,000, with $30,000 carried forward to 2015

e. $0

63. Splashy Fish Store allows qualified customers to purchase items on credit. During 2014, Lisa, the owner of the store, determines that $3,500 of accounts receivable are not collectible. Which of the following statements is true with respect to Splashy Fish Store’s deduction for the uncollectible accounts receivable?

a. Splashy is not allowed a deduction for the uncollectible accounts if the income arising from the accounts has not been previously included in taxable income.

b. Any deduction for the uncollectible accounts receivable will be treated as a short-term capital loss.

c. Only $3,000 of the uncollectible accounts receivable may be deducted in the current year.

d. All of the above statements are true.

e. Two of the above statements are true.

64. Which of the following would be a business bad debt if it were uncollectible?

a. A taxpayer loans his father $1,000 to start a business.

b. A taxpayer loans his son $10,000 to purchase a rental house.

c. A dentist, using the accrual basis of accounting, records income when it is earned and extends credit to a patient for services provided.

d. A taxpayer loans his brother $3,000 to purchase a truck for use in his brother’s business.

e. None of the above.

65. Tim loaned a friend $4,000 to buy a used car. In the current year, Tim’s friend declares bankruptcy and the debt is considered totally worthless. What amount may Tim deduct on his individual income tax return for the current year as a result of the worthless debt, assuming he has no other capital gains or losses for the year?

a. $4,000 ordinary loss

b. $4,000 short-term capital loss

c. $2,000 short-term capital loss

d. $3,000 ordinary loss

e. $3,000 short-term capital loss

66. Martin has a home office for his business as an agent for rock-and-roll bands. The business shows a loss of $2,000 before home office expenses. How should the home office expenses be treated?

a. Because of the business loss, home office expenses cannot be deducted and are lost forever.

b. Because of the business loss, home office expenses (other than mortgage interest and property taxes allocated to the office) cannot be deducted in the current year but can be carried forward to the next year.

c. The home office expenses increase the business loss in the year they are incurred and are fully deductible in that year.

d. The home office expenses increase the business loss in the year they are incurred and are 50 percent deductible in that year.

67. Peter operates a dental office in his home. The office occupies 250 square feet of his residence, which is a total of 1,500 square feet. During 2014, Peter pays rent for his home of $12,000, utilities of $4,800, and maintenance expenses of $1,200. What amount of the total expenses should be allocated to the home office?

a. $0

b. $2,000

c. $2,500

d. $3,000

e. None of the above

68. Gene is a self-employed taxpayer working from his home. His net income is $7,000 before home office expenses. His allocable home office expenses are $8,000 in total. How are the home office expenses treated on his current year tax return?

a. All home office expenses can be deducted and will result in a $1,000 business loss.

b. Only $7,000 of the office expenses can be deducted, the remaining $1,000 cannot be carried forward or deducted.

c. None of the home office expenses can be deducted because Gene’s income is too high.

d. Only $7,000 of the office expenses can be deducted; the remaining $1,000 can be carried forward to future tax years.

69. Bobby is an accountant who uses a portion of his home as his office. His home is 2,500 square feet and his office space occupies 1,500 square feet. Rent expense is $18,000 a year; utilities expense is $2,000 a year; and maintenance expense is $3,000 a year. What is the total amount of these expenses that can be allocated to his home office?

a. $5,800

b. $9,200

c. $9,280

d. $13,800

e. $23,000

70. Kendra is a self-employed taxpayer working exclusively from her home office. Before the home office deduction, Kendra has $6,000 of net income. Her allocable home expenses are $10,000 in total. How are the home office expenses treated on her current year tax return?

a. Only $6,000 home office expenses may be deducted, resulting in net business income of zero. The remaining $4,000 of home office expenses may be carried forward and deducted in a future year against business income.

b. Only $3,000 a year of the home office expenses may be deducted.

c. All home office expenses may be deducted, resulting in a business loss of $4,000.

d. Only $6,000 of home office expenses may be deducted, resulting in a net business income of zero. None of the remaining $4,000 of home office expenses may be carried forward or deducted.