b. Interest expenses attributable to a mortgage on the taxpayer\'s principal res

Question

b. Interest expenses attributable to a mortgage on the taxpayer's principal residence. Property taxes assessed on the taxpayer's residence. Tax preparation fee. c. More than one of the above are miscellaneous itemized deductions. AIG 8. B, a bank president, is a weekend potter. He regularly sells his pots at crafts fairs and spends an average of ten hours a week either making or marketing pots. Although he has made around $200 profit per year for the last two years from pottery sales, he tells everyone that he would do it for free. This year he had a $1,000 net loss due to increased entrance fees at the fairs. If B has been making and selling pots for only three years and he makes an election under § 183 to postpone IRS challenges, which of the following is a true statement if B makes a profit next year? a.) He can carry forward this year's $1,000 loss and deduct it for A.G.I c. He may shift the burden of proof to the IRS, which must show that the pottery d. He can postpone paying income tax on the profit until the challenge is resolved. He is conclusively the owner of a for-profit business rather than a hobby. activity is not a business. After having his best three quarters of earnings ever, and with a predicted strong fourth quarter, D, a sole proprietor who is a calendar year, cash basis taxpayer in a manufacturing business, is looking for ways to reduce his A.G.I. this year. Which of the following would probably not generate a deduction for A.G.I.? a Expenses incurred in December for a big January ad campaign. c. Expenses incurred in providing information to the city council on matters of direct d. Buying life insurance on his key employees' lives, with the business as Selling assets below his adjusted basis in them. interest to the taxpayer beneficiary Quiz Chapter 7

Explanation / Answer

8. A - He can carry forward this year $1000 loss and deduct it for AGI

9. B - Selling assets below his adjusted basis in them ( A & D options will generate a deduction)

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