Questions and Answers of Canadian Business And The Law

Mindy has a Roth IRA held longer than five years to which she has contributed $30,000. The IRA has a current value of $62,000. Mindy is 55 years old and she takes a distribution of $40,000 after
Tony is a 45-year-old psychiatrist who has net earned income of $320,000 in 2022. What is the maximum amount he can contribute to his SEP for the year?
Marge has a Roth IRA held more than five years to which she has contributed $38,000. The IRA has a current value of $62,000. Marge is 65 years old and she takes a distribution of $40,000. How much of
During 2022, Jerry is a self-employed therapist, and his net earned income is $160,000 from his practice. Jerry’s SEP Plan, a defined contribution plan, states that he will contribute the maximum
Mary has a Roth IRA held more than five years to which she has contributed $30,000. The IRA has a current value of $62,000. Mary is 55 years old and she takes a distribution of $40,000. How much of
Dori is 58 years old and retired in 2022. She receives a pension of $25,000 a year and no other income. She wishes to put the maximum allowed into an IRA. How much can she contribute to her IRA?
Donna, age 42 and a single taxpayer, has a salary of $112,000 and interest income of $20,000. What is the maximum amount Donna can contribute to a Roth IRA for 2022?a. $4,800b. $5,400c. $5,800d.
Bob is a single, 40-year-old doctor earning $190,000 a year and is not covered by a pension plan at work. What is the maximum deductible contribution into a Traditional IRA in 2022?
Martha and Rob, a married couple, under 50 years of age, have adjusted gross income on their 2022 joint income tax return of $45,000, before considering any IRA deduction. Martha and Rob have no
Barry is a single, 40-year-old software engineer earning $140,000 a year and is not covered by a pension plan at work. How much can he put into a Roth IRA in 2022?
Lyndon, age 24, has a nonworking spouse and earns wages of $36,000 for 2022. He also received rental income of $5,000 and dividend income of $900 for the year. Assuming Lyndon’s employer does not
What is the maximum amount a 55-year-old taxpayer and 52-year-old spouse can put into a Traditional or Roth IRA for 2022, assuming they earn $70,000 in total and are not participants in pension plans?
Which of the following is true about the self-employed health insurance deduction?a. The deduction cannot be claimed when a subsidized employer health insurance plan is also available.b. The
Which type of insurance is not deductible as self-employed health insurance?a. Medical insuranceb. Disability insurancec. Dental insuranced. Long-term care insurancee. Spousal medical insurance
Charlene has single coverage in a qualifying high-deductible health insurance plan. She is 47 years old and wishes to contribute the maximum amount to her HSA. How much is she allowed to contribute
Serena is a 48-year-old single taxpayer. She operates a small business on the side as a sole proprietor. Her 2022 Schedule C reports net profits of $15,000. Her employer does not offer health
Which of the following is a false statement about Health Savings Accounts (HSAs)?a. Taxpayers who contribute to an HSA must carry qualifying high-deductible health insurance.b. HSAs are available to
In 2022, Tracy generates a $10,000 loss from an otherwise qualified business activity. Fortunately, she also works as an employee and has taxable wages of $40,000. Tracy’s 2022 QBI deduction isa.
Qualified business income does not include which of the following:a. Income from sales of goodsb. Deductions related to cost of goods soldc. Deductions for business expenses such as rentd. Interest
The qualified business income deduction is unavailable to which of the following businesses:a. A sole proprietor dental practice that generates about $70,000 in income each yearb. An incorporated
Katrina has wages of $150,000 in 2022. She also operates a small business that generated net profits of $10,000. What is Katrina’s total self-employment tax?a. $0b. $267.82c. $290.00d. $1,530.00
Which of the following is not subject to self-employment tax?a. Gain on the sale of real estate held for investmentb. Net earnings of a self-employed lawyerc. Distributive share of earnings of a
For 2022, Roberta is a self-employed truck driver with earnings of $45,000 from her business. During the year, Roberta received $2,500 in interest income and dividends of $500. She also sold
Jim has a net operating loss in 2022. If he does not make any special elections, what is the first year to which Jim carries the net operating loss?a. 2017b. 2018c. 2019d. 2021e. 2023
Bonita earns $31,000 from her job, and she has $1,000 of interest income. She has itemized deductions of $35,000. There are no casualty or theft losses in the itemized deductions. What is Bonita’s
Norm is a real estate professional with a real estate trade or business as defined in the tax law. He has $80,000 of business income and $40,000 of losses from actively managed real estate rentals.
Ned has active modified adjusted gross income before passive losses of $250,000. He has a loss of $15,000 on rental property he actively manages. How much of the loss is he allowed to take against
Nancy has active modified adjusted gross income before passive losses of $75,000. She has a loss of $5,000 on a rental property she actively manages. How much of the loss is she allowed to take
Which of the following is classified as active income?a. Self-employment income from a small businessb. Interest incomec. Limited partnership incomed. Bonus paid by an employer to an employeee. a.
Which of the following types of income is passive income?a. Net rental income from real estate limited partnership investmentsb. Dividends from domestic corporationsc. Wagesd. Interest income from
Which of the following is not classified as portfolio income for tax purposes?a. Interest income on savings accountsb. Dividends paid from a credit unionc. Net rental income from real estate
Helen, a single taxpayer, has modified adjusted gross income (before passive losses) of $126,000. During the tax year, Helen’s rental house generated a loss of $15,000. Assuming Helen is actively
John owns a second home in Palm Springs, CA. During the year, he rented the house for $5,000 for fifty-six days and used the house for fourteen days during the summer. The house remained vacant
Juanita rents a vacation condo for 120 days and uses the condo for herself for twenty days. What allocation percentage will Juanita apply to the condo’s operating expenses (for example, insurance,
Jonathan rents his home for twelve days during the 2022 World Cup of US Soccer. Due to the popularity of the event, he earns $4,000 in rent. He spends $150 on a cleaning service immediately after the
Which of the following is true about the rental of real estate?a. Depreciation and maintenance expenses for an apartment complex are deductible.b. The expenses deductions for a home rented for 100
Gene, a single taxpayer, purchased a house eighteen months ago for $350,000. If Gene sells his house due to unforeseen circumstances for $550,000 after living in it for a full eighteen months, what
Kevin purchased a house 20 years ago for $100,000 and he has always lived in the house. Three years ago Kevin married Karen, and she has lived in the house since their marriage. If they sell
Susan, a single taxpayer, bought her home 25 years ago for $30,000. She has lived in the home continuously since she purchased it. In 2022, she sells her home for $200,000. What is Susan’s taxable
Jim, a single taxpayer, bought his home 25 years ago for $25,000. He has lived in the home continuously since he purchased it. In 2022, he sells his home for $300,000. What is Jim’s taxable gain on
Oscar, a single taxpayer, sells his residence of the last 10 years in January of 2022 for $190,000. Oscar’s basis in the residence is $45,000, and his selling expenses are $11,000. If Oscar does
Tyler, a single taxpayer, generates business income of $3,000 in 2019. In 2020, he generates an NOL of $5,000. In 2021, he generates business income of $1,000. In 2022, his business generates income
Serena, a married filing jointly taxpayer, has the following capital gains and losses in 2022:? $4,000 short-term capital gain? $2,000 short-term capital loss? $2,000 long-term capital gains? $8,000
If an individual taxpayer generates a net capital loss in excess of $3,000 in 2022:a. The loss can be carried back for 3 years and forward for 5 yearsb. The loss can be carried back for 2 years and
Angela sold her personal auto in 2022 for $8,000. She purchased the car for $26,000 in 2015. She has long-term capital gains of $4,000 from the sale of stock in 2022. What is Angela’s net
On May 1, 2022, Ella leases her condo to Fitz for a 12-month lease period starting May 1 for $1,000 per month. Ella requires that Fitz pay first month’s rent, last month’s rent and a $1,000
In 2022, Tim, a single taxpayer, has ordinary income of $30,000. In addition, he has $2,000 in short-term capital gains, long-term capital losses of $10,000, and long-term capital gains of $4,000.
Sherry rents her vacation home for six months and lives in it for six months during the year. Her gross rental income during the year is $6,000. Total real estate taxes for the home are $2,200, and
Harold, a single taxpayer, has $30,000 of ordinary income after the standard deduction, and $10,000 in long-term capital gains, for total taxable income of $40,000. For 2022, single taxpayers pay 0
In November 2022, Ben and Betty (married, filing jointly) have a long-term capital gain of $54,000 on the sale of stock. They have no other capital gains and losses for the year. Their ordinary
Kendra and Lloyd get married on July 1, 2022 and will file jointly in 2022. Both of them owned a home prior to marriage, but they agree that they wish to no live together in one of the homes.
In 2022, what is the top tax rate for individual long-term capital gains and the top tax rate for long-term capital gains of collectible items assuming that the net investment income tax does not
Bob sells a stock investment for $35,000 cash, and the purchaser assumes Bob’s $32,500 debt on the investment. The basis of Bob’s stock investment is $55,000. What is the gain or loss realized on
Grady gives a watch to his nephew, Fred. Grady’s original basis in the watch is $100 and the value of the watch on the date of the gift is $1,000. Fred keeps the watch for a year or two and then
Agnes passes away in 2022 and leaves her daughter, Sam, 100 shares of stock. Agnes purchased the stock for $1,000 over twenty-five years ago. It was worth $10,000 on the date of Agnes’ death. Sam
Jaye purchased a building for $100,000. After deducting depreciation of $12,000 through the date of sale, Jaye sells the building for $120,000. What is Jaye’s adjusted basis for computing realized
Vijay sells land and receives $5,000 cash, a motorcycle worth $1,600, and two tickets to the Super Bowl with a total face value (cost) of $800 but worth $1,200. In addition, the buyer assumes the
To calculate the number of days in the holding period, a taxpayer should:a. Include the date of acquisitionb. Exclude the date of dispositionc. Exclude the date of acquisitiond. Include the date of
Yasmeen purchases stock on January 30, 2021. If she wishes to achieve a long-term holding period, what is the first date that she can sell the stock as a long-term gain?a. January 20, 2022b. January
Which of the following is a capital asset?a. Account receivableb. Copyright created by the taxpayerc. Copyright (held by the writer)d. Business inventorye. A taxpayer’s residence
All of the following assets are capital assets, except:a. A personal automobileb. IBM stockc. A child’s bicycled. Personal furnituree. Used car inventory held by a car dealer
Stewie, a single taxpayer, operates an activity as a hobby. Brian operates a similar activity as a bona fide business. Stewie’s gross income from his activity is $5,000 and his expenses are $6,000.
Which of the following factors is not considered by the IRS in determining whether an activity is a hobby?a. Whether the activity is conducted like a businessb. The time and effort expended by the
Carol maintains an office in her home where she conducts a dressmaking business. During the year she collects $4,000 from sales, pays $1,300 for various materials and supplies, and properly allocates
Which of the following taxpayers qualifies for a home office deduction?a. An attorney who is employed by a law firm and has a home office in which to read casesb. A doctor who has a regular office
Kathy is a selfemployed taxpayer working exclusively from her home office. Before the home office deduction, Kathy has $3,000 of net income. Her allocable home office expenses are $5,000 in total
Loren loaned a friend $9,000 as financing for a new business venture. In the current year, Loren’s friend declares bankruptcy and the debt is considered totally worthless. What amount may Loren
Grady operates a lawn maintenance business using the accrual method. He estimates that 5 percent, or about $2,500 of his 2022 yearend customers’ invoices will never be paid. During 2022, he wrote
Which of the following statements about business gift deductions is not true?a. A taxpayer can provide two gifts to a client during the year and the maximum deduction is $50.b. Reasonable shipping
Which of the following business gifts are fully deductible?a. A gift to a client that cost $35b. A gift to an employee, for ten years of continued service, that cost $250c. A gift to a client and her
Which of the following selfemployed taxpayers are most likely permitted to deduct the cost of their uniform?a. A lawyer who wears a business suitb. A furnace repairman who must wear overalls while on
Which of the following is not deductible by the selfemployed taxpayer?a. A subscription to The CPA Journal by a CPAb. A subscription to The Yale Medical Journal by a doctorc. A subscription to
Which of the following is likely a deductible business educational expense?a. Leah is a selfemployed tax preparer. The State Board of Taxation requires Leah to attend federal and state taxation
Which of the following taxpayers may not deduct their educational expense?a. A CPA who attends a course to review for the real estate agents’ examb. An independent sales representative who attends
In 2022, Values R Us, a real estate appraising firm, incurs the following meals expenses:• $1,200 restaurant meals with business clients• $1,600 for an end of year celebratory company dinner for
Which of the following is not likely to be a deductible expense?a. The cost of tickets to a stage play for a client and the taxpayer.b. The cost for Rosa to take a potential customer to lunch to
Which of the following expenses is deductible as an entertainment expense?a. The depreciation on an airplane used to entertain customersb. The cost of a hunting camp used to entertain customersc. The
Joe is a selfemployed information technology consultant from San Francisco. He takes a weeklong trip to Chicago primarily for business. He takes two personal days to go to museums and see the sights
Which of the following expenses incurred while the taxpayer is away from home “overnight” is not included as a travel expense?a. Laundry expensesb. Transportation expensesc. Meal expensesd.
In which of the following cases is the employer entitled to a travel expense deduction?a. An employee, who worked in the Salt Lake City plant of a company, who is assigned to the Denver plant of the
Which of the following is not considered commuting miles?a. The miles from a taxpayer’s home to their regular place of workb. The miles to a taxpayer’s home from a regular second jobc. The miles
Heather drives her minivan 450 miles through June 30 and another 475 miles for business purposes in the second half of 2022. She elects to use the standard mileage rate for her auto expense
Which of the following taxpayers may use the standard mileage method of calcula ting transportation costs?a. A taxi driver who owns a fleet of six cars for hireb. A taxpayer who used accelerated
Lawrence owns a small candy store that sells one type of candy. His beginning inventory of candy was made up of 10,000 boxes costing $1.50 per box ($15,000), and he made the following purchases of
If a taxpayer has beginning inventory of $45,000, purchases of $175,000, and ending inven tory of $25,000, what is the amount of the cost of goods sold for the current year?a. $155,000b. $180,000c.
A small business that qualifies for the cash method may use which method to account for inventory?a. Treat as nonincidental materials and suppliesb. Treat the same as in the applicable financial
Which of the following expenses is generally deductible in the year incurred?a. Payments to remediate the contaminated ground water surrounding an oil refineryb. Interest expense associated with debt
Which of the following expenses is generally deductible in the year incurred?a. Capital expenditures for land and buildingsb. Illegal bribes or kickbacksc. Continuing legal training for a practicing
In the current year, Mary started a profitable housekeeping business as a sole proprietor. She has ten housekeepers working for her and spends her time selling their services and coordinating her
Which of the following is not a test for the deductibility of a business expense?a. Ordinary and necessary testb. Sales generation testc. Reasonableness testd. Business purpose test
Mike, a single taxpayer, has $10,000 of student loans forgiven in 2022 under a federal student loan forgiveness program. His total student loan balance was $34,000. His 2022 AGI is $55,000. How much
Kate acquires a principal residence in 2017 for $200,000 secured by a $180,000 mortgage. In 2022, Kate misses work for three months. Her employer stops paying her after ten days. In 2022 when the
Jack borrows $13,000 from Sawyer Savings and Loan and uses the proceeds to acquire a used car. When the loan balance is $12,000, Jack loses his job and is unable to make payments for three months.
Which of the following is correct for Qualified Tuition Programs (Section 529 plans)?a. Contributions are deductible, and qualified educational expense distributions are tax-free.b. Contributions are
In 2021, Son loses his job and he is able to reduce his mortgage debt on his principle residence by $30,000 and remains solvent. Explain how much cancellation of debt income Son will recognize and
The distinction between qualified dividends and ordinary dividends is:a. There is no distinction.b. Ordinary dividends are taxed at preferential rates.c. Qualified dividends are taxed at preferential
Helen loans her son Ricky, $25,000 to help with the purchase of a car and other personal expenses. Due to her affection for her son, Helen charges Ricky zero interest. Which of these statements best
Which of the following best describes the treatment of U.S. obligation interest income?a. Excluded from federal and state gross incomeb. Excluded from federal gross income but included for most
Lupita dies in 2022 but has a $1 million life insurance policy that lists her spouse, M’Baku as the beneficiary. M’Baku elects to receive all $1 million in a lump sum and spends $200,000
Which of the following might result in life insurance proceeds that are taxable to the recipient?a. A life insurance policy in which the insured is the son of the taxpayer and the beneficiary is the

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