(1).Which of the following expenditures incurred in the
operation of a business is not required to be capitalized?
A. Cost of replacing an old shingle roof with a new tile
B. Cost of changing from one heating system to another.
C. Cost of replacing an old truck used for business
D. Cost of replacing small tools.
(2) Mr. B paid the following amounts in the current year in
connection with his business property:
New motor purchased in December for a truck that extended its
useful life by 3 years
Replacement parts to maintain machinery
in efficient operating condition
Labor to maintain the above equipment
Cost of replacing gravel driveway with
Cost of repainting factory building
What is Mr. B's allowable deduction for repairs and
maintenance expense on his current year Schedule C, Form
(3) Mr. March, a medical equipment manufacturer, paid and
incurred the following expenses during the current year:
Materials and supplies
Freight-in on raw materials
Freight on shipments of finished goods
Allocable overhead expenses for production
Cost of inventory donated to charity
Fair market value of inventory donated
The inventory donated to charity was included in the beginning
inventory and is not eligible for special treatment under Sec.
170(e)(3). What was the amount of Mr. March's cost of goods sold
for the current year?
(4) Mr. M, a cash-basis sole proprietor, secured two business
loans from two different banks. The following information pertains
to the loans. Assume all costs have been paid by M.
Date of loan
Loan origination fee
Interest for Year 3
On December 31, Year 3, Mr. M paid off Loan 1 and had to pay a
prepayment penalty of $1,500. What deductions can Mr. M take in
Year 3 with respect to these loans?