Bob, a calendar-year, cash-basis taxpayer, owns an
insurance agency. Bob has four people selling insurance for him.
The salesmen incur ordinary and necessary meal and entertainment
expenses for which Bob reimburses them monthly. During the current
year, Bob reimbursed his agents $10,000 for meals and $26,000 for
entertainment. How much of the reimbursement can Bob deduct for
meal and entertainment expenses on his current-year federal income
 In January 2018, Mr. D, who is self-employed, purchased a
new automobile, which he uses 100% for business. During 2018, he
drove the car 14,000 miles. Mr. D also owns another automobile,
which he uses occasionally for business but primarily for persona
2018, he drove the second car 2,000 business miles. The second car
is not fully depreciated. What is the amount of Mr. D's automobile
expense deduction using the standard mileage rate?
 The 50% limit on deductibility of business-related
expenses applies to which of the following?
A. Meals while traveling away from home on business.
B. Employee's reimbursed meal expenses.
C. Meals for customers at your place of business.
D. Meals while traveling away from home on business and meals
for customers at your place of business.
 Which one of the following statements concerning the
recordkeeping requirements for travel is true?
A. Social Security numbers of business guests must be recorded
to support travel expenses.
B. If the business purpose of a meal is not recorded, other
evidence may be used to substantiate the business purpose.
C. Receipts must be kept for all transportation expenditures
D. A canceled check, by itself, is adequate evidence to
support a travel expense.
 During the current year, Ashley Corporation charged the
following payments to miscellaneous expense:
Travel expense of $300 for the company president to offer
voluntary testimony at the state capital against proposed
legislation regarded as unfavorable to its business Christmas gifts
to 20 customers at $75 each Contribution of $600 to local political
candidate The maximum deduction that Ashley can claim for these
 During the current year, Mr. Y, a cash-basis sole
proprietor, paid the following:
Base wages to his 4 employees
$100,000 Year-end bonuses paid to 2 employees for
establishing new sales records
20,000 Christmas gifts to his 4 employees in
appreciation for past services ($50 per gift)
What is the total amount Mr. Y can deduct on his current-year
income tax return?
 Flora Corporation made the following awards of tangible
personal property to employees during the current year under a
written, qualified, nondiscriminatory plan:
Value Name Reason for Award Received Mike 20 years' employment
$250 Kurt 20 years' employment 250 Steve 35 years' employment 450
40 years' employment 550 George 5-year safety award 200 No
other safety awards were awarded during the current year. The
amount Flora can deduct related to these awards is
 All of the following payments made to employees would be
currently deductible as business expenses except
A. Wages paid to employees for constructing a new building to
be used in the business.
B. Vacation pay paid to an employee when the employee chooses
not to take a vacation.
C. Reasonable salary paid to a corporate officer owning a
controlling interest for services she rendered.
D. Lump-sum payment made to the beneficiary of a deceased
employee that is reasonable in relation to the employee's past
 In Year 1, Paige signed a 6-year lease for a building to
use in her business. In Year 3, she installed shelves and made
other leasehold improvements to the building for a total of $3,200.
A. Deduct the $3,200 as a current expense.
B. Depreciate the $3,200 using regular MACRS
C. Depreciate the $3,200 using the alternative depreciation
D. Amortize the $3,200 over the remaining term of the
 In April of the current year, Mr. Beach, an accrual-basis
taxpayer, had a $25,000 theft loss from inventory items held for
sale to customers in the ordinary course of his business. In August
of the current year, he received a $25,000 reimbursement from his
insurance company to cover the loss. Which of the following is a
correct method of reporting the loss and reimbursement on Beach's
income tax return?
A. Include the $25,000 in ordinary income; the loss is
accounted for in the cost of goods sold.
B. Do not report the loss as a separate item; do not include
the $25,000 in ordinary income.
C. Include the $25,000 in ordinary income; decrease the cost
of goods sold by the $100 casualty loss rule.
D. Apply the 10% adjusted gross income rule to the loss; the
amount of the deductible loss would be the amount of the
reimbursement to be included in ordinary income.