Chapter 2, Problem 32P

Which of the following statements is incorrect? Assume that the rental activity is classified as ‘production-of-income.’ If the taxpayer sells the rental property later at a loss, the loss will be treated as a capital loss (i.e., $3,000/$1,500 deduction limit in the current year).  An amount that would have been paid in an arm’s-length transaction is considered a reasonable amount as deduction. Payment (except for medical or educational expense) of another person’s obligation does not result in a tax deduction for the payer. Regarding the start-up costs, if the new business is in the same line of business as the existing one and if the new business is not launched, then none of the start-up costs are deductible. Payments for a speeding ticket are nondeductible.  HELP

You are self-employed. Your business earns income during the period. You are subject to which of the following taxes?    A. Income Tax B. Business Tax C. A and B D. None of these

Which of the following taxpayers may claim a deduction for qualified business income? a. A driver for Uber or Lyft. b. A vetenarian operating as an S corporation. In addition to veterinary services, revenues are also derived from the sale of pet food and supplies and from the boarding of animals.  c. A CPA operating as an LLC taxed as a sole proprietorship. The CPA is single and has taxable income of $150,000. d. Same as part(c), except the CPA has taxable income of $200,000 e. A real estate salesperson. f. A pet sitter/ dog walker. g. A sole proprietor software developer. h. An individual wage earner who derives $60,000 of rental income from a duplex she owns.