Category: Writing

1.Why did Congress enact the wash sale provisions?
2. The wash sale rules disallow a loss in the year of sale
when substantially identica l stock or securities are acqu ired by the taxpayer
with in a 61-day period. What types of stock or securities are considered
substantially identica l?

1. What documentation is required in order for a travel or
entertainment expense to be deductib le?
2. Under what circumstances can prepaid expenses be deducted
in the year of payment by a taxpayer using the cash method of accounting?
3. Under what circumstances would a taxpayer use both the
cash method and the accrual method of accounting at the same time?

During November and December of last year, Tommy’s, Inc.,
incurred the following expenses in investigating the feasibility of opening a
new restaurant in town:
Explain the proper treatment of these expenses under the
following scenarios :
a. Tommy’s, Inc., already owns another restaurant in town
and is wanting to expand. Tommy’s, Inc. opens the new restaurant in February of
the current year.
b. Assume chat Tommy’s, Inc. is in the book selling business
and feels chat its bookstore business is nor making a high enough return and it
wanes to move into the restaurant business. le opens the restaurant in February
of the current year.
c. Same as Part b except Tommy’s decides against opening a
restaurant after the investigation .

In March 2019, Otter Corporation sends peo – ple co the
state capita l co lobb y the legislature co build a proposed highway chat is
planned co run through the area where its business is located.
a. If Otter Corp. incurs $3,200 of expenses, what part, if
any, of its expenses are deductible?
b. Would it make a difference if the proposed road were a
city road rather than a state high – way, and Otter lobbied its local
government?
c. Assume the same faces in Part a except chat Otter’s total
in-house expenses are $1,500. Are these expenses deductible?

1. Because expenses incurred both in a business and for the
production of investment income are deductible, why is it important to
determine in which category a particular activity falls?
2. In order for a business expense co be deductible it muse
be ordinary, necessary, and reasonable. Explain what these terms mean.

Bttsiness Investigation E.xpenditttres. Assume the same
facts as in Problem I:6-40, except that Big Bang LLC incurs $51,000 in
expenses, and it does not already own the ocher entertainment galleries and it
does not own anything similar.
a. What is the proper tax treatment of these expenses if Big
Bang does not open the new gallery?
b. What is the proper tax treatment of these expenses if Big
Bang decides co open the new gallery on May 1 of the current year and makes the
appropriate election under Sec. 195?

For 2019, Mario, a single individual with no dependents,
receives income of $55,000 and incurs deductible expenses of $9,000.
a. What is Mario’s taxable income assuming that the expenses
are deductions for AGI?
b. What is Mario’s taxable income assuming that the expenses
are itemized deductions from AGI?

Bttsiness Investigation E.xpenditttres. During Januar y and
February of the current year, Big Bang LLC incurs $13,000 in travel,
feasibility studies, and legal expenses to investigate the feasibility of opening
a new entertainment gallery in one of the new suburban malls in town. Big Bang
already owns two other entertainment galleries in ocher malls in the area.
a. What is the proper tax treatment of these expenses if Big
Bang decides not to open the new gallery? b. What is the proper tax treatment
of these expenses if Big Bang decides to open the new gallery?

During the year, Sara sold a capital asset at a loss of
$2,000 . She had held the asset as an investment. This is the only capital
asset she sold during the year. ls her deduction for this capital loss a
deduction for or a deduction from AGI?