Only select one answer. Please write your answer on the line to the left of the
ID: 2587137 • Letter: O
Question
Only select one answer. Please write your answer on the line to the left of the question number. QUIZ 1. The courts have determined that to qualify as a trade or business, an activity must a. be operated with a profit motive b. have a sufficient degree of taxpayer involvement. c. show a profit. d. Both a and b are true. e. All three statements are true. 2. The crucial reason for determining whether an item is deductible as an expense under §162 or under § 212 is that a. production-of-income expenses are not deductible. b. § 162 business expenses usually are deductions for A.GL, while § 212 production-of-income expenses usually are miscellaneous itemized deductions. § 162 business expenses are deductions from AGL, while § 212 production-of-income expenses are deductions for A.G.I c. d. it resolves certain ownership questions. 3. Z is a ten-percent (10%) shareholder of H, Inc. H, Inc. has distributable net income of S100,000 this year and no accumulated earnings and profits. Z was paid $15,000 by the company for his expertise as a pilot, but he did not fhy this year. How is the IRS likely to view the $15,000? a. b. $15,000 salary to Z $15,000 dividend. 1000 dividend, $5,000 salary, return of capital, or capital gain d. $7,500 salary, $7,500 dividend. os wExplanation / Answer
1. Both A and B are true ( Be operated with a motive & have sufficient degree of tax payer involvement) 1. The Courts have determined that to qualify as a trade or business an activity must
2. $ 162 business expenses usually are deductions for AGI, While $212 Production of income expenses usually are miscellaneous itemized deduction 2. The crucial reason for determining whether an item is deductible as expenses under $162 or under $212 is that
3. $ 10000 Dividend , $5000 Salary return of capital, or Capital gain 3. Z is a ten-percent (10%) shareholder of H, Inc. H, Inc. has distributable net income of $100,000 this year and no accumulated earnings and profits. Z was paid $15,000 by the company for his expertise as a pilot, but he did not fly this year. How is the IRS likely to view the $15,000?
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