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20. How much of its C corporation earnings cana professional corporation law firm keep inits corporate bank account without paying apenalty:A.B.C.D. 100,000 150,000 200,000 250,00021. Which state charges an 800 minimumfranchise tax fee per year for any LLCs orLLPs:A. DelawareB. IllinoisC. Massachusetts25. Which of the following would be included asQualified Business Income (QBI):A.B.C.D.dividend incomenet business incomecapital gainsbusiness income earned outside the U.S.26. Which of the following statements is correctregarding the pass-through deduction:A. it is an “above the line” deductionB. it reduces Social Security taxes as well asincome taxesC. it will reduce adjusted gross incomeD. it is a personal deduction taken on Form1040D. California22. Which of the following would not be considereda deductible business operating expense:A.B.C.D.telephone equipment costspostage costsadvertising costsoffice utility costs23. How long can an item or service last for itto still be considered a current operatingexpense:A.B.C.D.up to one monthup to one yearup to two yearsup to three years27. Which of the following is a non-deductiblepersonal expense:A.B.C.D.taking the train to the officedriving a motorcycle to a clientdriving a leased minivan to make deliveriestaxi fare to a convention28. In which case would it definitely make moresense to use the actual expense method overthe standard mileage method:A. if you receive a lot of parking tickets duringthe normal course of businessB. if your business car is a new MercedesC. if you have a small economy carD. if you drive an inexpensive motorcycle24. Which of the following would most likely beallowed as a business deduction:A.B.C.D.bar exam feeskickbacks paid to a private partytravel expensespenalties paid to the government7735B Final Exam 9

29. Under the Tax Cuts and Jobs Act, how is atrade-in vehicle treated for tax purposes:A. you can do a tax-free exchange with thepurchase of any car (new or used)B. you can do a tax-free exchange only with thepurchase of new vehicleC. there is no tax due on the sale of the tradein as long as the transaction is done at anauthorized dealershipD. the trade-in vehicle is treated as a taxablesale, regardless of the type of transaction30. How much bonus depreciation is allowed fornew passenger vehicles used primarily forbusiness purposes:A. 8,000B. 10,000C. 16,000D. 100% of the cost of the vehicle31. All of the following statements are trueregarding the tax treatment of a leased vehicleexcept:A. the actual expense method can be used todeduct the portion of the lease payment thatreflects the business percentage use of thecarB. either the standard mileage method or actualexpense method can be used on a leasedcarC. the method used can change from year-toyear on the same vehicleD. you can deduct the business use percentageof the down payment as long as you spreadthe deduction out equally over the entirelease period32. Which of the following is necessary for atrip to qualify for a business travel expensededuction:A. the trip must be for more than a single nightB. the trip must be outside the general areawhere your business is locatedC. the trip must require more than three hoursof travel timeD. all of the above10 7735B Final Exam33. How is “temporary work” defined for taxpurposes:A. work that is reasonably expected to last nomore than one monthB. work that is reasonably expected to last nomore than six monthsC. work that is reasonably expected to last nomore than one yearD. there is no guideline; it is at the taxpayer’sdiscretion34. If a trip is primarily considered personal, butyou do some business while there, which ofthe following would be deductible:A. travel costsB. lodging expensesC. computer rental feesD. meals35. What is the annual deduction allowance forattending conventions, seminars, or similarmeetings aboard a cruise ship:A.B.C.D. 1,000 2,000 5,000 10,00036. For 2020, how much is the standard mealallowance allocated for “highest cost areas”within the continental United States:A.B.C.D. 45 53 76 88

37. If you use your home office for businesson a regular basis, which of the followingrequirements must also be met in order foryour home office to qualify for a tax deduction:A. you meet clients or customers at your homeB. the home office is a separate structure usedexclusively for businessC. you store inventory or product samples athomeD. any of the above38. Effective January 1, 2018, which of thefollowing is correct about taking the homeoffice deduction as an employee:A. the home office deduction is no longeravailable to employeesB. as an employee, you must now provide proofof your time spent working at homeC. there are now less stringent requirements foremployees working out of the homeD. employees are now treated the same asthose that are self-employed39. Which of the following is the most precisemethod of measuring your home office space:A.B.C.D.square footage methodroom methodmathematical methodsimplified method40. Which of the following would be considered adirect expense for your home . When using the simplified home officededuction calculation method, the homeoffice deduction is capped at per year.A.B.C.D. 1,000 1,500 2,000 2,50042. Which of the following is correct regardingdeductions for outside offices:A. a rental deposit is deductible in the year it ispaidB. home office and outside office deductionrules are the sameC. there is no profit limit on deductions taken foroutside office rental expensesD. all outside rental office expenses are filed onIRS Form 882943. When you purchase real estate to use as youroffice, which of the following is included in itstax basis:A. the building and building componentsB. land improvements and landscapingC. personal property included in the purchasepriceD. all of the above44. Which of the following has the longestdepreciation period:A.B.C.D.land improvementsresidential real propertynonresidential real propertypersonal property45. Which of the following would be considereda current expense as opposed to a long-termasset:A.B.C.D.computersoffice suppliesbooksa copy machine7735B Final Exam 11

46. Which of the following used to be considered“listed property” but is no longer classified assuch:A.B.C.D.cell phonesdigital camerasautomobilesairplanes47. Which of the following could be eligible forbonus and purchases48. When would you need to use regulardepreciation as opposed to any of the otherdepreciation methods:A. for a new luxury automobile purchaseB. for office equipment that exceeds 2,500C. for personal property items that youconverted to business useD. all of the above49. How long of a depreciation period docomputers have:A.B.C.D.3 years5 years7 years10 years50. Which of the of the following would not beable to utilize the double declining balancedepreciation method:A.B.C.D.computer softwareautomobilesoffice furniturefarm property12 7735B Final Exam51. All of the following improvements tocommercial buildings can be depreciated inone year utilizing Section 179 except:A.B.C.D.landscapingroofingheating and air systemssecurity systems52. A special tax rule for start-up expensesenables companies to write off up toin the first year and then deduct the remainderover the next 15 years.A. 2,000B. 5,000C. 10,000D. 20,00053. Which of the following is treated as a start-upexpense by the IRS:A.B.C.D.inventoryresearch and development costsemployee training before the practice beginsorganizational costs54. With a start-up company, when does thebusiness actually begin for tax purposes:A.B.C.D.the date it is incorporatedthe date the first person receives a paycheckthe date it becomes a going concernthe date when the first money is earned55. Which major provision of the Affordable CareAct has been eliminated:A. the minimum standards on health carecoverageB. the individual mandateC. the employer mandateD. the premium tax credit

56. Which of the following is required in orderto be eligible for health insurance premiumassistance credits:A. the insurance must be obtained through astate exchangeB. the insurance must be obtained through anapproved insurance brokerC. the insurance must be obtained through thefederal governmentD. the insurance can be obtained through anyresource57. Individual taxpayers who itemize can deductmedical and dental expenses that are overof their adjusted gross income.A. 5%B. 7.5%C. 10%D. 12%58. Which of the following can be included in theself-employment health insurance income taxdeduction:A. health insurance premiums for a 22-year oldstepchildB. dental insurance premiums for a dependentC. long-term care coverage for a spouseD. all of the above59. Which type of entity can purchase healthinsurance for you, deduct the cost as abusiness expense, and not have to includethe cost in employee compensation:A.B.C.D.S corporationC corporationLLCLLP60. A Health Reimbursement Account (HRA)can be used to reimburse all of the followingexcept:A.B.C.D.over-the-counter medicationsdental treatmentcontact lenseschiropractic care61. For 2020, how much can an eligible smallbusiness with a QSEHRA reimburse itsemployees for deductible medical costs forthe family:A. up to 3,650B. up to 5,250C. up to 7,950D. up to 10,60062. Individuals in which age group are permittedto make catch-up contributions to their HealthSavings Accounts (HSAs) if they desire:A.B.C.D.35-4545-5555-6565-7563. Which of the following is not permitted to bepaid for with HSA funds:A. health insurance bought during openenrollmentB. health insurance obtained during acontinuation coverage periodC. health insurance premiums paid while onunemploymentD. long-term health care insurance64. Which of the following is not included in theIRS definition of “inventory”:A.B.C.D.finished products offered for saleunfinished work in progresspatents and copyrightsraw materials to be used in merchandise7735B Final Exam 13

65. Which of the following would determine ifcertain office supplies are “nonincidental”:A. if no record is kept when using the suppliesB. if you treat the cost of the supplies as anasset for financial reporting purposesC. if no physical inventory of the supplies istakenD. if deducting the cost of the supplies does notdistort your taxable income66. Which of the following would not qualify as agoodwill advertising expense:A. sponsorship of a little league teamB. pro bono work for a homeless shelterC. product samples given out at a fun runD. radio ad time encouraging people to donateto the Red Cross67. All of the following must be true in order fora debt to be considered a bad business debtand therefore able to be taken as a businessoperating expense except:A. it must be a bona fide business debtB. it must be deemed wholly or partly worthlessC. you must have suffered an economic lossbecause of the debtD. you must have gone to court at least once totry to collect the debt68. Which of the following is correct regardingcasualty losses due to the coronaviruspandemic:A. some losses caused by the coronaviruspandemic are considered deductible casualtylossesB. taxpayers have the option of deductingqualifying casualty losses due to thepandemic in 2019 instead of 2020 andobtaining a refund for taxes paid in that yearC. inventory losses cannot qualify for a casualtyloss deduction if the losses have alreadybeen deducted as cost of goods soldD. all of the above14 7735B Final Exam69. The maximum disabled access tax credit abusiness owner can take in one year is .A.B.C.D. 1,125 2,125 5,125 10,12570. Which of the following would be a deductiblebusiness-related education expense:A.B.C.D.the cost of attending law schoolthe cost of attending medical schoolattending a continuing education seminarall of the above71. For 2020, partnerships with average grossreceipts of 25 million or more are allowed toonly deduct interest payments up toof their adjusted taxable income.A.B.C.D.30%40%50%60%72. Which government agency reviews whethera worker is classified as an employee or anindependent contractor:A. the IRSB. the state’s tax departmentC. the state’s unemployment compensationinsurance agencyD. all of the above73. Which of the following is correct regardingthe Federal Unemployment Tax Act (FUTA):A. the FUTA tax rate is 3%B. the FUTA tax is assessed on the first 15,000 of an employee’s annual wagesC. the FUTA tax is usually 42 per year peremployeeD. the FUTA tax is deducted from employeewages

74. Which of the following is true regardingemploying your own children:A. children of the employer are treated exactlylike any other employeeB. children of the employer will only need to paytax on their income if it exceeds the standarddeduction amount ( 12,400 in 2020)C. the child will pay a tax rate of 20% on anyincome over the standard deductionD. FICA tax is still owed, regardless of the ageof the child75. If you pay an unincorporated independentcontractor (IC) or more in one yearfor business-related services, you must obtainthe IC’s taxpayer identification number andfile IRS Form 1099-NEC to let the IRS knowhow much you paid the IC.A.B.C.D. 600 1200 1500 180076. Which of the following is an advantage ofbeing classified as an employee of your owncorporation that is taxed as a C corporation:A. employment taxes will not be withheldB. the corporation will not owe unemploymenttaxes on your behalfC. you qualify for a variety of tax-free employeefringe benefitsD. the corporation does not need to send in aW-2 with your wages to the IRS77. What is the C corporation tax rate enacted in2018 with the Tax Cuts and Jobs Act:A.B.C.D.21%26%35%37%78. Which of the following is the factor usedby the courts to determine “reasonablecompensation”:A.B.C.D.duties performed by the employeetime and effort devoted to the businessthe payment history of all employeesno one factor is determinative79. Which of the following would not beconsidered a de minimis employee benefit:A. a 50 restaurant certificate as a holiday giftB. a 25 cash prizeC. an employee picnic thrown for the employeesand their guestsD. 1,000 group term life insurance80. Which of the following benefits would betaxable for S corporation employees:A. on-premises athletic facilitiesB. 2,500 for dependent care assistanceC. paying for an employee’s membership at acountry clubD. 5,000 in educational assistance81. Which of the following would be classified asa deductible working condition fringe benefit:A.B.C.D.professional association duesbusiness-related meals while travelinga company carall of the above82. Which of the following would occur if your LLCdid not have an accountable plan and paidyou a reimbursement for a working conditionfringe benefit:A.B.C.D.the money is tax-freethe money is subject to income taxthe money is subject to self-employment taxboth B and C above7735B Final Exam 15

83. How much are you allowed to loan interestfree to your own incorporated practice at anyone time:A.B.C.D. 5,000 10,000 25,000there is no restriction imposed on loaningmoney to your own corporation84. All of the following are required in orderfor a company with an accountable planto reimburse or advance worker expensesexcept:A. the payment procedures are stated in writingB. the worker incurs expenses that qualify asdeductible business expensesC. the worker accounts for the expenses withina reasonable period of timeD. the worker returns to the company anyamounts in excess of the actual businessexpenses85. If your practice is taxed asand you receive a payment deemed to be madeunder an “unaccountable plan,” the paymentwill be treated as employee wages.A.B.C.D.a multimember LLCa C corporationa partnershipan LLP86. Which of the following is not stated as one ofthe things the IRS is most concerned aboutwhen auditing small business owners:A. whether income is underreportedB. whether the taxpayer is claiming deductionsthat they are not entitled toC. whether deduction amounts are properlydocumentedD. whether the choice of business entity isappropriate16 7735B Final Exam87. Which of the following is the potential penaltyfor criminal convictions of promoters inabusive tax scams with the intent to evadeincome taxes:A. a fine of up to 75% of the underpayment oftaxesB. a fine of up to 1,000,000C. up to 250,000 in fines and up to five yearsin prisonD. up to ten years in prison88. Which of the following is the most cumbersomeway to track your mileage but the way the IRSwould like you to do it:A. 52-week mileage logB. business miles trackingC. sampling methodD. tracking of actual expenses89. Which of the following areas is considereda hot button by the IRS and requires moresupport documentation than other businessdeductions:A.B.C.D.office suppliesmaintenance and repair coststravel, meal and gift expensesde minimis expenses90. How long is the IRS statute of limitations ifyou underreported your gross income bymore than 25%:A.B.C.D.3 years6 years9 yearsunlimitedCongratulations –you’ve completed the exam!

TAX DEDUCTIONS FOR PROFESSIONALS #7735B (18 CPE HOURS)ANSWER SHEET (2/21)IMPORTANT NOTE: For certification, this answer sheet must be completed and submitted to PES for grading withinONE YEAR from the date of purchase. Please use BLACK INK and PRINT for quicker processing – thank you.Full Name (as it appears on your license)Address ( Home Work )City State ZipDaytime Phone () E-mailLicense Number State Exp Date: / Are you a: CPA CFP EA (check all that apply)PTIN Number (if applicable)If course was ordered by another party, please indicate their name here:GRADING OPTIONS – Please choose only ONE of the following:ONLINE GRADING – Visit our website at www.mypescpe.com. Login to your account (if you are a first-time user, you must setup a new user account). Click on the course title of the exam you wish to take. If you do not see the exam listed, click on “MyCPE in Progress,” then click on the “Add Exam to Account” button and follow the instructions.Mail – Mail your exam to: PES, 4208 Douglas Blvd., Ste 50, Granite Bay, CA 95746Fax – Fax your exam to (916) 791-4099 and choose one of the following options:Mail my resultsFax my results ( )Phone my results ( ) PLEASE INDICATE YOUR ANSWER BY FILLING IN THE APPROPRIATE CIRCLEPlease complete the attached course evaluation - your opinion is extremely valuable!7735B Final Exam 17

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personal funds B. an owner taking corporate funds for personal use C. an owner failing to observe corporate formalities D. any of the above 12. Which of the following is the default tax treatment for a single-owner LLC: A. C corporation taxation B. S corporation taxation C.