Answers

Chapter 10: Knowledge Check Five

1. $0.Valencia cannot take a bad debt deduction for the uncollectible amount because she never
included the uncollectible amount in her income.

Partial Problem
Review Mallory’s completed Schedule C, Part II, Expenses, and Part IV, Information on Your Vehicle:

2. 76%. 972 business miles ÷ 1,279 total miles = 76% A

3. $619. D $50
$ for parking + $25 for tolls + (972 business miles × 0.56 standard mileage rate) =
$619. The business percentage of vehicle insurance and registration are not deductible unless the
taxpayer is deducting actual expenses.

4. $376. B The
T business percentage of interest on a car loan is deductible even when using the
standard
dard mileage
m rate. $495 for car loan interest × 76% business use = $376

Fundamentals of Tax Preparation Knowledge Check Answers | KCA-55

Answers

5. $281.. C The
T business percentage of personal property tax for a vehicle is deductible even when
using
g the standard
s mileage rate. ($106 for car personal property tax × 76% business use) + $200 for a
business license = $281

6. $3,014. E $525 (Line 8)

$619 (Line 9)
$420 (Line 15)
$376 (Line 16b)
$150 (Line 17)
$444 (Line 18)
$281 (Line 23)
+ $199 (Line 25)
$3,014 Total

Chapter 10: Knowledge Check Six

1. Paint for the room used for business. Paint for the room used for business is a direct expense.
The others are indirect expenses.

2. Exclusive Use Test. $VKWRQIDLOVWKH([FOXVLYH8VH7HVWEHFDXVHKHRFFDVLRQDOO\XVHVKLVKRPHR௻FHIRU

personal purposes.

3. $660. 7RFDOFXODWHWKHEXVLQHVVXVHRIKRPHGHGXFWLRQZKHQXVLQJWKHVLPSOL¿HGPHWKRGPXOWLSO\
$5 by the lesser of the actual square footage of the area of the home that is used for business or
300 square feet. $5 × 132 actual square footage = $660.

Chapter 10: Knowledge Check Seven

1. Do you want to use estimated amounts for expenses for which you do not have records?
The taxpayer should not use estimated amounts for business expenses. The answers to the other
questions can help the preparer determine which expenses can be deducted on the taxpayer’s
return.

2. Sales credit card charge slips. Sales credit card charge slips are an acceptable record to use in
support of proving business income.

3. Annual budgets. An annual budget provides anticipated expense amounts, not actual expenses.

KCA-56 | Knowledge Check Answers Fundamentals of Tax Preparation