8. List three items that § 162 specifically excludes from classification as a trade or business expense.

8.  List three items that § 162 specifically excludes from classification as a trade or business expense.

9. LO.1 In the determination of whether a business expense is deductible, the reasonableness requirement applies only to salaries. Evaluate this statement.

10. LO.1 Dave uses the second floor of a building for his residence and the first floor for his business. The uninsured building is destroyed by fire. Are the tax consequences the same for each part of the building? Explain.

11. LO.1 Mary Kate owns a building that she leases to an individual who operates a grocery store. Rent income is $10,000, and rental expenses are $6,000. On what Form 1040 schedule or schedules are the income and expenses reported?

12. LO.2 What is the “actually paid” requirement for the deduction of an expense by a cash basis taxpayer? Does actual payment ensure a deduction? Explain.

13. LO.2 Aubry, a cash basis and calendar year taxpayer, decides to reduce his taxable income for 2013 by buying $65,000 worth of supplies for his business on December 27,2013. The supplies will be used up in 2014.
a. Can Aubry deduct the expenditure for 2013?
b. Would your answer in part (a) change if Aubry bought the supplies because the seller was going out of business and offered a large discount on the price? Explain.

14. LO.2 What is the significance of the all events and economic performance tests?

15. LO.2 Why is the reserve method not allowed to be used for Federal income tax purposes?

16. LO.3 Clear, Inc., is a bottled water distributor. Clear’s delivery trucks frequently are required to park in no-parking zones to make their deliveries. If the trucks are occasionally ticketed, can Clear deduct the fines that it pays? Explain.