Question

(1 pts) 15) Which of the following statements is correct in connection with the investigation of a business? a. If the taxpayer is not already engaged in the trade or business, the expenses incurred are deductible if the project is abandoned, b. Expenses may be deducted immediately by a taxpayer engaged in a similar trade or business regardless of whether the business being investigated is acquired. c. That business must be related to the taxpayer's present business for any expense ever to be deductible d. Regardless of whether the taxpayer is already engaged in the trade or business, the expenses must be capitalized and amortized. b Od (1 pts) 16). Which of the following is not a related party for constructive ownership purposes under $2672 a. The taxpayer's aunt b. The taxpayer's brother c. The taxpayer's grandmother d. A corporation owned more than 50% by the taxpayer. a b с d 17) Blue Corporation incurred the following expenses in connection with the development of a new product (pt)

Answer 1

15) Answer is d)

The cost of investigation of a business must be capitalised and amortised. The expenses are not eligible for deduction if the project is abandoned. The expenses are not eligible for deduction even if tax payer is engaged in similar trade or business. The business need not be related to the present business for claiming as expense. So answer is d) the expenses must be capitalised and amortized since benefits are derived over a period of time

16) Answer is a)

As per S 267 related party includes members of family including brothers, sisters, half –brother, half-sister, spouse and ancestors and linear descants. Ancestors include parents and grandparents. IT does not include aunt, niece, uncles, in-laws and step-brother. Hence brother and grandmother are qualified as relatives. As per S 267 if taxpayer has more than 50% in a corporation it is considered as relative. Hence answer is a) since aunt is not a relative